Void Or Voidable Foreclosure? Federal Appeals Court Reinstates Homeowner Challenge Involving Post-Sale Redemption Attempt Under Michigan State Law
In a recent ruling from a Federal Appeals Court, a homeowner’s challenge to a non-judicial foreclosure action in Michigan was reinstated for further litigation.
In the case, the estate of a deceased homeowner challenged a foreclosure on the grounds that the foreclosing bank failed to provide proper notice under Mich. Comp. Laws § 600.3204(4)(a) regarding the necessity to comply with the loan-modification process when conducting a foreclosure by advertisement. Further, an issue arose as to whether the estate attempted to have redeemed the property pursuant to Michigan state law prior to the end of the statutory redemption period.
The estate contended that, because the statute wasn’t followed, the foreclosure action was absolutely void (ie. void ab initio). Based on this argument, the estate asserted that the redemption period on a void foreclosure never started and, accordingly, it should be allowed to redeem the property. The lower court dismissed the estate’s challenge, and the estate subsequently filed an appeal.
On appeal, the 6th Circuit Court of Appeals determined that the facts of the case were not fully developed by the lower court so as to determine whether a failure to comply with the Michigan statute rendered the foreclosure void ab initio, or merely voidable.
Accordingly, the appellate court reversed the earlier ruling and booted the case back to the lower court to further develop the facts necessary to determine whether the flaw in the foreclosure process rendered the sale void ab initio, or merely voidable.
For the ruling, see Mitan v. Federal Home Loan Mortgage Corporation, No. 12-1169 (December 12, 2012).