HB-5277, As Passed Senate, April 24, 2014

SENATE SUBSTITUTE FOR

HOUSE BILL NO. 5277

     A bill to amend 1961 PA 236, entitled

"Revised judicature act of 1961,"

by amending sections 3204, 3240, and 3278 (MCL 600.3204, 600.3240,

and 600.3278), section 3204 as amended by 2013 PA 103, section 3240

as amended by 2013 PA 104, and section 3278 as added by 2011 PA

301, and by adding sections 3237 and 3238; and to repeal acts and

parts of acts.

THE PEOPLE OF THE STATE OF MICHIGAN ENACT:

     Sec. 3204. (1) Subject to subsections (4) and (6), a A party

may foreclose a mortgage by advertisement if all of the following

circumstances exist:

     (a) A default in a condition of the mortgage has occurred, by

which the power to sell became operative.

     (b) An action or proceeding has not been instituted, at law,

to recover the debt secured by the mortgage or any part of the

mortgage ; or, if an action or proceeding has been instituted,

either the action or proceeding has been discontinued ; or an

execution on a judgment rendered in an the action or proceeding has

been returned unsatisfied, in whole or in part.

     (c) The mortgage containing the power of sale has been

properly recorded.

     (d) The party foreclosing the mortgage is either the owner of

the indebtedness or of an interest in the indebtedness secured by

the mortgage or the servicing agent of the mortgage.

     (2) If a mortgage is given to secure the payment of money by

installments, each of the installments mentioned in the mortgage

after the first shall be treated as a separate and independent

mortgage. The mortgage for each of the installments may be

foreclosed in the same manner and with the same effect as if a

separate mortgage were given for each subsequent installment. A

redemption of a sale by the mortgagor has the same effect as if the

sale for the installment had been made upon an independent prior

mortgage.

     (3) If the party foreclosing a mortgage by advertisement is

not the original mortgagee, a record chain of title shall must

exist prior to before the date of sale under section 3216

evidencing the assignment of the mortgage to the party foreclosing

the mortgage.

     (4) A party shall not commence proceedings under this chapter

to foreclose a mortgage of property claimed as a principal

residence exempt from tax under section 7cc of the general property

tax act, 1893 PA 206, MCL 211.7cc, if 1 or more of the following

apply:

     (a) Notice has not been mailed to the mortgagor as required by

section 3205a.

     (b) After a notice is mailed to the mortgagor under section

3205a, the time has not expired for the mortgagor to request,

either directly or through a housing counselor, a meeting under

section 3205b with the person designated under section 3205a(1)(c).

     (c) Within 30 days after a notice is mailed to the mortgagor

under section 3205a, the mortgagor has requested a meeting under

section 3205b with the person designated under section 3205a(1)(c)

and 90 days have not passed after the notice was mailed. This

subdivision does not apply if the mortgagor has failed to provide

documents as required under section 3205b(2).

     (d) Documents have been requested under section 3205b(2) and

the time for producing the documents has not expired.

     (e) The mortgagor has requested a meeting under section 3205b

with the person designated under section 3205a(1)(c), the mortgagor

has provided documents as required under section 3205b(2), and the

person designated under section 3205a(1)(c) has not met or

negotiated with the mortgagor under this chapter.

     (f) The mortgagor and mortgagee have agreed to modify the

mortgage loan and the mortgagor is not in default under the

modified agreement.

     (g) Calculations under section 3205c(1) show that the

mortgagor is eligible for a loan modification and foreclosure under

this chapter is not allowed under section 3205c(7).

     (5) Subsection (4) applies only to proceedings under this

chapter in which the first notice under section 3208 is published

after July 5, 2009 and before January 10, 2014.

     (6) After January 9, 2014, a party to which section 3206

applies shall not commence proceedings under this chapter to

foreclose a mortgage of property claimed as a principal residence

exempt from tax under section 7cc of the general property tax act,

1893 PA 206, MCL 211.7cc, unless the party has complied with

section 3206.

