Michigan foreclosure profit settlement appealed, delaying payout

GRAND RAPIDS, Mich. (WOOD) — A settlement that returns most of the profits from property sales after some Michigan homeowners lost their homes due to unpaid property taxes has been appealed.

Before 2020, counties would keep all the profits from a property tax foreclosure sale, sometimes keeping tens of thousands of dollars more than what they were initially owed. But the Michigan Supreme Court in 2020 ruled that was unconstitutional and that the former property owner has a right to the surplus proceeds.

Earlier this month, United States District Judge Paul L. Maloney approved a settlement of a class action lawsuit that would send around 80% of those surplus proceeds back to several people who lost their property between 2013 and 2020. The class-action lawsuit represented claimants in 43 counties throughout the state.

But an appeal has delayed the payout, the Michigan Association of County Treasurers says. The appeal was filed by an attorney representing about 40 potential claimants who object to the settlement.

News 8 reached out to the attorney representing the objectors seeking comment late Tuesday afternoon but did not immediately hear back.

“Treasurers are anxious to send settlement checks to those entitled to their surplus auction funds,” Andrew Kmetz, Mason County Treasurer and President of the Michigan Association of County Treasurers, said in a Tuesday release. “However, the settlement has been appealed to the Sixth Circuit Court.”

The MACT estimates the appeal has delayed a payout until late 2025.

Ted Seitz, an attorney for MACT, in a statement said the “funds are being held hostage by the class settlement objectors.”

Kmetz said Michigan county treasurers look forward to returning the excess proceeds to the former property owners.

That lawsuit was spurred by a case out of Van Buren County in which Wayside Church owed $16,750 in taxes and other costs on a piece of property. The county sold it for $206,000, close to $190,000 in surplus proceeds, after foreclosing on it in 2014. The church didn’t get any of that.

On Monday, the Michigan Supreme Court ruled that its 2020 decision is retroactive, and that homeowners who lost their property due to unpaid property taxes prior to that year are entitled to the profits of the sale of their former home.

Kmetz told News 8 that decision provides further clarity on the process moving forward.

Tax foreclosure is a yearslong process. A new system enacted following the 2020 decision creates a way for people to get back the surplus proceeds. County treasurers say the process to get the money is as “simple as possible,” while attorneys say it’s “designed to fail.” Click here to read more.

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