Are You Behind on Your Mortgage?

Helpful Tips and Actions Steps

Homeowners can experience financial trouble for a variety of reasons, such as job loss, health problems, hospital bills or divorce. If you’re behind on your mortgage for any reason, hiding from the problem is the worst thing you can do.

Here are some practical steps you can take right now to reduce the likelihood of foreclosure and protect your credit rating for the future:

1. Stay in contact with your lender or lenders at all times. Don’t wait for them to call you. Call or visit your lender now to explain your situation and discuss alternatives.
2. Review all of your expenses and eliminate or reduce what you can so you can get current on your mortgage payment. This includes everything you spend money on, from food and transportation to phone service, cable TV and entertainment. Don’t leave a single expense off your list.
3. Speak with your other billing companies, such as utilities and credit card issuers, to let them know about your situation. Emphasize that you are taking active steps to correct the problem. Discuss temporary alternatives for overdue bills.
4. Free up some money by supplementing your food budget with groceries from a local pantry.
5. Ask to speak with your lender’s “Loss Mitigation Department” to see what options they may have to help you get back on track with your mortgage payments.
6. Call Home Repair Services if you live in Kent County, Michigan to schedule an appointment with a Financial Counselor. The phone number is (616) 241-2601. The address is 1100 S. Division Ave., Grand Rapids, MI.

Note: If you live outside of Kent County, Michigan, we encourage you to contact a local HUD Counseling Agency for assistance at 1-800-569-4287. They can also refer you to additional resources in your local area. Or find a HUD counselor online.

Foreclosure Timeline

What You Can Expect if You Miss

Payments—in Michigan

Mortgage lenders and banks use computers to track the status of every loan payment. If you fall behind on your mortgage, you can expect a process similar to the one described below. Act early. Don’t wait!

Missed Payment:

The first month your payment is missed, your mortgage company will probably contact you by mail and/or phone to inform you of your delinquent (overdue) status.

Missed Payment:

The mortgage company may begin calling you to discuss why you have not made payment. Important: Do not avoid their phone calls. Try to stay calm on the phone and explain to them your situation and how you are trying to resolve it. You still may be able to make one payment at this time to prevent yourself from falling three months behind.

Missed Payment:

At this point you are likely to receive a letter from the mortgage company stating the amount you 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 arrangements by the date given, the lender is allowed to refer you to foreclosure or accelerate your mortgage. The lender won’t usually accept less than the total amount due at this time, unless you’ve made other specific arrangements for payment.

Missed Payment:

Now you are nearing the end of the time allowed in your Demand or Notice to Accelerate letter. If this time period expires and you have not paid the full amount or worked out arrangements, you will be referred to their attorneys. At this time all attorney fees are added to the amount you owe. The attorney then schedules a Sheriff Sale, which is the actual date of foreclosure. You will be notified of this date by mail, along with a notice taped to your door. Note: This is not a move-out date! You still have time to work with your lender to avoid foreclosure. Don’t wait!

This will be scheduled for approximately 4-6 weeks after the attorney receives your file. You have up until this date to work out arrangements with the mortgage company or to pay the total amount owed (often called the “Reinstatement Amount”).

If nothing is done to resolve the situation, you enter your “Redemption Period.” State Law in Michigan requires that this period be no less than 30 days and no more than one year. Most mortgages allow six months. You will be notified of your time frame on the same notice that states your Sheriff Sale date. During this time you may still reside in the house.

Stay in contact with your mortgage company and seek assistance as early as possible. Remember all of these dates are estimated, and may vary according to your individual mortgage contract. Please note: This timeline does NOT apply for mobile homes and land contract-type mortgages.

Six Alternatives to Foreclosure

In the State of Michigan

Loss Mitigation is the term used by mortgage companies to describe their programs that can help you prevent foreclosure. Here are some important things to understand when dealing with a lender’s Loss Mitigation department:

• When speaking to your mortgage company, ask to speak with the “Loss Mitigation” office, which is sometimes called the “Loan Counseling” department. These are the people who can help you address your late-payment issues.
• To be able to assist you, the mortgage company must see a budget that clearly demonstrates the income coming into the home and all of the household bills.
• Take time to understand the type of loan you have. Is it a fixed-rate loan or an adjustable-rate loan? Did you take out a loan through a governmental or public agency, such as FHA, Rural Development or the Veterans’ Administration? Do you have private mortgage insurance? Make sure the answers to these questions are part of your discussion with the Loss Mitigation department.

