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Canton, MI homeowners discover ways to avoid foreclosure.

alsted — Fri, 11 Jul 2008 22:36:44 +0000

Plymouth and Canton, Michigan homeowners facing foreclosure usually don’t know they have many options. We help them discover ways to avoid foreclosure they never though of or were told would not work.

If you are like most homeowners facing foreclosure, you want to keep your home. Perhaps you raised your family in this home and have fond memories of the good times you’ve had. Maybe you have school-aged children, and you don’t want to move them out of the neighborhood or school district and away from their friends. Or, maybe you just dread the thought of packing up and moving.

Unfortunately, for about 90 percent of homeowners facing foreclosure, selling the home and moving to more affordable accommodations is usually the best option. If you were unable to make the monthly mortgage payments before, making the payments in the future while trying to catch up on missed payments can be quite a challenge. Understanding the intricacies of foreclosure is the first step to a solution. We find many couples ignore the possibilities that there may be a way out of the mess. Some spouses don’t even tell their partners there is trouble until it is too late. Open and honest communications and a solid work out plan could help you keep your home.

But can you keep your home?

That depends on several factors, which this article explores.

Is This a Temporary or Permanent Financial Setback?

If you are facing foreclosure because of a temporary financial setback, such as a short-term layoff or a large, unexpected medical bill, then you have a much better chance of keeping the home. As long as you can afford the monthly mortgage payments going forward, you should be able to work out a payment plan with the bank to catch up on missed payments.

Is Bankruptcy an Option?

If you’re behind on your house payments primarily because you’re buried in credit card debt and other debts not secured by your home, you may be able to file for bankruptcy and keep your home. Consult with a reputable bankruptcy attorney in your area to find out whether bankruptcy is a viable option for you and which assets you would get to keep.

Don’t dismiss the bankruptcy option before exploring it fully. A bankruptcy attorney may charge you $350 to $400 for the initial consultation, but it is usually worth the cost.

Do You Have Mortgage Insurance?

If you have been paying mortgage insurance, that insurance could offset what the bank stands to lose from your inability to pay and may make it more appealing to work out a deal with you or negotiate a short sale (accepting less than full payment of the loan), so you can sell the home and at least break even.

Is Your Bank Willing to Cut You a Deal?

The mortgage crisis has weakened the bank’s ability and willingness to foreclose, because they simply cannot handle the vast number of foreclosures. They may be more inclined to cut you a deal that allows you to keep making payments rather than foreclose on you. Foreclosure sticks them with a property they must rehab and sell, and your property’s value may not be sufficient to cover what you owe on your mortgage. Foreclosure usually costs the bank a lot of money.

Contact your bank and see what kind of deal they can offer you. They may forgive part of your debt, modify your mortgage to make your monthly payments more affordable, or work out a payment plan with you to catch up on missed payments over time or add them to the end of your mortgage.

Can You Borrow Money to Reinstate?

Prior to foreclosure, you can reinstate the mortgage by catching up on missed payments and penalties. If you have family members or friends who are in a position in which they can help you out, consider asking them for a loan to reinstate the mortgage.

Caution: Don’t reinstate unless you can start making your regular mortgage payments and have enough money to start paying back the loan from your relatives or friends.

Can You Tighten Your Belt?

If you are earning sufficient income to pay your bills but simply overspent your way into foreclosure, can you tighten your belt enough to get back on track? Be realistic. If keeping the home is going to place a significant strain on the family finances, moving into something more affordable may be your best option.

For information on how to obtain free or low-cost assistance from a HUD-approved credit counselor, call 1.888.995.HOPE or visit HOPE NOW.

Don’t Borrow Trouble

Freddie Mac’s Don’t Borrow Trouble website advises against borrowing trouble. Under duress, many homeowners panic and seek ways to borrow the money they need to bring their mortgage loan current. This can lead to high-interest loans and the possibility of signing over rights to your home to a con artist who offers what seems to be an easy solution.

Work with your lender and reputable professionals (an attorney, credit counselor, mortgage broker, your lender, and/or a Realtor) to determine your best course of action. The person who shows up at your door uninvited and offers to help is usually the wrong choice.

