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Michigan Court of Appeals Issues Opinion Affecting Mortgages Foreclosed by Advertisement

The Michigan Court of Appeals has issued important opinion affecting foreclosure of mortgages by advertisement.

Michigan law prohibits starting a foreclosure by advertisement if a lawsuit has already been filed to recover payment of "the debt" secured by the mortgage.  Many have understood this law to mean that while a mortgagee may not file a lawsuit to recover a debt secured by a mortgage and at the same time foreclose the mortgage by advertisement, the mortgagee could simultaneously file a lawsuit against a guarantor based on a guaranty of the debt while at the same time foreclosing the mortgage by advertisement.  However, the recent Court of Appeals decision held that a bank could not foreclose by advertisement on a mortgage when at the same time it had filed suit against a guarantor.

The Court based its decision on the fact that the underlying loan documents contained language which defined "the debt" to include any guarantees, and held the bank violated Michigan law by foreclosing the mortgage by advertisement at the same time it was suing the guarantors.  The Court looked at the entire loan package, and not just the mortgage to reach its decision.  As a result, the Court held that the bank could not proceed with the foreclosure by advertisement.  Under the Court's ruling, mortgagees may not foreclose a mortgage by advertisement while at the same time filing suit against guarantors.

© 2022 Varnum LLPNational Law Review, Volume II, Number 117
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About this Author

Randall J. Groendyk, Varnum law firm Creditor's Rights Attorney, Civil Litigation Lawyer
Counsel

Randy focuses his practice on creditor's rights law, including collections, bankruptcy, landlord-tenant, claim and delivery, foreclosure, and commercial and general civil litigation. His specialties also include Fair Debt Collection Practices Act and Fair Credit Reporting Act defense and compliance review.

Honors & Recognitions

Martindale-Hubbell® Distinguished™ Peer Review Rated

Professional Affiliations

ACA International

Commercial Law League of America

Grand Rapids Bar Association

Michigan Association of Collection...

616/336-6573
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