Eight homeowner responsibilities to know during the foreclosure process
After a sheriff sale, think about when to leave your house, finding another place to live, and moving. Also know your rights and legal responsibilities.
If you cannot afford to keep your home and foreclosure is the only exit option, you are faced with several choices. How long to stay before moving out? Where and how to find another place to live? Do I have any legal obligations? This article will discuss eight homeowner responsibilities during the redemption period for mortgage foreclosure.
First, understand the foreclosure timeline. Determine the date you must vacate the property and the date you will leave. Check with your county Register of Deeds for the date the sheriff sale occurred. In Michigan, you are typically in the redemption period for six months after the sheriff sale. Your lender is responsible for following through on the legal process of foreclosure. We have heard of cases where homeowners moved, no sheriff sale occurred, and homeowners realize a few years later they could have been living rent free in the house.
Second, understand your rights and respond promptly to all foreclosure notifications. Michigan laws now require you to allow inspectors to periodically come into your home with proper notification. If you do not allow them in, the lender can speed up the redemption period and begin the eviction process. See the article “When to move during the foreclosure process” published by Michigan State University Extension.
Third, you continue to maintain the property. Keep the grass mowed and the snow shoveled. Show visible signs that you live there. Lenders hire inspectors to drive by at least monthly to determine occupancy.
Fourth, set aside funds to pay for relocation. During redemption, you can continue living in the home without mortgage payments. You can also cancel homeowner’s insurance and obtain renter’s insurance. Use these budget savings for your move and new housing.
Fifth, determine where to go next after considering housing options. If renting, begin to look for listings. See the article to help determine your housing needs.
Sixth, consult a qualified tax specialist to discuss any potential tax implications. If the lender forgives your debt owed, you will receive a 1099-C (cancellation of debt) statement from the mortgage company by the end of January after the foreclosure year.
Seven, prepare for and make the move. Revisit your budget to determine what money is available for your next living situation. See the article When to move during the foreclosure process for questions to ask yourself about when to move.
Eight, provide the lender with a forwarding address. You may receive a 1099-C or other correspondence. If necessary, the lender may require you to pay any deficiencies or remaining debts. If your former property sells for less than what you owed, the lender may require you to pay that amount.
During foreclosure, understand your rights and responsibilities before you move. You are likely going through many challenges. However, you can make more knowledgeable decisions to help you navigate this stressful time.
Michigan State University Extension has released a new toolkit for homeowners who are experiencing or have previously experienced foreclosure. This toolkit will equip these individuals and families with tools to help them recover their financial stability, in the case that a recovery of their home is not possible. The toolkit is available to download free at the MI Money Health website.
Michigan State University Extension is a HUD-approved housing counseling agency has many MSHDA certified housing counselors at multiple county offices to assist you by phone or through technology. Find the one staff person nearest you at the MI Money Health website. MSHDA certified Housing counselors may be located online.