Mortgage may not be reformed or modified once it has been foreclosed

In OneWest Bank v Jaunese, the Michigan Court of Appeals held in an unpublished opinion that once a mortgagee has foreclosed a mortgage by advertisement and the redemption period has expired, that mortgage cannot be reformed.

The mortgage was intended to cover a parcel of land containing 106 acres but, due to an error in the legal description, only described a parcel containing 2.5 acres.  The mortgagors defaulted, the assignee of the mortgage foreclosed, and the redemption period expired without the property (the 2.5 acre parcel) being redeemed.  After the redemption period expired, the assignee recorded an affidavit to expunge the sheriff’s sale and filed suit seeking to reform the mortgage to correct the legal description.

The Court of Appeals held that, once the mortgage was foreclosed and the redemption period expired, the mortgagee no longer had standing to challenge the mortgage, reasoning from prior opinions of the Michigan Supreme Court that a mortgagor could not challenge a mortgage foreclosure after the redemption period expired:  if the mortgagor could not revive the mortgage after the redemption period, neither could the mortgagee.

In a footnote, the court cast strong doubt on the ability of a mortgagee to set aside a sheriff’s sale by the mere recording of an affidavit to expunge the sale, pointing out that sales can only be set aside by a court based upon fraud, mistake, or other irregularity in the sale proceedings.  However, because the redemption period had already expired when the affidavit was recorded, the court did not have to decide the issue.

© Steve Sowell 2018