If you are facing a foreclosure it can be a very scary thought. Many people do not understand the process or the consequences of a foreclosure. There are alternatives to foreclosure such as a short sale, deed in lieu, or even a loan modification. You should only consider foreclosure as a last resort. It is very important to find an experienced real estate agent, preferably a Certified Distressed Property Expert (CDPE) to help you understand your options before you just walk away from your home. It is always imperative you consult with an attorney to discuss your options and legal ramifications. If you take the time in the beginning it will pay off in the end, and make whatever situation you find yourself in less stressful and easier to get through. Ignorance is not bliss!

How are mortgages foreclosed?

Different states have different foreclosure procedures. There is the judicial process and non-judicial process. Michigan is governed by non-judicial foreclosure. This type of foreclosure does not involve court action but requires foreclosure by advertisement. Because this process is non-judicial, there are very strict procedures the lender must follow or the process becomes void and they have to start over.

What event puts the foreclosure process in motion and what is the correct procedure?

The foreclosure process usually begins once you are 90 days delinquent on your mortgage. The lender will send you a notice in writing informing you of their intentions to begin foreclosure proceedings and will usually give you 30 days to remedy the situation and notify you they will not accept partial payment to stop the process. If nothing happens on your part, the lender must publish a notice of sale for four consecutive weeks in the local newspaper of the county where the home is located. Within 15 days of the first notice you will be served with a written notice, pinned or stapled to your door, which will include the date of the auction, also known as a Sheriff Sale.

What is a Sheriff Sale?

Sheriff Sales must take place between 9:00 am and 4:00 pm as part of a public auction. The Sheriff or Deputy will auction the property at the courthouse to the highest bidder including the lender. Most of the time, the lender will buy the property at auction. There can be postponements under certain circumstances.

What happens next?

Michigan has a statutory right of redemption, which means that the borrower has a redemption period to catch up the payments and all interest and penalties to redeem their rights back to his property; the redemption period in Michigan is usually 6 months.

What are the consequences of a foreclosure?

1) A homeowner who loses a home to foreclosure is ineligible for a Fannie Mae backed property for a period of 5 years.
2) Your interest rate could be affected on a future loan application.
3) Your credit score may be lowered anywhere from 250 to more than 300 points and typically could affect you for over three years.
4) Foreclosure will remain as a public record permanently and on a person’s credit history for 10 years or more.
5) Foreclosure will affect you if you hold a job or position that requires security clearance. In almost all instances, your security clearance will be revoked and position will be terminated. This is a generally unknown fact and most people are shocked to learn this.
6) Foreclosure could affect your current or future employment. Many employers are now requiring credit and background checks on all applicants. This could lead to reassignment or termination.
7) In 100% of foreclosures (except in those states where there is no deficiency), the bank has the right to pursue a deficiency judgment. This deficiency period can exceed 7 years and your situation can be reevaluated if your financial situation changes and you begin making money. They can also garnish your wages.

Foreclosures will affect your life in many ways for many years. Keep in mind, in a foreclosure, everyone is affected: families, neighborhoods, municipalities and even states. Never lose hope. Always seek help before you get into a dire situation. If foreclosure is the only option, understanding it and going through it with a professional team on your side will ease your pain and help you move through the process quicker. Remember, we can always start anew and a foreclosure is never a reason to lose hope in life!