When people become unable to make their monthly mortgage payments, the bank will sometimes foreclose on the property. Though the idea of foreclosure can be overwhelming, understanding the basics of the process will help you make the best decision about your home or, in some cases, prepare for the inevitable.
Foreclosure in Michigan occurs when borrowers fall behind in their mortgage payments. Because mortgages are secured by a home, the bank has the right to take possession of the home and sell it if the mortgage is in default. Below is a description of the foreclosure process.
Approximately two to three months after your first missed mortgage payment, the lender will send you a Notice of Default, or NOD, which lets you know that the foreclosure is imminent. If you do not reach an agreement to bring the loan up to day the lender will schedule a foreclosure sale. When the sale is scheduled, you should receive a copy of the Notice of Sale, or NOS, which will also be displayed in local newspapers.
On the day of the foreclosure sale, the property will be auctioned and sold to the highest bidder. The sale typically takes place on the steps of the local courthouse. If the opening bid is met, the person who bids the most will win the auction. He or she must make a deposit up front and, in most cases, pay the remainder of the purchase price within 24 hours. At that point, the buyer will receive the deed to the home.
If no one at the auction meets the opening bid, the property will become Real Estate Owned, or REO, and will usually be placed on the general housing market after the redemption period expires (typically six months).
During the foreclosure process, you will be able to remain in your home. Once the home’s sale is completed, you will receive a notice informing you of the date by which you must leave the home.
After the foreclosure is reported to the credit bureaus, your credit score will drop significantly. The foreclosure will remain listed on your credit report for up to seven years. However, if you keep all of your other bills current, your credit score can begin to recover in as little as two years.
Foreclosure and Bankruptcy
If you file bankruptcy, an automatic stay will prevent the bank from initiating or proceeding with foreclosure until the bankruptcy process is complete. However, even though your personal obligation to pay the mortgage debt may be erased in bankruptcy, the bank can still foreclose on the home after the bankruptcy case is closed. If you want to keep your home after bankruptcy, you must pay the delinquent amount and reinstate the mortgage with reaffirmation agreement approved by the lender and the court.
This blog should not be construed as providing a legal opinion or legal advice. Each person’s situation is different and requires careful analysis before an attorney at our firm can provide a recommendation or legal advice on how to proceed.