If the home is affordable, possible options for repayment may include:

• A Repayment Plan: The mortgage company may be willing to take the amount that you are delinquent (overdue) and add it on to your regular payment spread out usually over 3-12 months. Some mortgage companies will allow longer.
• Loan Modification: In this case, the mortgage company adds the amount that you are delinquent to the principle balance of your loan. If they think it is necessary, they may consider extending your terms back out to 30 years and/or adjusting your interest rate. Some banks may consider changing your loan from an adjustable rate loan to a fixed-rate loan.
• Partial Claim: This option is applicable only to FHA loans or those with PMI (private mortgage insurance). If you qualify, the insurer of your mortgage may be willing to give you a loan for the amount that you are delinquent. This is a non-interest loan that does not need repayment until the sale of the home or after the first mortgage is paid off.

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Unfortunately, maintaining ownership of your current home is not always possible. You may not qualify for a repayment plan or loan modification. And you may not have private mortgage insurance on your loan. In some cases, you may be forced to sell the home. Even though this can be very difficult, it’s still a better solution than going all the way through foreclosure.

By selling your home yourself instead of waiting for a foreclosure sale, you can help preserve your credit history and make it easier for you to buy another house in the future. Here are three options to consider:

• Short Sale: The mortgage company may allow you to sell the home for less than what is owed. This option can be used before the Sheriff Sale, but prior arrangements need to be made with the mortgage company – in writing – before the official sale of the home.
• Traditional Home Sale: List the home for sale. This can be done before or after the Sheriff Sale is scheduled. However, to prevent the foreclosure from going on your record the sale must be complete before the actual Sheriff Sale date. If you are considering this option, alert your lender immediately.
• Deed-in-Lieu Agreement: In this case, the mortgage company may allow you to give back the deed to the home in exchange for a “forgiveness” of the debt. This must be done before a Sheriff Sale. The mortgage company may require you to have the home listed on the market for a period of time before considering this option.

Important Reminder: No matter what alternative you choose, stay in contact with the mortgage company at every step of the way and make sure they agree to your plan. There is no substitute for open, honest and frequent communication with your lender’s Loss Mitigation department.

Getting a New Job? You have up until the date of a Sheriff Sale to complete “work out” arrangements with your mortgage company. If you can re-establish sufficient income before that date to cover your essential household bills, then other options that involve keeping your home may become available to you.

Your Rights After a Sheriff Sale

Important Points of Michigan Law

The Sheriff Sale is your actual date of foreclosure. You received notice of this by letter from the attorneys for your mortgage company and by a notice taped to the front door of your home. Remember: This is not a move out date! Here are your rights under Michigan law:

After the Sheriff Sale – At this point, the home has officially been foreclosed on, and will now appear on your credit report as a foreclosure. The home has either been sold or retained by your current mortgage company. The information regarding who bought your home and the amount it sold for can all be obtained by the same attorneys that have been corresponding with you during this period. You now officially enter what is considered your “Redemption Period.”

Redemption Period – By law in the State of Michigan, you are guaranteed that your Redemption Period will be no less than 30 days and no more than one year beginning the day of the Sheriff Sale. Your time frame will be given to you on the notice taped to you door. In most cases you are allowed six months for this period of time.

The only way for you to retain possession of the home after the Redemption period is to re-purchase the home. However, this can be a difficult task with a foreclosure on your credit report.

You may also sell the home during this Redemption Period. This will allow you to retain any equity that you may have in the home. You must be in contact with the attorneys to obtain the updated debt owed on the home, as this amount will change throughout the Redemption Period.

The best advice for anyone facing a financial crisis is to start working on your problem immediately. Don’t wait until your home is foreclosed on. Start finding alternative solutions now.