Michigan: Rates, Forms & Underwriting Practices Agency Webinar Presented by: Douglas G. Smith Vice President, Associate Senior Underwriter Michigan is a filed rate state You must use the filed rates at ALL times. These rates are contained in the Michigan Residential and Commercial Rate Manuals Forms are not pre-approved by the Insurance Bureau (OFIR) However, you must use the commitment, policies, schedules and endorsements in the Michigan forms package due to potential audits by OFIR. All forms must use the form number reflected on the bottom of the form. Michigan Foreclosure Guaranty and Commitment Michigan has a unique product called the Michigan Foreclosure Guaranty and Commitment which has special schedules, exceptions and has a special rate for the product. Entireties ownership Entireties ownership is an ownership interest in both husband and wife. Any reference to the marital status between man and woman creates a presumption of entireties ownership. Example: “X conveys to Doug Smith and Dawn Smith, his wife”. This is a single unit of ownership and a conveyance by one spouse without the other is void unless the conveyance is to the other spouse. Tenancy in common Tenancy in common is an ownership interest in parties which interest reverts to the party’s heirs upon death. This form of ownership is legally presumed if there is no recitation of tenancy on the conveyancing instrument. Example: Smith”. “X conveys to Doug Smith and Dawn Joint tenants and not tenants in common (destructible) Joint tenants and not tenants in common (destructible) is a form of join ownership which, upon the death of one tenant, reverts title to the remaining joint tenant(s). It is destructible, however, in that the conveyance of one joint tenant’s interest to a 3rd party destroys the joint interest to the grantee and that grantee takes as a tenant in common to the rest of the tenants. Example: “X conveys to Doug Smith, Dawn Smith and Alyssa Smith as joint tenants and not as tenants in common”. Doug Smith conveys his interest to Y. Y takes as tenant in common in relation to the other joint tenants. Joint tenants with full rights of survivorship (indestructible) Joint tenants with rights of survivorship (indestructible) is a form of join ownership which, upon the death of one tenant, reverts title to the remaining joint tenants. It is indestructible, however, in that a conveyance of one joint tenant’s interest to a 3rd party conveys a “life estate interest” to the grantee for the life of the grantor. Upon the death of the grantor, the grantee acquires no interest as the interest passes to the other joint tenants. Only upon the death of all the “other” joint tenants first would title then revert to the grantee upon the grantor’s death. Example: “X conveys to Doug Smith, Dawn Smith and Alyssa Smith as joint tenants with full right of survivorship”. Doug Smith conveys to Y. Y has a life estate for the life of Doug Smith. If Doug Smith dies before the other joint tenants, Y gets nothing. Dower Dower is the interest of the wife in and to 1/3rd of the lands owned by the husband during coverture (marriage). The male equivalency “curtsey”, is not recognized in Michigan. Dower can vest only if the non-owning wife is a resident of Michigan. A voluntary non-resident can not claim a dower interest in the lands of her husband. Homestead Homestead is the interest of a party in their domicile (fact issue) and does not apply to investment or recreational property. The interest entitles the holder to claim a right to live on the property for a year, claim a modest sum, and the archaic right to a cow, a pig and a chicken. [Noted for historical interest, only] May be released by deed. Non-purchase money mortgages Non-purchase money mortgages must be signed by both the owning spouse and the nonowning spouse to be effective in Michigan. Purchase money mortgages do not require the signature of the non-owning spouse to be enforceable. Mortgages on property owned by both husband and wife must be signed by both husband and wife. Dower Dower must be released by the wife on a conveyance from a husband to a grantee by the signature of the non-owning wife on the deed. There is no requirement that a non-owning male spouse sign a deed to release his homestead interest. Corporations Corporations require evidence of good standing and submission of a corporate resolution identifying the appropriate party to execute documents on behalf of the organization. Corporations may “wind down” affairs without being in good standing. Limited Liability Companies (LLC) LLC’s require the submission of the Articles of Organization and the Operating Agreement to the Company to determine the proper party or parties authorized to execute documents on part of the Company. If no managing member is identified, then the instruments must be signed by all members. Sole member LLC’s are not required to have Operating Agreements. Title work for sole member LLC’s must involve a name search on the member, individually. Must show all federal and state tax liens and judgment liens against the individual. Partnerships Partnerships require submission of the Partnership Agreement to determine the proper party authorized to execute documents on behalf of the general copartnership or limited partnership. Sole Proprietorships/DBA’s Treat Sole Proprietorships/DBA’s as “individual ownership” and run a name search on the principal and require a release of all tax liens and judgment liens against the individual. Federal tax liens Federal tax liens attach to all property, no entireties shield. 10 year limitation unless preserved by a refilling of the lien. State tax liens State tax liens attach to all “tenant in common” ownership. 7 year limitation unless preserved by a refilling of the lien. Lien does not attach to entireties ownership unless the lien is against both husband and wife. Construction liens Construction lien’s priority is established at the date of first physical improvement to the property (first spade into the ground) for all trades working on the project. Liens are presumed to have priority over the construction mortgage. Insuring construction loans in Michigan is extremely risky. Must follow guidelines as articulated in Company Bulletins. Legal Bulletin MI2009009 Legal Bulletin MI2010007 Judgment liens Judgment liens are effective for 5 years, with one right of renewal. They affect all after-acquired property in the county of recordation. Discharged with a Discharge of Debtor order in Bankruptcy Court. Attorney’s liens Attorney’s liens never expire and may be found at the Register of Deeds or at the courthouse in Property Settlements in divorce cases. Commercial Real Estate Broker’s Liens Commercial Real Estate Broker’s Liens, effective October 5, 2010 have the right to lien property to enforce collection of their commission. MI2010008 Advertisement foreclosure Generally, there is no personal service on parties in interest. Exceptions: federal tax liens and condominium association liens which entitle those parties to mailed notice. SLS2010021 Redemption periods Redemption periods vary in length depending on the balance of the indebtedness and amount of acreage involved. Follow the statute for the appropriate time frames. MCL 600.3240 Abandonment Abandonment affidavits may be recorded by the foreclosing lender [only] which will reduce the redemption period to one month. MCL 600.3241 and 600.3241a. Vacant property arguably can’t be abandoned. Foreclosure Guarantee and Foreclosure Commitments Foreclosure Guarantee and Foreclosure Commitments are a unique product available in Michigan which is an insuring product to the foreclosing entity as well as a commitment that contemplates a REO sale out from the lender to a new purchaser. It has unique requirements and exceptions as evidenced by the modified schedules. Passage of title Passage of title to the grantee on the Sheriff’s deed occurs at date of deed for purposes of Bankruptcy. Borrower filing a petition for bankruptcy after recordation of the Sheriff’s deed gives the Trustee only an equitable right of redemption.