Deficiency judgments in Michigan may be obtained when a foreclosure property is sold at a public foreclosure auction sale for less than the loan balance owed to the lender. Under these circumstances, the lender has an option to pursue the judgment against the borrower. The borrower can use the defense that the foreclosure sale was not for fair market value and is allowed to present expert appraisal testimony. If the court determines that the property was sold for less than the loan balance, they will issue a judgment against the borrower. You should weigh your options before deciding to let your home go to foreclosure. It’s a good idea to speak to a Michigan foreclosure defense attorney before making any decisions.
Short Sale or Deed in Lieu- Protection Against Deficiency Judgment?
Participating in a short sale or deed in lieu of foreclosure prevention does not guarantee that your lender will not pursue a deficiency judgment against you in Michigan. Bankruptcy is the only option that automatically gives you protection against your lender filing a deficiency judgment against you. So to be sure that your lender does not pursue the judgment in a short sale or deed in lieu of foreclosure, you must get a written guarantee from them prior to completing the short sale or deed in lieu of foreclosure. The guarantee should state that the transaction satisfies your mortgage debt and that you don’t owe the lender anything. A good Michigan foreclosure defense attorney can negotiate the terms with your lender.
Factors Determining Whether Lender Will Pursue Judgment
Michigan lenders generally only pursue deficiency judgments in Michigan under the following circumstances:
- If the lender feels the borrower has sufficient assets to go after to collect. The lender may the borrower's financial information on file if the borrower applied for a mortgage modification, deed in lieu of foreclosure or short sale prior during negotiations to save their home from foreclosure.
- In the case of a strategic default, where the borrower is upside down on their mortgage, but chooses to walk away even though they can afford their mortgage payment.
While you should be aware of Michigan deficiency judgments, Michigan lenders are less likely to pursue one against you because they would rather spend their time making money on making loans to new borrowers.
Consult with a Michigan Attorney
Michigan foreclosure and deficiency laws are complicated. A Michigan foreclosure defense attorney can explain the Michigan foreclosure and deficiency judgment laws to you. The attorney can help you negotiate with your lender to settle a deficiency judgment against you or defend you in court, if necessary.
