Alternatives to Foreclosure in Michigan: Six Options Compared
The short answer: A Michigan homeowner facing foreclosure usually has six alternatives. Three keep the house: forbearance, a repayment plan or a loan modification. Three let it go on better terms than a foreclosure: selling it, a short sale or a deed in lieu. Federal rules generally bar your servicer from starting foreclosure until you're more than 120 days behind. A complete loss-mitigation application sent more than 37 days before a sheriff's sale gets evaluated for every option before the sale can go ahead. If you have equity, a regular sale usually protects the most of it.
Falling behind on a mortgage feels like a single outcome is coming. It usually isn't. Michigan homeowners have more options, and often more time, than they expect. The choice among them mostly comes down to two questions: do you want to keep the house, and how much equity is in it?
First, know your protections
Federal mortgage servicing rules (Regulation X) give you a few protections that shape every option below:
Early contact. Your servicer must try to reach you by phone by the 36th day of delinquency and send a written notice about your options by the 45th day.
The 120-day rule. A servicer generally can't make the first notice or filing for foreclosure until you're more than 120 days delinquent.
Complete application, full review. If the servicer receives a complete loss-mitigation application more than 37 days before a foreclosure sale, it must evaluate you for every option it offers within 30 days. It can't hold the sale while that review is pending.
Appeal rights. If your complete application arrives 90 or more days before a sale, you can appeal a denied loan modification.
The word that matters is complete. Ask the servicer, in writing, exactly what documents they need, and keep copies of everything you send.
Options that keep the house
Forbearance
Your servicer lets you pause payments or pay less for a set period. You still owe the full amount and repay the difference later. It fits a temporary hardship with a clear end, like a job gap or a medical recovery.
Repayment plan
You catch up by adding part of the past-due amount to your regular payment over a set period. It works when the hardship is over and your income can handle a somewhat higher payment for a while.
Loan modification
The servicer permanently changes your loan terms. That can mean the rate, the term, or rolling the arrears into the balance, to make the payment affordable. It's the main option for a hardship that changed your income for the long run. Once you get an offer, the servicer can require an answer, but not sooner than 14 days after making it.
Options that let the house go on better terms
Sell the house
If the home is worth more than you owe plus the costs of selling, a sale pays off the mortgage, the arrears and the fees, and you keep the rest. In Michigan you can sell before the sheriff's sale, and the state's housing authority notes that homeowners can still sell during the redemption period after it. Of all the alternatives, this is the one most likely to protect your equity.
Short sale
If you owe more than the house is worth, the lender may agree to accept a sale for less than the balance. It takes lender approval and usually more time than a regular sale. Ask for a written waiver of the deficiency, meaning the unpaid balance. Without one, you may still owe it.
Deed in lieu of foreclosure
You voluntarily sign the house over to the lender to avoid the foreclosure process. As with a short sale, get any deficiency waiver in writing.
The six options at a glance
Forbearance: keep the house · best for a temporary hardship · the missed amount is still owed later.
Repayment plan: keep the house · best when the hardship is over · higher payments for a while.
Loan modification: keep the house · best for a lasting income change · requires a complete application and approval.
Sell: leave with your equity · best when you owe less than the house is worth · needs enough time to close before the sale, or during redemption.
Short sale: leave without foreclosure · best when you owe more than it's worth · needs lender approval, and ask for a written deficiency waiver.
Deed in lieu: leave without a sale · best when a sale isn't workable · lender approval, written deficiency waiver.
Two things that changed or catch people out
Forgiven mortgage debt may now be taxable. For years, a special federal exclusion covered forgiven debt on a main home. According to IRS Publication 4681, that exclusion does not apply to discharges completed, or agreements entered into, after December 31, 2025. A 2026 short sale, deed in lieu or foreclosure that forgives debt could create taxable income unless another exception applies, such as insolvency. Talk to a tax professional before you sign.
