Here is Foreclosure Overview from RealityTrac

The foreclosure process begins when a borrower/owner defaults on loan payments (usually mortgage payments) and the lender files a public default notice, called a Notice of Default or Lis Pendens. The foreclosure process can end one of four ways:

The borrower/owner reinstates the loan by paying off the default amount to during a grace period determined by state law. This grace period is also known as pre-foreclosure.

The borrower/owner sells the property to a third party during the pre-foreclosure period. The sale allows the borrower/owner to pay off the loan and avoid having a foreclosure on his or her credit history.

A third party buys the property at a public auction at the end of the pre-foreclosure period.

The lender takes ownership of the property, usually with the intent to re-sell it on the open market. The lender can take ownership either through an agreement with the borrower/owner during pre-foreclosure or by buying back the property at the public auction. These are also known as bank-owned or REO properties (Real Estate Owned by the lender).

This process allows for three opportunities for finding bargains on foreclosure homes.

Pre-Foreclosure (NOD, LIS): Buying a property in pre-foreclosure involves approaching the borrower/owner and offering to buy the property outright. The borrower/owner can walk away with something to show for any equity in the property and avoid a bad mark on his or her credit history. The buyer has time to research the title and condition of the property and can realize discounts of 20-40 percent below market value.

Auction (NTS, NFS): If the loan is not reinstated by the end of the pre-foreclosure period, potential buyers can bid on the property at a public auction. Buyers often are required to pay in cash at the auction and may not have much time to research the title and condition of the property beforehand; however, a public auction often offers some of the best bargains and avoids the unpredictability of dealing directly with the borrower/owner.

Bank-owned (REO): If the lender takes ownership of the property, either through an agreement with the owner during pre-foreclosure or at the public auction, the lender will usually want to re-sell the property to recover the unpaid loan amount. The lender will then typically clear the title and perform needed maintenance and repair; however, the potential bargain for these REO homes is typically less than a pre-foreclosure or auction property. Bank foreclosures can become government foreclosures if the loan is backed by a government agency such as the Department of Housing and Urban Development (HUD) or the Department of Veterans Affairs (VA). In that case the government agency would be responsible for selling the property.

For more information on buying foreclosed homes click here.

How to avoid Foreclosure Do not ignore letters from your lenders. If you are having problems making your payments, contact your lender, explain your situation, provide them with financial information such as monthly income and expense. Stay in your home. There are some alternatives, such as: arrangement of a repayment plan based on your financial situation. Mortgage Modification- you may be able to refinance the debt or extend of your mortgage loan. Partial Claim- your lender may be able to work with you to obtain a one-time payment from the FHA-Insurance fund to bring your mortgage current. Pre-foreclosure sale- you can attempt to sell your property for the amount less than the amount necessary to pay off your mortgage loan. You may qualify if:

the loan is at least 2 months delinquent;

you are able to sell your house within 3 to 5 months; and

a new appraisal (that your lender will obtain) shows that the value of your home meets HUD program guidelines.

Before you buy You'll need to make sure you're armed with the foreclosures data you'll need to find and buy foreclosed homes.

Here is a look at Michigan Foreclosure Law.

Experts say here are the main points you should remember:

Don't lose your home and damage your credit history.

Call or write your mortgage lender immediately and be honest about your financial situation.

Stay in your home to make sure you qualify for assistance.

Arrange an appointment with a HUD-approved housing counselor to explore your options at (800) 569-4287 or TDD (800) 877-8339.

Cooperate with the counselor or lender trying to help you.

Explore every alternative to keep your home.

Beware of scams.

Do not sign anything you don't understand. And remember that signing over the deed to someone else does not necessarily relieve you of your loan obligation.

If you have further questions, contact your lender or a housing counseling agency. Call 800-569-4287.