Facing Foreclosure? Know Your Rights!
If financial challenges have caused you to fall behind on your mortgage payments, foreclosure can transition quickly from a worry to a very real possibility. Few things are more alarming than receiving a Notice of Default from your lender, as it is the first step in the potential loss of your home.
When this happens, it is important to not panic. You have rights when it comes to foreclosure and understanding them can help you keep your home. Once the Notice of Default arrives, it is essentially a warning that you are in breach of your mortgage contract. You still have time to remedy the situation.
This is the quickest and easiest way to stop a foreclosure. By paying your lender all past-due mortgage payments plus penalties and any foreclosure costs, you can reinstate the mortgage. This option works best for homeowners who fell behind due to temporary difficulties and are expecting to receive enough money (e.g., from an insurance payment or personal injury award).
Chapter 13 Bankruptcy
Filing for Chapter 13 bankruptcy in Michigan can prevent a foreclosure because the automatic stay immediately stops all current creditor collection actions. You can then propose a payment plan that allows you to catch up on your mortgage payments and other debts over the course of three to five years. If your lender accepts the plan, you can stay in your home provided you keep making your mortgage payments on time going forward.
You may be able to delay and prevent a foreclosure by applying for a loan modification. Federal law restricts dual tracking, which is when a lender proceeds with a foreclosure while an application for loss mitigation is pending.
In Michigan, if the lender receives your application more than 37 days before a scheduled foreclosure sale, they may not carry out the sale or move for a foreclosure judgment until:
- They advise you that you are not eligible for any loss mitigation options
- You have rejected all offers of loss mitigation
- You fail to comply with the terms of a loss mitigation plan
Ultimately, if your application for a loan modification is approved, the foreclosure will be stopped so long as you keep up with the new payment agreement.
With a forbearance agreement, your lender agrees to lower or suspend mortgage payments for a specified period of time and refrain from a foreclosure action. When the forbearance period ends, you resume your full mortgage payments and get current on the ones you missed. If a temporary financial hardship caused you to fall behind, this type of agreement can help you avoid foreclosure until your situation improves.
If you are an active-duty member of the U.S. military, you may be protected from foreclosure (at last temporarily) by the Servicemembers Civil Relief Act. If you took out the mortgage before assuming active-duty status, your lender cannot typically foreclose while you are on duty and for 12 months after discharge unless they get a court order. Other protections imposed by the SCRA include:
- A mortgage interest rate reduction to 6% for your entire service period and one year afterward.
- Protection from default judgments, as your lender cannot pursue a court action against you during your absence unless you consent or strict conditions are met.
Contact a Michigan Foreclosure Defense Attorney
At Maxwell Dunn, we understand the stress that foreclosure worries can cause, and are here to listen and help. Once we understand your financial circumstances, we will help you find the best solution for your foreclosure situation. For a confidential consultation, call us directly at 1-248-246-1166.See all videos