Foreclosure Prevention of Michigan
24725 W. 12 Mile Road, Suite 110, Southfield, MI  48034
(248) 359-8000
Foreclosure Process in Michigan
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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.

The foreclosure process begins when a borrower/owner defaults on loan payments (usually mortgage payments) and the lender files a public default notice, called a Notice of Default or Lis Pendens. The foreclosure process can end one of four ways:
                   
  1. The borrower/owner reinstates the loan by paying off the default amount during a grace period determined by state law. This grace period is also known as pre-foreclosure.
  2. The borrower/owner sells the property to a third party during the pre-foreclosure period. The sale allows the borrower/owner to pay off the loan and avoid having a foreclosure on his or her credit history.
  3. A third party buys the property at a public auction at the end of the pre-foreclosure period.
  4. The lender takes ownership of the property, usually with the intent to re-sell it on the open market. The lender can take ownership either through an agreement with the borrower/owner during pre-foreclosure, via a short sale foreclosure or by buying back the property at the public auction. Properties repossessed by the lender are also known as bank-owned or REO properties (Real Estate Owned - by the lender).
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
106-149
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 Non-Judicial action / newspaper advertisement (AKA "Sheriff's 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 6 Months, except in situations where there are more than four units to the homeowner's property (in which case the redemption period is 12 Months), 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. If the property is redeemed, the original rights and obligations of ownership  are reinstated.

SOURCE: Michigan State Housing Development Authority