Ralph R. Roberts, GRI, CRS and his team of foreclosure experts regularly assist families facing foreclosure and have authored Foreclosure Self-Defense For Dummies (John Wiley & Sons).

The solutions are many when you have someone to help guide you through the maze.

We can help. Others have found our store of knowledge has gotten them out of their foreclosure mess a lot less damaged than they thought would be the case.

Call us today for a free and confidential consultation.

Canton couples keep foreclosure a secret!

alsted — Wed, 19 Mar 2008 20:14:49 +0000

Facing Foreclosure? Canton and Plymouth homeowners are not telling their partners until it is too late!

Noel and I have access to a special list of all the homes that are about to go into foreclosure in the Detroit, Michigan suburbs. We have contacted hundreds of these pre-foreclosure homeowners in Canton, Plymouth, Northville, Novi and many other surrounding cities and have discovered a disturbing phenomenon.

Over 50% of the homeowners we come in contact with either don’t realize they are in foreclosure or are aware of it and their spouse is not, or are aware of it and they don’t realize the severity of their situation.

In a majority of the cases one of the foreclosing homeowners hides it from the spouse. Usually, the partner keeping the secret is the person responsible for paying the bills and is (or feels) responsible for causing the problem and fixing it. This partner may feel like a failure for not properly managing the finances or for overspending, or the person may be using the family finances to support an embarrassing and costly habit.

Attempting to sweep the foreclosure under the rug can compound the problem in any or all of the following ways:

· Makes you more susceptible to becoming a victim of foreclosure rescue scams. One of the con artist’s most powerful strategies is divide and conquer. They will offer ways to avoid foreclosure so your partner “never has to know about it.” They are afraid that the more people “know about it,” the more likely they will get caught.

· Removes one of your pillars of support. As a couple, you have a much better chance of improving the outcome than by acting alone. Your partner may have some excellent ideas and resources to help save your home.

· Wastes time. The longer you try to keep the secret without taking positive steps to resolve the problem with your lender, the less time you have to save your home, sell it, or pursue other options.

· Leads to distrust with your partner, who will eventually find out anyway.

Remember, your partner is going to eventually find out about the foreclosure. It’s always better if your partner finds out earlier from you rather than later from a stranger… like when the sheriff shows up to evict you and your family from your home or the person who purchased the home at auction shows up at the front door.

Communication Is Key

If you and your partner can’t have an honest discussion about household finances and troublesome behaviors, then your entire relationship is already at risk. Look at the foreclosure as an opportunity to become open and honest and build intimacy. Either your relationship will not survive, meaning it was not worth trying to save in the first place, or it will deepen and become more rewarding over time.

Financial Setback + Communication Breakdown = Loss of Home and Equity

What is equity? Equity is the amount of money that you get to keep after you sell your home and pay back the debt you owe on it.

Adding communication back into the equation gives you and your partner a much better chance of addressing the underlying financial shortfall and ultimately saving your home or selling it to cash out enough equity to make a graceful exit.

Whether you’re currently facing foreclosure or have just missed one or two mortgage payments, tell your partner immediately. Losing your home in a vain attempt to avoid an uncomfortable discussion with your partner is the wrong approach.

Avoid the Worst Options

The worst option in foreclosure is to try to sweep the problem under the rug. Well, actually there are three “worst” options:

· The absolute worst option is to deal with a con artist who’s out to steal your home through some foreclosure scam or strip you of the equity in it.

· The next worst option is to do nothing. When you do nothing, the lender forecloses, the property is sold, and you’re evicted. You can say “so long” to both the property and any equity you built up in it.

· Another bad option is choose a solution that puts you right back on the path to future foreclosure. Some people, for example, borrow money to reinstate the loan – that is, bring the payments current with the bank. This is a viable solution if the financial setback was temporary and you will have sufficient income to start making payments on your mortgage and on the money you borrowed to reinstate. However, if you are unable to make the monthly payments, you will probably be better off selling the home and finding more affordable accommodations.

Overcoming Your Fears

If you are afraid of telling your partner, then ask another family member, a close friend, a financial counselor, a marriage counselor, or someone else that you and your partner both feel comfortable talking with and that you both trust to help you break the bad news.

An unbiased third party can act as an intermediary, laying out the facts more rationally, so arguments do not get in the way of a full disclosure. You want to come clean and lay all the facts and figures on the table so you and your partner know what you are dealing with.

