Foreclosure Help Center

Knowledge is power, they say, and the sooner you learn about the foreclosure process the sooner you’ll prosper.   It’s a good idea to seek expert advice when approaching the foreclosure process.

Foreclosure Process Timelines

On average the foreclosure process takes around 10 - 11 months to complete.  There are several intervals in which the homeowner can try working out an arrangement with the lender in order to prevent the foreclosure from going forward.  There are also several alternatives to foreclosure that can be employed prior to the auction date.

Foreclosure

After one or two missed mortgage payments (30 to 60 days) a property is considered to be in pre-foreclosure. By issuing a Demand Letter lenders can demand complete and immediate payment of the loan, plus late charges, penalties, and legal fees. If the homeowner doesn’t pay the debt in full within 30 days, the foreclosure process moves forward in earnest.

Notice of Default

The foreclosure process legally launches after mortgage payments are neglected for 60 days. At that juncture the lender issues a Notice of Default (NOD) to the homeowner as a certified letter. The NOD outlines the homeowners debt and last-ditch remedies for reinstating the mortgage. Meanwhile, a notice of foreclosure is recorded with a local newspaper and a date is selected for a foreclosure auction.

Michigan's 90 Day Rule

Issuance of the NOD also triggers opportunities for homeowners to negotiate possible alternatives with the lender, which often prove beneficial.  In Michigan lenders must wait at least 90 days before continuing with the process to give the homeowner time to work out an alternative.  A notice informing the homeowner of the 90 day rule will go out and the homeowner has just 15 days after receipt of that notice to request a meeting with their lender.

The Auction

The goal of this part of the foreclosure process is simple: recover the lender’s losses. The opening bid is named by the lender initiating the foreclosure process. After bidding is complete, a Sheriff's Deed is issued to the high bidder. If no bids are received higher than the opening bid, the lender purchases the property and puts it back on the market.

Post-Auction

In Michigan the foreclosure process includes a “redemption period,” meaning the original owners are allowed to re-purchase their property—after the auction—if they can produce the purchase price, fees, penalties, legal costs, etc.  Typically the redemption period for owner occupied property is 6 months.

Eviction

Immediately following the redemption period the lender or holder of the Sheriff's Deed can evict the homeowner immediately.  However, in many cases the court appointed officer will visit the home one last time just before eviction to give the occupants a couple of days to move out voluntarily.

The most common type of loan modification program is the government backed Home Affordable Modification Program (HAMP). It is not required that you are behind on your mortgage payments in order to qualify for a modification, but if you are that's still acceptable. The eligibility criteria for the HAMP are:

• Be an owner-occupant in a one to four unit property
• Have an unpaid principal balance that is equal to or less than $729,750 for one unit properties (there is a higher limit for two to four unit properties)
• Have a loan that was originated on or before January 1, 2009
• Have a mortgage payment (including taxes, insurance, and home owners association dues) that is more than 31% of your gross (pre-tax) monthly income, and
• Have a mortgage payment that is not affordable, perhaps because of a financial hardship. (this is a key requirement for HAMP)

HAMP is focused on getting as many families as possible who are struggling with their mortgages into a mortgage that they can afford over the long-term. With HAMP lenders

have the ability to exercise one or all of the methods listed above to get your mortgage payment down to an affordable amount. Equitrust Mortgage can help you achieve a loan modification. Click here to start your Loan Mod application now!

What is a short sale?

A short sale is a transaction in which the lender agrees to accept less than the mortgage amount owed by the current homeowner. In some cases, the difference is forgiven by the lender, and in others the homeowner must make arrangements with the lender to settle the remainder of the debt. The language on your short sale payoff letter is crucial to determining whether or not your remaining balance has been forgiven.

Why is the number of short sales rising?

Due to the recent economic crisis, including rising unemployment, and drops in home prices in communities across the nation, the number of short sales is increasing. Since a short sale generally costs the lender less than a foreclosure, it can be a viable way for a lender to minimize its losses.

A short sale can also be the best option for homeowners who are “upside down” on mortgages because a short sale may not hurt their credit history as much as a foreclosure. As a result, homeowners may qualify for another mortgage sooner once they get back on their feet financially.

