WHAT IS FORECLOSURE?
Foreclosure is a legal process by which a bank, mortgage company or
other creditor takes a homeowner’s property in order to satisfy a debt. The
foreclosure is the result of non-payment of the mortgage (including second
mortgages and home equity loans); however, people also lose their homes due to
unpaid property taxes. As a result of the foreclosure (at the end of the
redemption period), the homeowner loses the rights he or she had to the
property.
FORECLOSURE TIMELINE:
Day 1-15 Mortgage payments are typically (not always) due on the first of each month. If the payment is not made by the due date it is considered delinquent.
Day 16-30 A late fee is usually assessed to the mortgage account after day 15. The first notice is usually mailed on the 16th of the month. You may begin getting phone calls at this time.
Day
31-45
A loan enters default when it is 30 days late, and a second notice is sent at
that time. This default date will have a negative impact on your credit score.
Day 45-60
Servicer sends “demand” or “breach” letter to the borrower pointing
out that terms of the mortgage have been violated.
Day 61-90
When a loan is 60 days past
due, the lender may initiate acceleration procedures by sending a letter
notifying the borrower that foreclosure is the next step. At this time the
lender will only accept your total past due which includes: all past and current
payments with late fees and interest.
Acceleration procedures
include lenders refusing to accept any partial payments and requiring that the
past due balance on the mortgage be paid in full, and can even mean that the
lender will void any payment agreement and call the loan due in full.
Day 91-105
Servicer refers loan to foreclosure department. Hires local attorney
or other firm to initiate foreclosure proceedings.
Depending on the state
where the home is located, the servicer’s representative may record a formal
notice of foreclosure at the local courthouse, publish details of the debt in
the local newspaper, attend hearings on the case and make appropriate court
filings.
Once acceleration begins, if you abandon the property or the property is red
tagged, your home may be repossessed. This may include your locks being changed
and your utilities are disconnected.
Foreclosure proceedings can start any time after the acceleration notice is
sent, but usually happens when the loan is 90 or more days past due. This is
when attorney fees become a significant part of the fees due. On average
attorney fees will add about $2,000 to your total amount due.
Day 150-415
House sold at foreclosure sale or auction. Wide time range due to
different state requirements.
Foreclosure can happen in
Michigan either by judicial action or by newspaper advertisement (sheriff sale).
The most common foreclosure action in Michigan is by advertisement. In this
procedure, the lender’s attorney advertises the property for sale in a
general-circulation newspaper for four consecutive weeks.
The sheriff sale date is listed in the advertisement, and following the four
weeks the county sheriff sells the property to the highest bidder (which is
usually the lender).
The sale must be a public sale that happens between 9:00 a.m. and 4:00 p.m. and
will be held at a courthouse. The sheriff or deputy usually conducts the auction
and the winner will be the highest bidder.
The sale may be adjourned, and the notice of adjournment must be posted where
the sale would have taken place. Adjournments will be published in the same
newspaper where the original notice was advertised.
The officer conducting the sale will execute and deliver a “sheriff’s deed” for
the premises to the highest bidder. The deed will specify the last date that the
mortgagor can redeem the property. This deed must be recorded within 20 days of
the sale, and the person recording the deed will endorse the date and time it
was received on the document. If the property is redeemed the sheriff’s deed
will be destroyed.
Borrowers in states with judicial foreclosures, or those in which lenders have
to retake property titles via the court system, can get almost a year to
straighten out their affairs before the sale. Those in non-judicial states have
as little as two months.
Day 150-415+
After the property is sold at a sheriff sale the mortgagor has a
redemption period during which time the property can be reacquired.
The redemption period in Michigan is usually six months, except in situations
where there are more than four units; less than 2/3 of the original debt owed,
multiple acres and/or abandonment occur.
In order to redeem the property at this point you must pay off the mortgage, all
interest and late fees, court costs, attorney fees, title and appraisal fees. If
the sheriff deed holder paid taxes or insurance after the sheriff sale, the
mortgagor must pay those fees as well. Redeeming the property by getting another
mortgage is very difficult because of the bad credit rating that resulted from
the foreclosure. Redeeming the property by selling it on the market is often a
good option. If the property is redeemed, the original rights and obligations of
ownership are reinstated.
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This article was obtained from a
MSHDA, Michigan State Housing Development Authority, web site