Michigan allows foreclosure of a mortgage by publication, an auction process, or through a lawsuit in a court.
If the bank bids the amount you owe at the foreclosure auction, you owe them nothing, no matter what they may get for selling the house later.
However, if the bid is less than what you owe, and it is a reasonable market price, you can be sued for the difference between what they bid and what you owe, also called the deficiency.
If the first mortgage holder forecloses in Michigan, and gets the house back, the second mortgage company gets nothing.
Any secondmortgage has to pay off the first mortgage to get ahead of them in line for rights to the house.
Theoretically, a foreclosure auction could bring more than the balance owed on the first mortgage, which would go to the mortgage holder.
But that does not happen any more in Michigan.
The second mortgage company can sue for whatever amount of money is owed.
In judicial foreclosure, the mortgage company sues in court to get the house back.
Of course, any suit for money by a mortgage company can be stopped by filing bankruptcy.
What if you have two mortgages, and do a short sale?
Well, as a lawyer, what can I say? It depends.
(see part two)
The second mortgage company has to sign off for title to the real estate for you to transfer, that is, to sell your house.
But signing off their lien on the house does not mean you do not owe them any money, it just means they do not have your house as security for the loan any more. You still owe on the note, and they may forgive the loan, or not.
Same with the first. They can sign off their lien on the house so the short sale takes place, but that does not automatically mean that you do not owe them any more money.
Mortgage In Foreclosure, Will I Still Owe Money? (part one)
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