Remember, what has happened is in the past. You and your partner can do nothing to fix what has already happened. You can only make things better now and for your future together.

About the Author: Ralph R. Roberts, GRI, CRS and his team of foreclosure experts regularly assist families facing foreclosure and have authored Foreclosure Self-Defense For Dummies (John Wiley & Sons).

If you find yourself in financial trouble and may be facing foreclosure keep in mind you are not alone. Nor are you in as bad a situation as you may think. You have more options than you think.

Most banks don’t want to take a home back and are willing to work out many arrangements for homeowners in trouble.

Keep looking for our series of blogs on short sales coming soon. In the meantime if you have any questions or concerns call us at 734-459-2600.

Remember all your information will be held strictly confidential.

Foreclosure details for Michigan

alsted — Fri, 22 Feb 2008 21:55:05 +0000

Noel and I and other professionals conduct monthly seminars in a series called "Negotiating The Real Estate Maze" at the Summit on the Park. Last night our second seminar "Foreclosure May Not be Your Only Option" drew an enthusiastic audience. All agreed there is a plethora of information on foreclosures out there on the web and elsewhere but very few could find sources containing specific details pertaining to foreclosure laws in Michigan.

Our presentation was in two parts. The first was from an article in "Today’s Buyer’s Rep" March 2007 issue titled "Anatomy of a Foreclosure". The second part of our presentation outlined the details of foreclosure law as it pertains to Michigan. For more on foreclosures click here.

Here are the two parts of the presentation:

Part 1) Anatomy of a Foreclosure - The process differs from state to state.

Stage 1: Pre-foreclosure

When homeowners default on their mortgage, their property is considered to be in a state of pre-foreclosure. Lenders are typically quick to respond to that first late payment, beginning with phone calls to the borrower.

How the foreclosure process actually proceeds from this point forward varies greatly from state to state. For example, it’s important to know how your state determines property ownership prior to foreclosure, since this largely dictates which steps will be taken and how long they will take. In lien-theory states, the deed is held in the borrower’s name, and a lender will need to place a lien on the property by means of the mortgage instrument. While specifics vary, lien-theory states tend to favor borrowers because they usually require that a judicial action be taken against borrowers, which typically requires more time.

In title-theory states, lending institutions hold title to the property, while borrowers receive a deed of trust. Until the loan is paid in full, the title remains in the lender’s name. Title theory tends to benefit lenders because it usually doesn’t require a judicial action to move towards foreclosure.

A third form, intermediate theory, combines lien and title theory, placing ownership between the borrower and the lender. The borrower’s name appears on the title as owner, as in lien theory, but upon default ownership immediately transfers to the lender.

From the Home-owner’s Perspective:

During pre-foreclosure, homeowners are very likely to feel embarrassed and threatened by the phone calls and letters they begin to receive from their lender. It is generally true, however, that lenders are more interested in devising workable solutions than continuing the foreclosure process. Troubled homeowners should be encouraged to respond to their lender-if they don’t the problem will only get worse.

Homeowners typically have many more options available to them for working out of a difficult situation if they contact their lender sooner rather than later. In fact, some remedies may only be available in the early stages of delinquency. Explaining to the lender why payments have fallen behind-whether it’s a short-term issue like a job loss, or something more permanent, like a long-term illness which prevents full-time work-will go a long way towards finding a cooperative solution with the lender. Perhaps the homeowner can make partial or interest-only payments for a while. Or maybe the loan can be reconfigured into a new program that requires a smaller monthly payment.

During the pre-foreclosure period, owners in financial distress may also receive inquiries from private investors. Because pre-foreclosure properties are publicly registered, it’s not difficult for potential buyers to identify distressed owners and make direct contact with them. Are these offers worth considering? It depends. Some offers to get out of debt are blatant fraud attempts. Owners should never feel pressured and certainly shouldn’t sign any papers without first having them reviewed by their attorney.

However, if the owner can negotiate an attractive solution with a legitimate private investor, this option is certainly better than letting the situation move into foreclosure, which generates a black mark on the defaulting owners record, seriously constricting their future access to mortgage financing or other forms of credit.