The Michigan Homeowner Assistance Fund is closed to new applicants. MSHDA stopped taking new MIHAF applications on December 8, 2023. If you've read about it online, don't build a plan around it. Free HUD-approved housing counseling is still available (see below).
If foreclosure has already started
Many Michigan foreclosures are handled out of court, by advertisement. The notice is published once a week for four weeks and posted on the property within 15 days of the first publication, then the sheriff's sale is held. For most owner-occupied homes, the redemption period after the sale is six months. It can be longer or shorter depending on how much is owed and whether the home is abandoned. I've laid out each stage and what it means for a sale in how long you have to sell before foreclosure in Michigan.
If the sale price at the sheriff's sale is less than what you owe, the lender can pursue the difference. Michigan law limits it: if the bid was below fair market value, the deficiency is measured against the fair market value rather than the bid.
Behind on property taxes as well? That runs on a separate county timeline: selling with delinquent property taxes in Michigan.
Free help, no sale required
HOPE Hotline: (888) 995-HOPE (4673), open 24/7. Connects you with HUD-approved housing counselors.
Find a counselor: consumerfinance.gov/find-a-housing-counselor
MSHDA-approved counselors: listed on michigan.gov/mshda
Michigan Legal Help: michiganlegalhelp.org
A counselor can help you put together a complete application and talk to your servicer. It's free, and it's often the right first call.
Frequently asked questions
What are the alternatives to foreclosure in Michigan?
Forbearance, a repayment plan and a loan modification can keep the house. Selling, a short sale and a deed in lieu of foreclosure let it go on better terms than a foreclosure. The right choice depends on whether you want to keep the home and how much equity it has.
How long does a mortgage servicer have to wait before starting foreclosure?
Under federal Regulation X, a servicer generally can't make the first notice or filing for foreclosure until the loan is more than 120 days delinquent.
Can a lender foreclose while my loan modification is being reviewed?
If the servicer receives a complete loss-mitigation application more than 37 days before a foreclosure sale, it must evaluate you within 30 days and can't conduct the sale while the application is pending.
Is forgiven mortgage debt taxable in 2026?
It may be. IRS Publication 4681 says the qualified principal residence indebtedness exclusion does not apply to discharges completed or agreements entered into after December 31, 2025. Other exceptions, such as insolvency, may still apply. Ask a tax professional.
Can I still sell my house after a sheriff's sale in Michigan?
Yes. Michigan's housing authority notes that homeowners can sell or buy back the property during the redemption period, which is six months for most owner-occupied homes.
Want to see your numbers?
Send me the address and whatever paperwork you've received. I'll tell you what the house is worth today, what a sale would net after the payoff, and how that compares with the other options. If a modification or a counselor is the better move, I'll say so. For the full picture, see selling a house in pre-foreclosure in Michigan, or see all your selling options.
Options first. Recommendation second.
Call, text, or email: (586) 238-3693 · aj@ajrittner.com
AJ Rittner · Real Estate Advisor
eXp Realty, LLC · 39555 Orchard Hill Place, Suite 600, Novi, MI 48375 · (586) 238-3693
Licensed Michigan Real Estate Salesperson since 2018 · License #6501416084 (Alexander Rittner)
This article explains how foreclosure alternatives generally work in Michigan. It is not legal, tax or financial advice. AJ Rittner is a licensed Michigan real estate agent and active real estate investor, not an attorney, accountant or tax adviser. Your options depend on your loan, your servicer and your property. Confirm your situation with a HUD-approved housing counselor or a qualified attorney, and speak with a tax professional about any forgiven debt.
Sources (checked 21 Sept 2026): 12 CFR §1024.39 and §1024.41 (Regulation X), consumerfinance.gov; CFPB definitions of forbearance, repayment plan, loan modification, short sale and deed in lieu; IRS Publication 4681; MSHDA, Stages of Foreclosure and MIHAF closure notice (Nov 2023), michigan.gov/mshda; Michigan Judicial Institute landlord-tenant benchbook on MCL 600.3208, 600.3240 and 600.3280, courts.michigan.gov; Michigan Legal Help.
