The Dexter Leader
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Seven key questions for mortgage expert Bob Yopko
PUBLISHED: April 24, 2008
What is a foreclosure?
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Foreclosure is the process whereby the lender takes title to a property after default on the mortgage.
How does the process work?
The process starts with the lender sending a notice of default to the borrower. Then it winds through a legal process that can take weeks or months and ends with a Sheriffs Sale, where the property is sold to high bidder, usually the lender. That's because after the Sheriff's Sale, there is usually a redemption period. This period can vary with circumstances, but generally lasts six months. During that period the new owner generally cannot take possession of the home, unless it has been abandoned by the former owners. When the redemption period expires, the new owner takes possession, secures the home and puts it on the market for resale.
What does it mean to a person's credit if they foreclose on a house?
Foreclosure is a serious detriment to credit. After a foreclosure, you generally cannot qualify for conforming home loans for a minimum of 5-7 years. In addition, it negatively impacts credit scores, and therefore affects availability and cost of other credit.
Why are foreclosures on the rise throughout Michigan?
A combination of economic downturn and weak housing prices have lead to an increase in foreclosures. Loss of a job is the most common reason for homeowners to fall behind. Since home values have dropped in many areas, homeowners may be unable to sell their homes for enough to pay off their mortgages. This leads to a foreclosure.
What are some alternatives to foreclosure?
If homeowners have enough equity in their home, they should sell it rather than letting it go into foreclosure. This will stop the foreclosure, and allow the homeowner to take out their equity. If homeowners have a short term problem, they should contact their lender about modification or forebearance. In many cases, they will work with the homeowner. Lenders have far more foreclosures than they want, and have become more active in avoiding foreclosure.
What is a "short sale" and how does it work?
A short sale is a modification whereby the lender reduces the mortgage payoff to allow the homeowner to sell the home and break even. This has become more prevalent as lenders work to avoid foreclosures. Homeowners seeking to get out of a mortgage that is more than the home value should contact their lender to see if they can arrange a short sale. Generally some sort of hardship is necessary to qualify.
Where can people get help/answers?
A number of counseling services are available for challenged borrowers. Greenpath Debt Solutions and Legal Services both do a good job. HUD has a counseling hotline for borrowers at 1-800-569-4287.
Bob Yopko is with First Equity Residential Mortgage, Inc. in Chelsea. He can be reached at 734-475-0270.
Mortgage foreclosure timeline
First month missed payment: The first month your payment is missed your mortgage company is likely to contact you by mail and/or telephone to inform you of your delinquent status. A late charge is assessed on the missed payment.
Second month missed payment: The second month your payment is missed your mortgage company is likely to begin calling the contact numbers that they have for you, in order to discuss why you have not made a payment. It is important that you not avoid their telephone calls. Try to stay calm on the telephone and explain to them your situation and what you are trying to do to resolve it. You still may be able to make one payment at this time to prevent yourself from falling three months delinquent.
Third month missed payment: At this point, you are likely to receive a letter from the mortgage company stating the amount your are delinquent, and that you have 30 days to bring it current. This is called your "Demand Letter" or "Notice to Accelerate." If you do not pay the specified amount or make some form of arrangement by the date given, they are allowed at that time to refer you to foreclosure or accelerate your mortgage. They are unlikely to accept less than the total due without prior arrangements if you have received this letter. Foreclosure/Acceleration means that they forward your account to their attorneys. You still have time to work something out with the mortgage company.
Fourth month missed payment: Now you are usually nearing the end of the time allowed in your Demand Letter or Notice to Accelerate. If this expires and you have not paid the full amount or worked out arrangements, then you will be referred to their attorneys. At this time, you incur all attorney fees as part of your delinquency.
The attorney then schedules a Sheriff's Sale, which is the actual date of foreclosure. The Sheriff's Sale will be scheduled for approximately six weeks after the attorney receives your file. You will be notified of this date by mail, along with a notice taped to your door. This is NOT a move-out date.
The attorney publishes notice of foreclosure over four successive weeks in the local legal newspaper. After the first insertion on your property is published in the legal news, you have 4 weeks until the Sheriff's Sale! Contact your lender NOW!
Sheriff's Sale: You have up until the date of the Sheriff's Sale to work out arrangements with the mortgage company or to pay the total amount owed (reinstatement amount). At the Sheriff's Sale your house will be sold. An outside party may bid on your home. If no bids are received, the home goes back to the lender.
Redemption period: If nothing is done to resolve the situation and the Sheriff's Sale is completed, then you enter the redemption period. The redemption period starts from the date of the Sheriff's Sale. State law requires that this period is not less than 30 days and no more than one year. Most mortgages allow the homeowner six months to redeem property with the lender/bidder, paying the amount owed plus interest and fees. If property is over three acres, you may have a 12-month redemption period. You will be notified of your time frame on the same notice that states your Sheriff's Sale date. This is still your time to reside in the home.
End of redemption period: If the homeowner has not redeemed the property, ownership is transferred to lender or bidder. If the homeowner has not left, the new owner starts eviction proceedings. An eviction hearing is held within two weeks, followed by a 10-day grace period for the former homeowner to vacate the premises.When the grace period ends, eviction is certified. Court bailiffs are notified and empty the premises.
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