During the pre-foreclosure period, if the owner doesn’t send payments to the lender or otherwise attempt to resolve the situation, the lender will issue a formal notice of default (NOD), specifying a time period with in which the owner can reclaim the property by paying the past-due amounts in full, or the loan balance. These redemption periods vary by state, but frequently span 90 days. If the terms of the NOD aren’t met by the specified deadline, a notice of sale will be issued, which officially moves the property into the final stage of foreclosure.

From the Buyer-Investor’s Perspective:

Buyers may find that properties that are in the pre-foreclosure period are attractive investments. While it’s unlikely that a highly discounted price can be negotiated, especially for desirable properties, there are several advantages to purchasing at this stage. First, there may be less competition from other investors before the property is put up for public sale. Secondly, if you’re sensitive to the owners situation and approach them on your buyer-client’s behalf in the right manner, you’ll improve the odds that a cooperative agreement can be reached, eliminating many of the problems and uncertainties that make purchasing foreclosure properties in auction sales such a risky business. Owners will be more receptive to win-win solutions that truly help them at a difficult time, rather than take advantage of their misfortune. If you’re able to engage their cooperation early on, you’ll also be more likely to gain access to the property for inspection purposes and be able to discover what, if any, encumbrances may exist.

Stage 2: Sale/Auction

Following a notice of sale, a lender typically lists the foreclosure property for sale at auction. The timing and procedures of these sales vary by state and, to some extent, sales terms will be determined by the lender. For example, an auction can occur through a public sheriff’s sale, or through a private party. Some lenders may even opt for a short sale, which means the property is sold for less than the amount of money owed, simply to remove a non-productive asset from the books.

From the Home-owner’s Perspective

In many states, once the notice of default has been issued, the distressed owner has run out of options. In some instances, however, the bank will still want to work something out. Also, some states call for a right of redemption period after the sale, giving the foreclosed owner up to 365 days to recover their property. In these cases, a new buyer is issued a bill of sale-not a title-and runs the risk of losing the home until the end of the redemption period, unless the lender is able to purchase the foreclosed owner’s right of redemption.

From the Buyer-Investor’s Perspective

Frequently, the best bargains in distressed properties can be found at the sheriff’s sales, although numerous pitfalls can be encountered. First, it’s fair to say that the buyer probably won’t have complete information about what they’re purchasing. Because defaulting owners frequently still occupy the home at this point, and are not likely to open their doors to show anyone around, you won’t be able to see beyond the exterior, much less bring in inspectors. In this type of sale, there are no requirements to disclose flaws: properties are sold “as is”, without any warranties.

It may also be difficult to determine if there are any old debts that could surface later as liens on the title. For example, you may become obligated to settle with the contractor who put a new roof on the home, but was never paid. And if the owners are still in the home, you’ll have to contend with the awkward business of evicting them facing the additional risk that they will damage the property before they vacate.

Another challenge can be paying for the home. Usually, public sales require cash payments, meaning that your financing will need to be in place well in advance of the auction.

Stage 3: Real-Estate Owned (REO)

If a foreclosure home does not successfully sell at auction, it moves into the lender’s inventory and is considered a real-estate owned (REO) property. Generally speaking, lenders don’ like to hold non-performing assets, especially ones that require upkeep and maintenance, so they may be motivated to sell. At the same time, lenders still want to maximize their profits and are unlikely to accept deep discounts.

From the Buyer-Investor’s Perspective

Buying foreclosure property at the REO stage is typically the easiest and most straightforward approach, especially for investor-buyers new to foreclosures. Many of the risks that are present at the auction stage have now been eliminated. However, the potential return on investment has also been reduced. On the other hand, expenses such as taxes and liens, that aren’t generally covered in an auction sale, may be covered by the lending institution in a REO sale.

If the home is held by a smaller bank, you may be able to negotiate a purchase directly with the lender. It’s more likely, however, that you’ll be working through an outside real estate representative who has been retained independently by the bank.

Part 2) Foreclosure Basics For Michigan

1) Lien Theory vs. Title Theory

Michigan is a lien theory state.

2) Judicial vs. Non Judicial

In Michigan we have both available but 99% of the time we are going to be

Non-judicial. Also known as Foreclosure by Publication or Foreclosure by Advertising.

