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Foreclosure and Eviction for Homeowners

Contents

    If you’re behind on your mortgage payments, you could be facing foreclosure on your home. In Michigan, most foreclosures are done without going to court. Foreclosure starts when your lender says it will exercise its right to sell your property unless you catch up on your payments or make other arrangements with it. Your lender is the bank or company that holds the mortgage on your house.

    Preventing Foreclosure

    If you are facing foreclosure, you can contact a housing counselor to get help. Housing counselors are free. You should never pay a fee for help working with your lender. Use a counselor who’s certified by the Michigan State Housing Development Authority (MSHDA) or the U.S. Department of Housing and Urban Developer (HUD).

    To find a MSHDA certified counselor use MSHDA’s Counselor Locator.

    The Department of Human Services (DHS) also offers emergency assistance to help prevent foreclosure. This can be up to $2,000 to help you catch up on missed payments or property taxes you owe.

    Before Foreclosure

    Before a lender can start foreclosing on your home, it must send you a notice that tells you:

    • You’re in default;
    • How much you owe, including late charges and interest;
    • Contact information for the lender and for a designee who can make decisions on behalf of the lender;
    • You can request a meeting with the designee, either directly or through a housing counselor to discuss modifying your loan;
    • The names of housing counselors you can contact to help you with this process (they’re available at no cost to you); and
    • If you request a meeting to discuss modification and other options, the foreclosure process can’t begin until 90 days after the notice was sent.

    When you get the notice, you can contact one of the housing counselors to start the process of negotiating a loan modification. You can also contact the lender’s designee directly. If you can negotiate a modification and make the payments as agreed, you can avoid foreclosure. Modifications must be in writing. Both you and the lender must sign them.

    If you don’t respond to the notice within 30 days of when your lender sent it to you, your lender can start to foreclose.

    Changes to the Notice Requirements

    After January 9, 2014, most lenders will not have to send you the notice saying you are behind. They will not have to schedule an in-person meeting or delay foreclosing if they do meet with you.

    Five Big Lenders Still Need to Give Some Notice

    Five large banks will still have to send written notice to homeowners before they can foreclose. These notices will invite homeowners to ask for a meeting within 30 days. If a homeowner asks for a meeting within 30 days, the bank cannot foreclose until meeting with the homeowner. These rules only apply to Ally/GMC, Bank of America, CitiMortgage, JP Morgan Chase, and Wells Fargo.

    Foreclosure

    If you can’t modify your loan or catch up on your payments, your lender can start the foreclosure. It does this by advertising a Sheriff’s Sale of your home. The Sheriff's Sale is the auction of your home. The notice of the foreclosure is published in a local newspaper and posted on your home.

    The Sheriff’s Sale

    The notice of the Sheriff’s Sale is published for at least four weeks. During this period, to avoid foreclosure you can:

    • Sell your home
    • Refinance your home
    • Seek a loan modification with your lender
    • Pay all missed payments and late fees;or
    • File for bankruptcy (if you are considering this, you may want to talk to a lawyer)

    If your home is sold at the Sheriff’s Sale, it will usually be bought by the lender.

    If the home is sold for less than what you owe on it, you might still owe the unpaid amount. That amount is called a deficiency. Your lender could sue you to collect the deficiency from you.

    After the Sheriff’s Sale – The Redemption Period

    After the Sheriff’s Sale, there’s a redemption period before you can be evicted from your property. During this period, you can continue to live in the home. You don’t have to pay your mortgage during this time. You may want to save money to redeem your property or negotiate something with the buyer of your home.

    Redeeming Your Home

    During the redemption period, you can avoid foreclosure by redeeming your property. To do this, you’ll have to pay your lender:

    • The sheriff’s sale price, plus
    • Some costs from the sale, and
    • A daily interest rate based on your mortgage interest rate.

    You can find the sale price by getting a copy of the Sheriff’s deed from the Register of Deeds in the county where your home is located.

    Time to Redeem

    For most homes, the redemption period is six months. If your property is more than three acres and used for farming, or you have paid more than two thirds of your mortgage, your redemption period is one year.

    Changes to the Law During the Redemption Period

    After January 9, 2014, the buyer of a foreclosed home has the right to inspect it during the redemption period. The homeowner cannot unreasonably stop the buyer from inspecting the home. If the homeowner refuses an inspection, the buyer can evict them. If the buyer finds damage to the home, the buyer can evict the homeowner. If the homeowner repairs the damage before the eviction hearing, the judge will not evict them.

    “Damage” Under the New Law

    A homeowner can be evicted under the new law if the home:

    • Has a boarded up or closed off window or door

    • Has broken window panes

    • Has a smashed, broken, or unhinged door

    • Has lots of trash or debris

    • Is missing plumbing, wiring, or other metal material

    • Is missing a furnace, water heater, or AC unit

    • Is not kept home clean and safe enough for local laws

    Cash for Keys

    If you cannot redeem your home, you might see if the buyer is willing to work out a “cash for keys” deal. In a “cash for keys” deal, you leave the home before the redemption period ends in exchange for money. This lets the buyer avoid waiting for possession of the home and the costs of an eviction.

    Eviction From the Home

    Once the redemption period has ended, you can be evicted from the home. The new owner can file a Summons and Complaint to evict you from the property. You will get a notice of this, including a time for a hearing or notification that you must respond in writing. To learn about the eviction process read the articles Eviction: What Is It and How Does It Start? and Eviction to Recover Possession of Property.

    This kind of eviction is difficult to defend, unless there was something wrong with the foreclosure. If you think there was a problem with the foreclosure, you may want to contact a lawyer. To find information about lawyers in your area, look at the “Find a Lawyer” section of this page.

    If the court orders the eviction, you usually have 10 days to leave the home. You can ask the new owner for more time if you have special circumstances. If you stay, the court will order the sheriff to evict you and remove your belongings from the home.

    Consequences of Foreclosure

    Losing a home in foreclosure impacts your credit record for years. This can make it harder to buy another home, or get other loans.

    Foreclosure also has tax consequences. If your house is sold at the Sheriff’s sale for less than you owed on your mortgage and the lender does not collect the difference, it  forgive the debt. You may have to pay income taxes on the amount that’s forgiven. If you have a deficiency that was forgiven, you may want to talk to a lawyer or tax preparer about it.