A Michigan property owner defaults on her mortgage. The lender initiates foreclosure by advertisement. Before the sheriff's sale occurs, the borrower files for Chapter 13 bankruptcy. Three months later, the bankruptcy court lifts the automatic stay. The lender then completes the sheriff's sale. The original mortgage was $500,000, and the outstanding balance at the time of the sheriff's sale is $350,000. The property is currently occupied by the borrower. What is the correct redemption period?
Correct Answer
B) 12 months, because the outstanding balance exceeds two-thirds of the original mortgage
Under MCL 600.3240, the redemption period is extended to 12 months when the outstanding balance at the time of the sheriff's sale exceeds two-thirds of the original mortgage amount. Two-thirds of $500,000 = $333,333. The outstanding balance of $350,000 exceeds $333,333, triggering the 12-month extended redemption period. The Chapter 13 bankruptcy filing and subsequent lifting of the automatic stay do not change the redemption period calculation—the relevant factors are the loan balance threshold and property occupancy status, both of which support the 12-month period here.
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Related Topics & Key Terms
Key Terms:
Related Concepts
An adjustable-rate mortgage (ARM) has an interest rate that changes periodically based on market conditions, typically after an initial fixed-rate period. The rate adjustment is tied to a financial index plus a margin.
Closing costs are the fees and expenses paid by the buyer and seller at the closing of a real estate transaction, beyond the purchase price. They typically range from 2-5% of the purchase price.
A conventional loan is a mortgage that is not insured or guaranteed by a government agency such as the FHA, VA, or USDA. It is originated and funded by private lenders and may be conforming or non-conforming.
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