Tom, a Michigan homeowner, abandons his property after defaulting on his mortgage. The lender proceeds with foreclosure by advertisement and the property is sold at a sheriff's sale. The outstanding loan balance is $90,000, and the original loan was $200,000. What is Tom's redemption period under Michigan law?
Correct Answer
A) 6 months, because the outstanding balance is less than two-thirds of the original loan amount
Under MCL 600.3240, the standard 6-month redemption period applies when the outstanding loan balance is less than two-thirds of the original loan amount. Two-thirds of $200,000 is approximately $133,333. Tom's outstanding balance of $90,000 is well below that threshold, so the 6-month period applies. While property abandonment can be a factor in some foreclosure contexts, the two-thirds rule is the controlling factor for the redemption period length here.
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Related Topics & Key Terms
Key Terms:
Related Concepts
An FHA loan is a mortgage insured by the Federal Housing Administration that allows lower down payments and credit scores than conventional loans. It is designed to help first-time homebuyers and borrowers with limited resources.
A fixed-rate mortgage has an interest rate that remains constant for the entire term of the loan, resulting in equal monthly principal and interest payments throughout the life of the mortgage.
Foreclosure is the legal process by which a lender takes possession of a property when a borrower fails to make mortgage payments. It allows the lender to sell the property to recover the outstanding debt.
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