Important pointers to consider when requesting a short sale:

• Hire a Realtor who is experienced with processing short sales. The process can take 90 to 120 days after you secure a buyer, but some preliminary work can be completed prior to signing a purchase agreement. Your Realtor will need to be aggressive once the home sells to keep the process moving along. For a qualified Realtor in your area please click on this link. (This link should take them to a page to email us a request for a Realtor referral – They should provide us with contact info and the zip code.)
• Make sure your payoff letter uses language like "satisfaction in full" or "without recourse" so you will be discharged from any possible future liability.
• Although Congress has temporarily barred the unpaid principal balances on a short sale from being a taxable event on your federal tax return, it may still be subject to state income tax.

In a classic example of a cash for keys offer, the lender will initiate the foreclosure process on a home, and indicate that it is willing to pay the homeowner a set amount of cash in exchange for the keys. If the homeowner accepts, ownership of the home reverts to the lender, and a moving date is set. The cash offer is usually not made until after the auction sale and typically a homeowner can negotiate a figure of between $1,000 and $3,000.

Without voluntary surrender of the keys to a home, lenders face a lengthy eviction process. Running an eviction is expensive and time consuming, because while eviction notices are served and the eviction is finally enforced, the house is simply sitting there usually accruing property taxes and general maintenance.

This procedure is also known as granting a "Deed in Lieu", meaning you are willing to sign deed over to the lender in lieu of going through the complete foreclosure process as long as you also receive some money to pay for moving expenses.  One important objective is for you to have the lender release you from all liability after you sign the deed.  You should try obtaining something in writing from the lender that states they will accept the “Deed in Lieu” as "satisfaction in full" of the mortgage balance.

You can avoid or delay foreclosure of your home by seeking bankruptcy protection.

If you are facing foreclosure and cannot work out a deal or other alternative with the lender, bankruptcy may help. If you've already tried and failed with other foreclosure prevention measures like the ones detailed on this website, now is a good time to consider bankruptcy as a possibility for avoiding or stalling foreclosure. Here are some ways that filing for bankruptcy can help you.

The Automatic Stay: Delaying Foreclosure

When you file either a Chapter 13 or Chapter 7 bankruptcy, the court automatically issues an order (called the Order for Relief) that includes a wonderful thing known as the "automatic stay." The automatic stay directs your creditors to cease their collection activities immediately, no excuses. If your home is scheduled for a foreclosure sale, the sale will be legally postponed while the bankruptcy is pending.  However, you must seek bankruptcy protection prior to the actual auction date or you may not be protected.

How Chapter 13 Bankruptcy Can Help

Many people will do whatever they can to stay in their home for the indefinite future. If that describes you, and you're behind on your mortgage payments with no feasible way to get current, the only way to keep your home is to file a Chapter 13 bankruptcy. It is advisable to try to remedy the foreclosure with the other methods detailed on this website first.  If your homes value is considerably less than your mortgage balance, you may want to consider utilizing Chapter 7 of the bankruptcy code.

How Chapter 7 Bankruptcy Can Help

It may be that you'll have to give up your home no matter what. In that case, filing for Chapter 7 bankruptcy will at least stall the sale and give you more time to work things out with your lender. If you have any unsecured debt like credit cards, Chapter 7 can wipe out those balances as well.  This form of bankruptcy is effective for someone with a considerable amount of debt and little or no savings.  You should expect to find a new home to live in and, due to the credit consequences of bankruptcy, it will likely have to be a rental home.

Equitrust Mortgage is committed to helping you during these trying times. Below are links to other professionals that also may be able to help.

Loan Modifications & Short Sales
Law Offices of Lucia & Assoc. 
Karen Lucia
www.lucialegal.com

Bankruptcy Attorney
Thomas Budzynski
3777 North Groesbeck Hwy
Clinton Township, MI 48036
(586) 463-5253

Community Alliance Program (CAP)
www.communityallianceprogram.org

National Association of Foreclosure Prevention Professionals
www.nafpp.org/default.aspx