Patricia defaulted on her Ann Arbor home mortgage. The lender pursued foreclosure by advertisement. At the sheriff's sale, the property sold for $240,000. The outstanding mortgage balance at the time of the sale was $260,000. The original loan amount was $300,000. Which of the following correctly describes the legal outcome and Patricia's redemption period?
Correct Answer
A) The lender may seek a deficiency judgment for $20,000 in a separate court action, and Patricia has a 12-month redemption period because the outstanding balance exceeds two-thirds of the original loan
Two-thirds of the original loan ($300,000) is $200,000. The outstanding balance of $260,000 exceeds $200,000, triggering the 12-month redemption period under MCL 600.3240. Regarding the deficiency: the sale proceeds ($240,000) are less than the outstanding balance ($260,000), creating a $20,000 deficiency. Under Michigan law, a lender may pursue a deficiency judgment in a separate court action, but deficiency judgments are not automatic — they require separate legal proceedings. Michigan also has anti-deficiency protections in certain circumstances.
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Related Topics & Key Terms
Key Terms:
Related Concepts
Predatory lending refers to unfair, deceptive, or abusive lending practices that impose unjustified terms on borrowers, often targeting vulnerable populations. It includes practices like excessive fees, inflated appraisals, and unnecessary refinancing.
RESPA is a federal law that requires lenders to provide borrowers with information about settlement costs, prohibits kickbacks and referral fees, and limits escrow account deposits. It applies to federally related mortgage loans.
The secondary mortgage market is where existing mortgage loans are bought and sold between lenders, investors, and government-sponsored enterprises (GSEs) like Fannie Mae, Freddie Mac, and Ginnie Mae.
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