Michigan mortgage laws explained: from closing to foreclosure

Federal law sets the floor everywhere; Michigan sets the rest. Michigan abolished dower in 2017, records every mortgage for a flat $30, caps non-bank prepayment penalties at 1 percent for three years, and gives most homeowners a six-month redemption period after a sheriff’s sale.

How a Michigan closing is conducted

Michigan closings are conducted by title companies, which search title, issue the policies, prepare the settlement statement and record the mortgage, with attorneys involved only when a party retains one. Lenders fund at signing, and buyers typically pay 2 percent to 3 percent of the price in closing costs while sellers customarily buy the owner’s title policy. The title agent also collects the state and county transfer taxes from the seller at the table.

Who has to sign: community property and homestead joinder

Michigan is a separate-property state, and since April 2017 dower has been abolished (Public Act 489 of 2016), so a wife who is not on title no longer signs to release a dower interest. Married couples typically hold as tenants by the entirety, which means both spouses must sign a mortgage of entireties property and a judgment against one spouse alone cannot reach it. No community-property rule applies, so FHA and VA ratios count only the borrower’s debts.

Michigan’s ordinary creditor homestead exemption under MCL 600.6023 is an antique $3,500, but debtors in bankruptcy may instead use the state exemption in MCL 600.5451, which is adjusted every three years and currently sits in the mid-forty-thousands, with a higher figure for owners 65 and older or disabled. Neither stops a mortgage, a tax lien or a construction lien. For property taxes, the Principal Residence Exemption under MCL 211.7cc removes up to 18 mills of school operating tax from an owner-occupied home, and Proposal A caps annual growth in taxable value at the lesser of 5 percent or inflation until the property transfers and its value uncaps.

Taxes and fees at recording

Michigan has no mortgage tax or intangible tax on the note; the register of deeds charges a flat $30 per document to record a mortgage or deed regardless of page count (MCL 600.2567, since 2016). On the deed, the state real estate transfer tax of $3.75 per $500 plus a county tax of 55 cents per $500 is paid by the seller. A refinancing borrower therefore owes only the $30 recording fee plus a discharge fee on the old lien.

Michigan’s state real estate transfer tax is $3.75 per $500 (0.75%) plus a county tax of $0.55 per $500 (0.11%), both customarily paid by the seller.

Can a Michigan lender charge a prepayment penalty?

Michigan permits a prepayment penalty on a first-lien residential loan made by a non-depository lender only within the first three years and only up to 1 percent of the amount prepaid, under MCL 438.31c, and forbids any penalty after that. Loans governed by the Consumer Mortgage Protection Act may not carry a penalty when they meet its high-cost definition. Federal QM rules cut the permitted period and amount further for most owner-occupied loans.

Usury and predatory-lending protections in Michigan

Michigan’s Consumer Mortgage Protection Act (2002 Public Act 660, MCL 445.1631 through 445.1645) prohibits unfair practices in mortgage lending, restricts high-cost loans by reference to the federal HOEPA thresholds, bans financing of single-premium credit insurance and flipping without benefit, and preempts local anti-predatory ordinances so that the rules are uniform statewide. The Mortgage Brokers, Lenders, and Servicers Licensing Act adds a list of prohibited licensee conduct, and the Attorney General enforces both. Michigan otherwise relies on HOEPA rather than a separate rate-based trigger of its own.

Michigan’s criminal usury limit is 25% per year, and its civil cap of 7% applies only absent an exemption; business-purpose loans and loans secured by real property are exempt from the civil cap, so hard money lenders operate up to the 25% criminal ceiling with contractual freedom on points.

Who regulates mortgage lenders in Michigan

The Michigan Department of Insurance and Financial Services licenses first-mortgage lenders, brokers and servicers under the Mortgage Brokers, Lenders, and Servicers Licensing Act (1987 Public Act 173) and second-mortgage lenders under the Secondary Mortgage Loan Act (1981 Public Act 125), with individual originators licensed under the Mortgage Loan Originator Licensing Act (2009 Public Act 75). Everything runs through NMLS, and depository institutions are exempt but their originators are registered. DIFS publishes a licensee list and enforcement actions.

What Michigan adds to the federal disclosures

Michigan adds no rescission period beyond federal law, and its distinctive rules come after default: foreclosure by advertisement under MCL 600.3201 requires four weekly newspaper publications and a posting on the property, followed by a sheriff’s sale, and then a redemption period that is six months for most homes, twelve months when the debt has been substantially repaid, and as short as one month when the property is abandoned. The lender must serve or post a notice of the borrower’s right to redeem, and since 2014 the purchaser may inspect the property during redemption and shorten it if the owner causes damage. Michigan’s pre-foreclosure loan-modification negotiation statute expired in 2014, so the federal 120-day servicing rule is now the main pre-sale protection.

If the loan defaults

Michigan uses a non-judicial process and a typical uncontested case reaches a sale in 2 to 3 months. After the sheriff’s sale, the homeowner generally has six months to redeem by paying the sale price plus interest and allowed costs. A Michigan lender may sue the borrower for the deficiency after a sheriff’s sale. The full timeline, redemption and mediation rules are on foreclosure in Michigan; the investor view — usury, licensing exemptions, recovery speed — on hard money in Michigan.

Frequently asked questions

Do I need a lawyer to close a mortgage in Michigan?

Michigan closings are conducted by title companies, which search title, issue the policies, prepare the settlement statement and record the mortgage, with attorneys involved only when a party retains one. The answer depends on local practice more than on a single statute; the Loan Estimate will show who is expected to conduct the settlement and what it costs.

Does Michigan allow prepayment penalties on home loans?

Michigan permits a prepayment penalty on a first-lien residential loan made by a non-depository lender only within the first three years and only up to 1 percent of the amount prepaid, under MCL 438.31c, and forbids any penalty after that. Federal rules add their own limits: a qualified mortgage may carry a penalty only in the first three years, capped at 2% then 1%, and never on an adjustable-rate or higher-priced loan.

What does Michigan charge to record a mortgage?

Michigan has no mortgage tax or intangible tax on the note; the register of deeds charges a flat $30 per document to record a mortgage or deed regardless of page count (MCL 600.2567, since 2016). Michigan’s state real estate transfer tax is $3.75 per $500 (0.75%) plus a county tax of $0.55 per $500 (0.11%), both customarily paid by the seller.

Who licenses mortgage lenders in Michigan?

The Michigan Department of Insurance and Financial Services licenses first-mortgage lenders, brokers and servicers under the Mortgage Brokers, Lenders, and Servicers Licensing Act (1987 Public Act 173) and second-mortgage lenders under the Secondary Mortgage Loan Act (1981 Public Act 125), with individual originators licensed under the Mortgage Loan Originator Licensing Act (2009 Public Act 75). Licensing is verified through NMLS Consumer Access; a company or person who cannot produce an NMLS number should not be originating a consumer mortgage.

Federal layer: TILA / Reg Z · RESPA · TRID disclosures · ECOA · Fair Housing Act · all federal regulations. Buying here: first-time buyer programs in Michigan.