     (7) Subsections (4) and (6) do not apply to a mortgage of

property used for agricultural purposes if the mortgage is subject

to borrower's rights under the federal acts and is subject to the

restructuring of distressed loans or the debt restructuring and

loan servicing provisions of the federal acts, if the applicable

period to apply for a restructuring required under the federal acts

is longer than the period within which a borrower may request a

meeting under section 3205b, and if compliance with the federal

acts will not result in proceedings being commenced under this

chapter within 90 days after a default under the mortgage. As used

in this subsection, "federal acts" means the farm credit act of

1971, Public Law 92-181, as amended, or the consolidated farm and

rural development act, Public Law 87-128, and rules and regulations

promulgated under those acts.

     Sec. 3237. (1) After a foreclosure sale under this chapter, if

the purchaser at the sale intends to conduct an interior inspection

of the property under section 3238 during the redemption period,

the purchaser shall provide an initial notice to the mortgagor and

any other person that has possession of the property in writing

that contains all of the following:

     (a) The identity of the purchaser.

     (b) The residence or business address, mailing address,

telephone number, and, if applicable, electronic mail address at

which the purchaser may be contacted.

     (c) The date of the sale, the amount of the sale, and the

estimated date the redemption period expires.

     (d) The details of the purchaser's rights of inspection under

section 3238.

     (e) One or more alternative methods for surrendering control

of the property under section 3278.

     (f) A statement that if the mortgagor intends to vacate the

property at any time after the sale, he or she must notify the

purchaser as required by section 3278, and that if the mortgagor

does not do so, he or she may risk heightened liability for damage

to the property.

     (2) The purchaser shall provide notice under this section by

certified mail, physical posting on the property, or any other

method reasonably calculated to achieve actual notice.

     Sec. 3238. (1) After a foreclosure sale under this chapter and

providing notice under section 3237, the purchaser at the sale may

inspect the property, including the exterior and interior of any

structures on the property as provided in this section.

     (2) The purchaser may conduct an initial inspection of the

interior of any structures on the property. In addition to the

notice provided in section 3237, the purchaser shall provide notice

to the mortgagor by certified mail, physical posting on the

property, or in any manner reasonably calculated to achieve actual

notice of the purchaser's intent to inspect the property at least

72 hours in advance and shall set the time of the inspection at a

reasonable time of day, in coordination with the mortgagor if

possible.

     (3) The purchaser may conduct any number of exterior

inspections of the property and any structures on the property

during the redemption period.

     (4) After the initial inspection described in subsection (2),

the purchaser may request by certified mail, physical posting on

the property, or in any manner reasonably calculated to achieve

actual notice that the mortgagor provide information on or evidence

of the condition of the interior of any structures on the property,

in any form reasonably necessary to assess the condition of the

property. The purchaser shall not make such a request more than

once in a calendar month or more often than 3 times in any 6 months

of the redemption period, unless the purchaser has reasonable cause

to believe that damage to the property is imminent or has occurred.

     (5) If the mortgagor refuses to provide information or

evidence requested under subsection (4) within 5 business days

after receipt of the request, or if the information or evidence

provided reveals that damage has occurred or is imminent, the

mortgagor may schedule an inspection of the interior of any

structures on the property. For an inspection under this

subsection, the purchaser shall provide notice as described in

subsection (2) of the purchaser's intent to inspect the property at

least 72 hours in advance, and shall set the time of the inspection

at a reasonable time of day, in coordination with the mortgagor if

possible. If the mortgagor provides the information or evidence

requested under subsection (4) and damage has not occurred or does

not appear imminent, the purchaser shall not conduct an interior

inspection under this subsection related to that request.

     (6) If an inspection under this section is unreasonably

refused or if damage to the property is imminent or has occurred,

the purchaser may immediately commence summary proceedings for

possession of the property under chapter 57 or file an action for

any other relief necessary to protect the property from damage. If

a purchaser commences an action for possession or any other relief

under this section, the purchaser may also name as a party to the

action any person who may redeem the property under section 3240.

     (7) Before commencing summary proceedings for possession of

the property under this section, the purchaser shall provide notice

to the mortgagor by certified mail, physical posting on the

property, or in any other manner reasonably calculated to achieve

actual notice, that the purchaser intends to commence summary

proceedings if the damage or condition causing reasonable belief

that damage is imminent is not repaired or corrected within 7 days

after receipt of the notice.

     (8) A purchaser shall not commence summary proceedings for

possession under this section if either of the following conditions

exists:

     (a) The damage or condition causing reasonable belief that

damage is imminent is repaired or corrected within the 7-day period

described in the notice of intent under subsection (7).

