Each state has different but in the State of Michigan, there are two phases to the foreclosure process. There is the Pre-Foreclosure phase and the Formal Foreclosure phase.
Pre-Foreclosure- Months 1-3
First Month Missed Payment
• Customer misses mortgage payment.
• Late notice send by bank.
Second Month Missed Payment
• Customer misses additional payments.
• Bank attempts in writing and by phone to contact customer and resolve situation.
Third Month Missed Payment
• No arrangements are agreed upon and customer continues to miss payments.
• Bank issues a “Demand Letter” or “Notice to Accelerate” for payment under the note in full, based on the acceleration clause. Most mortgage notes contain language which basically says if you fail to pay the bank under the terms of the note with monthly payments as promised they can accelerate the note, meaning that the full amount is due on demand. For example if your mortgage is $100,000 with payments of $1000.00 per month you are only required to pay $1000.00 per month unless you miss these payments and the bank subsequently demands the balance based on this acceleration. Once this happens you legally owe the full balance of $100,000.00 plus back interest, plus late charges, plus legal fees all at once. You will find from this stage on the bank will not accept monthly payments. They will instead demand much more to reinstate the loan. Although I consider this step in the pre foreclosure category, once demand has been made and the note has been accelerated you should already have contacted an attorney who is an expert in dealing with these matters.
Formal Legal Foreclosure Process- Months 4-6
Fourth Month Missed Payment
• No payments or arrangements acceptable to the bank are made.
• Bank sends by sheriff or by certified mail Notice of Intent to Foreclose.
• Bank begins action in the court system to foreclose.
• Legal notices (see soldiers and sailors notice below) as required by law begin to be published in local papers.
Fifth Month Missed Payment
• No payment or settlement arrangements are made with the lender.
• Notice and waiting periods expire.
• Court holds hearing regarding banks claim.
• Legal notice of actual foreclosure sale and advertisements published in local papers.
Sixth Month Missed Payment
• No payment arrangements or settlements reached with the bank.
• House sold at Sheriffs Sale to highest bidder.
Redemption Period- Months 6-12
• After the Sheriff Sale the homeowner enters what’s called the Redemption Period. Michigan State law requires the redemption period be no less than 30 days and no more than 1 year. The majority of redemption periods last six months provided the homr is occupied. The homeowner will be notified of the time frame for redemption on the same notice that states the Sheriff Sale date.
**Important: Stay in contact with your mortgage company, and seek assistance as early as possible. If you’re too overwhelmed or your lender isn’t willing to deal with you, remember, you have options. Contact a professional, like Michigan Mortgage Modification, that specializes in negotiating with mortgage companies as soon as possible. The longer you wait the less chance you have of saving your home.