Thousands of foreclosures take place in Michigan every year, making the homeowners there anxious for steps to stop foreclosure. Michigan ranks eighth in the nation in foreclosure rates, resulting in many borrowers facing either judicial or non-judicial foreclosures. Non-judicial foreclosures can be executed when power of sale clauses are contained in the trust mortgage. That means that the lender can begin foreclosure proceedings upon default and after due notice, sell the property at auction. An uncontested foreclosure generally takes sixty days to complete, after which time the homeowner has varying periods by which they can redeem the property, depending on its type and status. In addition, the lender does have the right to file for a deficiency judgment, however, the borrower may challenge that claim.
Lender Assistance
An unlikely partner for many homeowners is their lender. Because they’re the ones that would ultimately foreclose when a borrower is unable to avoid default, many people assume they must be in conflict, but most lenders would rather help their homeowners fulfill their mortgages than have to go through the expense and complication of foreclosure. In light of that fact, it is better for borrowers to notify their lender as soon as they sense they may have difficulty making mortgage payments, since lenders are then more likely to agree to one of the following plans:
- Loan reinstatement – if the borrower will be receiving additional income in the near future, the lender may be willing to forgo foreclosure and reinstate the loan after the homeowner makes up partial or missed payments.
- Forbearance – a lender may allow a few late, partial, or missed payments if an otherwise reliable homeowner is just going through a short-term financial or family struggle. This usually includes an agreement by which the debtors promises to make up those payments at a specified time.
- Loan modification – a lender may agree to modify the terms, rates, or payment schedules for homeowners who have been consistent in making payments until a crisis such as medical bills or job loss has made that difficult.
Government Assistance
The government is investing thousands of dollars in incentive programs to help struggling homeowners. Not all lenders can qualify for all of these programs, so a counselor from the U.S. Department of Housing and Urban Development (HUD) is a good source of free advice for how and where to apply.
- The Homeowner Affordability and Stability Act offers financial incentives to lenders who assist homeowners having difficulty making their mortgage payments through refinancing or adjusting mortgage terms.
- The Hope for Homeowners Act offers similar incentives to lenders, as well as financial benefits to those who agree to reduce the mortgage principal or dispense with charges for early or late payments.
- The Mortgage Forgiveness Debt Relief Act of 2007 protects borrowers from having forgiven debts assessed as income by the IRS and taxed.
Bankruptcy Assistance
Government regulated bankruptcy laws help those who need more help than lenders and government programs can provide. A petition is followed immediately by a hold on all foreclosure or collection activities by creditors. That gives the homeowner time to regroup and pursue the appropriate action.
- The type of bankruptcy for which more individuals qualify is Chapter 13, or reorganization. Working with their attorney and a bankruptcy trustee, their finances and debts are reorganized and a plan is formulated whereby they should be able to make debt payments within their means. If they comply with the plan, they should be able to pay off their debts and retain their homes.
- Fewer people can qualify for Chapter 7 bankruptcy, but it allows many of a debtor’s bills to be discharged, or erased. However, it may also require that some personal property be liquidated. In Michigan, however, there is a homestead exemption of between $34,450 and $51,650, which can protect many homes from foreclosure.
It is important to note that bankruptcy does considerable damage to one’s credit rating, but it also generally provides a way to begin rebuilding it more quickly than some other processes.
Home Sale Assistance
If all else fails and there is no other way to avoid foreclosure, homeowners may still find alternatives to that final damaging option. The first and most beneficial is to sell their home and realize a profit to help them relocate and possibly even pay other bills. Depending on the housing market, this may be impossible. If so, there are still some options available:
- Requesting that their lender agree to accept a sale price below the mortgage amount to fulfill the note. This is called a short sale and could leave the homeowner open to a deficiency judgment for the difference if the lender doesn’t put this agreement in writing.
- Offering the deed to their home to fulfill the mortgage debt is another alternative. It allows the lender to use their wider and more experienced resource to get a better price for the home and it saves borrowers from having the expense and complication of selling the home themselves. This option is called deed in lieu of foreclosure.
Getting Legal Help Stopping Foreclosure in Michigan
It is important to obtain experienced and committed legal help at the very beginning of this process. Without such help, the homeowner may be unaware or unable to take advantage of many of the opportunities that exist to stop foreclosure. Skilled attorneys are also familiar with the types of scams prevalent today and can protect their clients from these deceptions.