     (b) The mortgagor and the purchaser agree on procedures and a

timeline to repair the damage or correct the condition causing

reasonable belief that damage is imminent and the procedures are

completed by the original date agreed to by the mortgagor and

purchaser or by an extended date that is agreed to by the mortgagor

and purchaser.

     (9) In determining whether to enter judgment for possession in

favor of the purchaser in summary proceedings under this section,

the judge shall consider the totality of the circumstances

surrounding the damage or condition that threatens imminent damage,

including, but not limited to, all of the following:

     (a) The cause of the damage or condition.

     (b) Whether the mortgagor has taken appropriate steps to

repair the damage or correct the condition and to secure the

property from further damage.

     (c) Whether the mortgagor has promptly contacted the purchaser

and any property insurer regarding the damage or condition.

     (d) Whether any delay in repairs or corrections is

affirmatively caused by the purchaser or the property insurer.

     (10) If a judgment for possession is entered in favor of the

purchaser in an action under chapter 57 as described in subsection

(6), the right of redemption under section 3240 is extinguished and

title to the property vests in the purchaser as provided in section

3236 as to all persons against whom judgment was entered.

     (11) As used in this section, "damage" includes, but is not

limited to, any of the following:

     (a) The failure to comply with local ordinances regarding

maintenance of the property or blight prevention, if the failure is

the subject of enforcement action by the appropriate governmental

unit.

     (b) An exterior condition that presents a significant risk to

the security of the property or significant risk of criminal

activity occurring on the property.

     (c) Stripped plumbing, electrical wiring, siding, or other

metal material.

     (d) Missing or destroyed structural aspects or fixtures,

including, but not limited to, a furnace, water heater, air-

conditioning unit, countertop, cabinetry, flooring, wall, ceiling,

roofing, toilet, or any other fixtures. As used in this

subdivision, "fixtures" means that term as defined in section 9102

of the uniform commercial code, 1962 PA 174, MCL 440.9102.

     (e) Deterioration below, or being in imminent danger of

deteriorating below, community standards for public safety and

sanitation that are established by statute or local ordinance.

     (f) A condition that would justify recovery of the premises

under section 5714(1)(d).

     Sec. 3240. (1) A purchaser's deed under section 3232 is void

if the mortgagor, the mortgagor's heirs or personal representative,

or any person that has a recorded interest in the property lawfully

claiming under the mortgagor or the mortgagor's heirs or personal

representative redeems the entire premises sold by paying the

amount required under subsection (2) and any amount required under

subsection (4), within the applicable time limit prescribed in

subsections (7) to (12), to the purchaser or the purchaser's

personal representative or assigns, or to the register of deeds in

whose office the deed is deposited for the benefit of the

purchaser.

     (2) The amount required to be paid under subsection (1) is the

amount that was bid for the entire premises sold, interest from the

date of the sale at the interest rate provided for by the mortgage,

the amount of the sheriff's fee paid by the purchaser under section

2558(2)(q), and an additional $5.00 as a fee for the care and

custody of the redemption money if the payment is made to the

register of deeds. Except as provided in subsection (15), (14), the

register of deeds shall not determine the amount necessary for

redemption. The purchaser shall provide an affidavit with the deed

to be recorded under this section that states the exact amount

required to redeem the property under this subsection, including

any daily per diem amounts, and the date by which the property must

be redeemed shall be stated on the certificate of sale. The

purchaser may include in the affidavit the name of a designee

responsible on behalf of the purchaser to assist the person

redeeming the property in computing the exact amount required to

redeem the property. The designee may charge a fee as stated in the

affidavit and may be authorized by the purchaser to receive

redemption money. The purchaser shall accept the amount computed by

the designee.

     (3) If a distinct lot or parcel separately sold is redeemed,

leaving a portion of the premises unredeemed, the deed is void only

to the redeemed parcel or parcels.

