Civil procedure: foreclosure; distribution of proceeds from mortgage foreclosure auctions; modify. Amends sec. 3208 of 1961 PA 236 (MCL 600.3208) & adds secs. 3214 & 3222. TIE BAR WITH: HB 5153'25

Section 3214(1) now applies to conveyances made before the foreclosure sale is conducted (section 3216) rather than before expiration of the redemption period (section 3240), narrowing the time window in which the protections apply.

Section 3208(b) recording requirement now applies only to residential property described in section 3214(9) (residential property not exceeding 4 units) rather than all property subject to foreclosure notice.

Section 3222 now requires that a notice of foreclosure must have been recorded under section 3208(b) before the cancellation notice recording requirement applies, tying the two provisions together.

A mandatory 7-day cooling-off period was added (subsection 3). The grantee cannot present the deed or any agreement to convey for signature until 7 days after the grantor signs the notice of rights. This period is non-waivable and violation is a per se willful violation.

Detailed formatting requirements were added for the notice of rights (subsection 2): must be a separate document, printed in 14-point boldfaced type, all blanks must be completed before presentation, and property must be identified by street address and tax parcel number.

The required notice language was substantially expanded to include a property value disclosure section with five calculated fields (state equalized value, approximate market value, purchase price, outstanding mortgage balance, and estimated equity forfeited), a recommendation to seek legal counsel or a HUD-certified housing counselor, and an explicit warning against backdating.

A damages framework was added (subsection 5): fair market value minus mortgage balance minus consideration paid. Willful violations trigger double damages. Willfulness is presumed if the grantee is an entity in the distressed property business, has acquired multiple foreclosure-gap properties in 3 years, backdated the notice, prevented the grantor from seeking counsel, or failed to record within 120 days.

Joint and several liability was added (subsection 6) for beneficial owners or controlling persons of entities subject to the section, with a presumption of actual knowledge of the recorded foreclosure notice.

A civil penalty of $50 per day (capped at $25,000 per instrument) was added (subsection 13) for failure to record the conveyance and notice within 30 days of execution.

An affirmative defense for minor notice defects was added (subsection 11): if the grantee provided all completed property value disclosures, the grantor signed, the cooling-off period was observed, and the defect did not mislead or prejudice the grantor.

An affirmative defense was added (subsection 7): the grantee had no actual knowledge of the recorded foreclosure notice. A bona fide search of the register of deeds index before closing creates a presumption of no actual knowledge.

An exemption was added (subsection 10): the section does not apply if the grantee is the person foreclosing the mortgage or has an interest subordinate to the foreclosing party's interest.

The scope is limited to residential property not exceeding 4 units (subsection 9). Property used in part for nonresidential purposes qualifies only if residential use is the principal use.

The statute of limitations for damages actions does not begin to run until both the instrument of conveyance and the notice of rights are recorded (subsection 14).

The enacting clause removed the reference to a companion Senate Bill, leaving only House Bill 5153 as the required companion for the act to take effect.