Judicial takes more time. Mortgage gives lender the right to take over the house.

3) Possible Options for Homeowners / Borrowers

a) Work Out Plan or Forbearance

Lender forgives or relieves borrower of payments for a number of months (usually 3). This is a temporary measure to try to get borrowers back on their feet. There is no standard among lenders. Sometimes they tack on the payments to the back end of the mortgage. Sometimes they add it to the principle

b) Deed-in-lieu (of foreclosure)

Instead of foreclosure. Borrower gives the lender the deed so they don’t have to waste time with foreclosure process. In this case borrower gives up their redemption period. Careful…lender may forgive the mortgage but not the note (promise to pay). Usually lender requires history of property being on the market. Borrower will usually get a 1099 for the forgiven debt. Lenders don’t have to disclose this to client and many times it comes as a surprise. The best way to accomplish this is to find the lender’s “Loss Mitigation Specialist” (almost every lender has one). Talking to other lender departments can be very frustrating. The typical lender has many departments that don’t often talk to each other so borrower gets churned through their system.

c) Cash for keys/deed

Sometimes the lender will make a money offer to shorten the redemption period. This will reduce their carrying costs. Borrower usually gets 1099 in this case. Similar to Deed-in-lieu. Lender may not offer this but you can offer it to lender.

d) Short Sale

Lender forgives a portion of the debt if sale price is less than what is owed, otherwise known as an upside down situation. Sometimes sale price is less than what property is worth. Can do short sale anytime before end of redemption period. Borrower usually gets 1099 for forgiven debt. Short sale can happen any time. You don’t have to be in the redemption period. Every lender is different as to what they will allow. Sometimes you can negotiate with them if you have missed a few payments and you can establish you will have a hard time making them up. Usually have to prove hardship to the lender.

Contact your attorney and/or financial advisor to learn which option (Deed-in-lieu, Cash for Keys, or Short Sale) is the best.

e) Foreclosure

Borrower just gives up the house and lender takes it back and puts it on the market for sale. Lenders can’t start redemption period until 30 days after borrower fails to make payments. In reality lenders usually take more than 30 days to give notice of default ( NOD ). In many cases they have taken 60 to 90 days or more.

Foreclosure Steps and Other Options After NOD

1) Public Notice – For the purpose of informing the borrower. Has to be done in the county where the property is located. Have to put in newspaper once per week for 4 consecutive weeks prior to Sheriff’s Sale. Usually posted in Detroit Legal News, Oakland Press. Also published in County Sale Website. Within 15 days of publication the property must also have a posting attached to it with all information regarding Sheriff’s Sale.

2) Sheriff’s Sale – Before the redemption period. When the lender forecloses they take it to court for sale. Usually happens in court or on courthouse steps. Anyone can participate in these sales. Lender decides on minimum bid price which usually includes all their costs and fees. Highest bidder gets Sheriff’s Deed. Deed will not go into effect until after the redemption period is over and borrower fails to redeem property. Can’t get a mortgage on these. Cash sale only. No disclosures required. No inspections allowed after the sale. You buy as-is and buyer pays for certificate of occupancy and any city requirements to bring property up to code. Title may not be clear. Do homework before executing this sale. Sheriff’s Deed will include interest that will be paid to winning bidder if borrower redeems property. A word of advice – attend a Sheriff’s sale before you get involved.

3) Redemption Period – After the Sheriff’s sale the borrower is granted a period of time to redeem property by making the back payments. If not sale goes to highest bidder.

i) 15 Days – for abandonment only. Vacant is not the same thing as abandonment. If there is a for sale sign on the property it could be vacant and not abandoned. Lender has to post property, send notice to last known address of borrower. If borrower does not respond within 15 days the redemption period expires.

ii) 6 months – If borrower has paid less than 1/3 on their note at time of default.

iii) 1 Year – If borrower has paid more than 1/3 on their note at the time of default or if the property is more than 3 acres in size.

4) Tenant’s rights – Tenants must move out at Sheriff’s Sale. Mortgage and note takes precedence over tenant’s rights. Lender is first lien holder. Tenant should contact their attorney to find out what to do with regards to rental payments. Some landlords pocket the money and don’t pay the mortgage so the lenders want the tenants out immediately.

By Lee Bittinger