     (4) If, after a sale under section 3220, 3216, the purchaser,

the purchaser's heirs or personal representative, or any person

lawfully claiming under the purchaser or the purchaser's heirs or

personal representative pays taxes assessed against the property,

amounts necessary to redeem senior liens from foreclosure,

condominium assessments, homeowner association assessments,

community association assessments, or premiums on an insurance

policy covering any buildings located on the property that under

the terms of the mortgage it would have been the duty of the

mortgagor to pay if the mortgage had not been foreclosed and that

are necessary to keep the policy in force until the expiration of

the period of redemption, redemption shall be made only upon

payment of the sum specified in subsection (2) plus the amounts

specified in this subsection with interest on the amounts specified

in this subsection from the date of the payment to the date of

redemption at the interest rate specified in the mortgage. This

subsection does not apply unless all of the following are filed

with the register of deeds with whom the deed is deposited:

     (a) An affidavit by the purchaser or someone in his or her

behalf who has knowledge of the facts of the payment showing the

amount and items paid.

     (b) The receipt or copy of the canceled check evidencing the

payment of the taxes, amounts necessary to redeem senior liens from

foreclosure, condominium assessments, homeowner association

assessments, community association assessments, or insurance

premiums.

     (c) An affidavit of an insurance agent of the insurance

company stating that the payment was made and what portion of the

payment covers the premium for the period before the expiration of

the period of redemption.

     (5) If the redemption payment in subsection (4) includes an

amount used to redeem a senior lien from a nonjudicial foreclosure,

the mortgagor has the same defenses against the purchaser with

respect to the amount used to redeem the senior lien as the

mortgagor would have had against the senior lien.

     (6) The register of deeds shall indorse on documents filed

under subsection (4) the time they are received. The register of

deeds shall record the affidavit of the purchaser only and shall

preserve in his or her files the recorded affidavit, receipts,

insurance receipts, and insurance agent's affidavit until

expiration of the period of redemption.

     (7) Subject to subsection (13), section 3238, for a mortgage

executed on or after January 1, 1965, of commercial or industrial

property, or multifamily residential property in excess of 4 units,

the redemption period is 6 months from the date of the sale.

     (8) Subject to subsections (9) to (11) and (13), section 3238,

for a mortgage executed on or after January 1, 1965, of residential

property not exceeding 4 units, if the amount claimed to be due on

the mortgage at the date of the notice of foreclosure is more than

66-2/3% of the original indebtedness secured by the mortgage, the

redemption period is 6 months.

     (9) For a mortgage of residential property not exceeding 4

units, if the property is abandoned as determined under section

3241, the redemption period is 1 month.

     (10) If the property is abandoned as determined under section

3241a, the redemption period is 1 month or until the time to

provide the notice required by section 3241a(c) expires, whichever

is later.

     (11) Subject to subsection (13), section 3238, for a mortgage

of property that is used for agricultural purposes, the redemption

period is 1 year from the date of the sale.

     (12) If subsections (7) to (11) do not apply, and subject to

subsection (13), section 3238, the redemption period is 1 year from

the date of the sale.

     (13) After the sale under section 3220 and periodically

throughout the redemption period, the purchaser at the sale may

inspect the exterior and interior of the property and all ancillary

structures. If inspection is unreasonably refused or if damage to

the property is imminent or has occurred, the purchaser may

immediately commence summary proceedings for possession of the

property under chapter 57 or file an action for any other relief

necessary to protect the property from damage. A court shall not

enter a judgment for possession in an action under chapter 57 if,

before the hearing for possession, the mortgagor repairs any damage

to the property that was the basis for the action. If a judgment

for possession is entered in favor of the purchaser, the right of

redemption is extinguished and full title to the property vests in

the purchaser. As used in this subsection, "damage" includes, but

is not limited to, any of the following:

     (a) The failure to comply with local ordinances regarding

maintenance of the property, if the failure is the subject of

enforcement action by the appropriate governmental unit.

     (b) A boarded up or closed off window or entrance.

     (c) Multiple broken and unrepaired window panes.

     (d) A smashed through, broken off, or unhinged door.

     (e) Accumulated rubbish, trash, or debris.

     (f) Stripped plumbing, electrical wiring, siding, or other

metal material.

     (g) Missing fixtures, including, but not limited to, a

furnace, water heater, or air conditioning unit.

     (h) Deterioration below, or being in imminent danger of

deteriorating below, community standards for public safety and

sanitation.

     (i) A condition that would justify recovery of the premises

under section 5714(1)(d).

