By Jeff Sugar, Mortgage Loan Officer
Even after a few missed mortgage payments, a homeowner can still catch up on payments and avoid foreclosure. Different laws exist in each state specifying the number of missed payments before the lender starts the foreclosure process. The US Department of Housing and Urban Development recommends that you contact your lender within 30 days of missing your first monthly payment.
Before starting foreclosure, your lender may contact you by phone to discuss missed mortgage payments. Sometimes lenders permit you to delay foreclosure by making a single month’s payment, even if you are a few months behind. If your lender starts actual foreclosure proceedings, the lender must send written notice that the foreclosure process has begun. The written notice specifies how many days you have to catch up on your mortgage payment to avoid foreclosure. After several months of missed payments, your lender can charge late fees and attorney fees.
If you cannot work out a payment arrangement, your lender may sell your property in a public sale, often called a sheriff’s or public trustee’s sale, depending on the laws of the state where the foreclosed property is located. You may receive a notice of the intended date of sale in the mail or the lender will have a notice posted on your front door. The lender may also list the foreclosure in a local newspaper’s classified advertisement section. Public auction is a common method used to sell foreclosures. The date of the sale is typically the actual date of foreclosure.
The redemption period allows you to save your home even if the lender completes the public sale process. The length of the redemption period as well as the redemption procedure is different from state to state. Lenders will likely request that you pay your mortgage in full, along with costs such as attorney fees and late fees in order to redeem your home.
When all the foreclosure steps are completed, you will receive notification regarding the date you must move out of the home. For example, in Michigan, the new owner may give you a three-day written notice to vacate the property. If you do not vacate the property within the specified time, the new owner must complete the state’s eviction process. If a tenant occupies the property, the terms of the lease and the tenant’s payment status may determine procedures for vacating the property.
Delinquent Mortgage Options
Homeowners in financial hardship who have missed mortgage payments have options to avoid foreclosure. A delinquent mortgage involves a payment that is more than 30 days late, while seriously delinquent mortgages are more than 60 days late.
Generally, lenders would rather help you get your delinquent loan back on track than foreclose, especially if your financial hardship is temporary. If you recently lost your job, your lender may reduce your payments or suspend them for a limited amount of time through forbearance, until you are able to resume regular payments.
A forbearance may result in deferment, in which skipped payments are added back to the loan’s principal balance for repayment.
You may be able to renegotiate more favorable loan terms permanently through a loan modification. A modification involves changing one or more of your loan’s terms, such as lowering its interest rate, extending the maturity date or repayment term, or changing the loan from an adjustable-rate program to a fixed-rate. A loan modification is generally offered when your ability to make the regular payment has changed, but your finances demonstrate that you can keep the loan current after it is modified.
Pre-Foreclosure and Deed-in-Lieu
A pre-foreclosure sale, commonly known as a short sale, is a last resort for borrowers who can’t afford to keep the home under any of the lender’s delinquent mortgage options. Short sales occur when the loan balance exceeds the home’s market value and the lender agrees to settle the debt for less than the amount owed. It involves marketing the property, selling for at least a minimum price set by the lender and moving out of the home. A deed-in-lieu of foreclosure involves moving out of the home and conveying ownership to the lender, rather than undergoing foreclosure proceedings. Through Making Home Affordable, a borrower may receive a cash incentive of up to $3,000 for relocation expenses under the pre-foreclosure sale and deed-in-lieu options.
To review the stages of a foreclosure, visit the Michigan State Housing Department Authority. For questions regarding your home loan and possible foreclosure, contact our team of Loan Officers today at 877.312.9033.