Archive for the ‘Michigan Foreclosure’ category

Landlord’s Foreclosure With Tenants? Yes, Mr. or Mrs. Tenant, You Have Rights and Protections.

July 9, 2011

It’s a relatively new occurrence with the crash of our financial system and the foreclosure epidemic. Have you seen it yet? Here’s the scenario:

–  Mrs. Tenant signs a lease with Mr. Landlord

–  Mr. Landlord fails to make his mortgage payments

–   The lender forecloses on Mr. Landlord (sometimes with the Mrs. Tenant’s knowledge, sometimes without)

–  After foreclosure, the lender evicts Mrs. Tenant, even though there is still time left on Mrs. Landlord’s lease

Fair?  Not fair?  I guess it depends on whether you are Mrs. Tenant or the lender.

Well, in an attempt to bring some certainty to tenants living in foreclosed homes, the federal government passed a law called the Protecting Tenants at Foreclosure Act. 

Athough the law was enacted in 2009 and amended in 2010, very few people seem to be aware of it. Here are the key provisions of the law:

General Rule #1:  A tenant with a lease has the right to remain in the home until the lease term expires. This rule applies unless one of the following exceptions to General Rule #1 applies:

Exception #1: If the tenant is a child, spouse or parent of the landlord (that is, the homeowner before foreclosure). Of course, this exception stops a landlord from giving a close family member a “sweetheart lease” right before foreclosure.

Exception #2: The lease must have been formed in a “arms length transaction”. In short, the deal between the landlord and tenant must have been a “normal”, “fair” deal between two parties with equal bargaining power. Again, this exception stops the lender from being forced to deal with a one-sided lease after foreclosure.

Exception #3: If lease is for “substantially less than fair market value”, the tenant may not stay until the end of the lease term. Once again, this exception protects the foreclosing landlord from being on the wrong end of an unfair lease.

Exception #4: If the foreclosing party desires to personally occupy the property, or sells the property to someone who wants to personally occupy the property, a tenant must be given 90 days notice to move. This exception will allow a lender or person buying from a lender to evict you before the end of your lease term.

Exception #5:  If you don’t pay your rent, or if you violate any other term of your lease, you can be evicted. Yes, as one of my college economics professors once said, there is no such thing as a free lunch. As a tenant, you must pay rent and meet all other terms of your lease.

General Rule #2: If a tenant’s lease expires before the foreclosure is concluded, or if a tenant’s lease ends within 90 days of the foreclosure being concluded, the foreclosing lender may not evict the tenant without giving the tenant at a minimum 90 days notice.

How to analyze your situation: If you are a tenant and fall within General Rule #1, and don’t fall within any of the exceptions, you can stay until the end of your lease. If you don’t fall within General Rule #1, the foreclosing lender (or new owner) may not evict you without giving you 90 days notice.

Other helpful information:

The law was originally set to expire on December 31, 2012, but that date was extended by a recent amendment, and the law will not expire until December 31, 2014.

The law applies to Section 8 rentals. If you are a tenant and find yourself at the wrong end of a foreclosure, call an experienced Michigan real estate attorney to discuss your options.

Glenn Matecun

Michigan Attorney | Michigan Landlord-Tenant Law

www.MichiganEstatePlans.com

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Major Victory For Mortgage Borrowers In Michigan: MERS Foreclosures Are Illegal

May 5, 2011

The Michigan Court of Appeals issued a decision on April 21, 2011 that will have a major impact on past and present foreclosures in Michigan.  The Court held that foreclosures by advertisement started by the Michigan Electronic Registration System (MERS) are against the law.  This important decision leaves in question the title to potentially thousands of homes that were previously foreclosed on by MERS in Michigan.   

In short, the Michigan Court of Appeals held that MERS is not a proper party to conduct a foreclosure by advertisement under Michigan law.  Following is the pertinent portion of the Court’s introduction and conclusion:

These consolidated cases each involve a foreclosure instituted by Mortgage Electronic Registration System (MERS), the mortgagee in both cases. The sole question presented is whether MERS is an entity that qualifies under [Michigan law] to foreclose by advertisement on the subject properties, or if it must instead seek to foreclose by judicial process.  We hold that MERS does not meet the requirements of [Michigan law] and, therefore, may not foreclose by advertisement.

Defendants [borrowers] were entitled to judgment as a matter of law because, pursuant to [Michigan law], MERS did not own the indebtedness, own an interest in the indebtedness secured by the mortgage, or service the mortgage. MERS’ inability to comply with the statutory requirements rendered the foreclosure proceedings in both cases void . Thus, the circuit courts improperly affirmed the district courts’ decisions to proceed with eviction based upon the foreclosures of defendants’ properties.

Note the Court’s language:  “void ab initio” – in layman’s terms, that means “void from the very beginning”.  So, what if MERS foreclosed on your home last year, or the year before?  The argument is that you have been wrongfully driven out of your home when you still owned it.  That is because MERS’ foreclosure by advertisement was “void from the very beginning”.

If you have been foreclosed on by MERS (or if you don’t know who was involved in your foreclosure), you should find out whether the foreclosure was against the law, and what you can do about it.  Call our toll-free number at (888) 487-6150 – we will walk you through a checklist (no cost to you) to determine whether your foreclosure was one of the illegal MERS foreclosures.  If it was illegal, we will talk with you about the best way to move forward.  Remember, claims like this in Michigan have a “statute of limitations”, so it’s best to check as soon as possible to make sure you don’t lose your rights.