(13) (14) The amount stated in any affidavits recorded under

this section shall be the amount necessary to satisfy the

requirements for redemption under this section.

(14) (15) The register of deeds of a county with a population

of more than 750,000 and less than 1,500,000, at the request of a

person entitled to redeem the property under this section, shall

determine the amount necessary for redemption. In determining the

amount, the register of deeds shall consider only the affidavits

recorded under subsections (2) and (4). A county, register of

deeds, or employee of a county or register of deeds is not liable

for damages proximately caused by an incorrect determination of an

amount necessary for redemption under subsection (2).

(15) (16) A register of deeds may charge not more than $50.00

for determining the amount necessary for redemption under this

section.

(16) (17) For purposes of this section, there is a presumption

that the property is used for agricultural purposes if, before the

foreclosure sale under this chapter, the mortgagor provides the

party foreclosing the mortgage and the foreclosing party's attorney

proof that the mortgagor filed a schedule F to the mortgagor's

federal income tax form 1040 for the year preceding the year in

which the proceedings to foreclose the mortgage were commenced and

records an affidavit with the register of deeds for the county in

which the property is located stating that the proof has been

delivered. If the mortgagor fails to provide proof and record an

affidavit as required by this subsection before the foreclosure

sale, there is a presumption that the property is not used for

agricultural purposes. The party foreclosing the mortgage or the

mortgagor may file a civil action to produce evidence to rebut a

presumption created by this subsection. An action under this

section shall be filed before the expiration of the redemption

period that would apply if the property is determined not to be

used for agricultural purposes.

Sec. 3278. (1) During the period of redemption following a

foreclosure sale of property under this chapter, the mortgagor and

any other person liable on the mortgage is liable to the purchaser

at the sale, or the mortgagee, payee, or other holder of the

obligation secured by the mortgage if the mortgagee, payee, or

other holder takes or has taken title to the property at the sale

either directly or indirectly, for any physical injury to the

property beyond wear and tear resulting from the normal use of the

property if the physical injury is caused by or at the direction of

the mortgagor or other person liable on the mortgage.

     (2) If the purchaser has provided notice to the mortgagor

under section 3237 and the mortgagor intends to move from the

property at any time after the foreclosure sale of property under

this chapter, the mortgagor shall inform the purchaser by

electronic mail, certified mail, or any other method reasonably

calculated to achieve actual notice, at least 10 days before

vacating the property so that the property may be secured. If the

purchaser has provided notice to the mortgagor under section 3237,

both of the following apply:

     (a) There is a rebuttable presumption that the mortgagor is

liable to the purchaser at the foreclosure sale for all damage to

the property that occurs before the expiration of the redemption

period if the mortgagor does any of the following:

     (i) Subject to section 3238, fails to consent to an initial

inspection, comply with a request for information on the condition

of the property, or consent to an inspection of the property after

the initial inspection, if requested.

     (ii) Fails to provide timely notice to the purchaser under this

subsection.

     (iii) Fails to surrender control of the property in a manner

that reasonably provides the purchaser with the opportunity to

secure it.

     (b) There is a rebuttable presumption that the mortgagor is

not liable for damage to the property that occurs after the

mortgager surrenders control of the property if the mortgagor does

all of the following:

     (i) Subject to section 3238, consents to an initial inspection,

complies with a request for information on the condition of the

property, and consents to inspections of the property after the

initial inspection, if requested.

     (ii) Provides timely notice to the purchaser under this

subsection.

     (iii) Surrenders control of the property in a manner that

reasonably provides the purchaser with the opportunity to secure

it.

     (3) For purposes of subsection (2)(a)(iii) and (b)(iii), the

purchaser shall designate 1 or more alternative methods for

surrender of control of the property.

(4) (2) In an action for damages under this section, the

amount of damages may be determined by any measure of damages

applicable under law, including, but not limited to, the method

provided under section 5739(2).

(5) (3) An action for damages under this section may be joined

with an action for possession of the premises under chapter 57.

     Enacting section 1. Sections 3205, 3205e, and 3206 of the

revised judicature act of 1961, 1961 PA 236, MCL 600.3205,

600.3205e, and 600.3206, are repealed.

     Enacting section 2. This amendatory act takes effect 30 days

after the date it is enacted into law.