How To Stop Foreclosure Immediately
If you are in a position that you can no longer afford to make your payments or have already fallen behind on your mortgage, it can be a very stressful time. There are many emotions that come along with this situation… pride, fear, anger, disappointment…. We work with people every day that are going through the same thing, and understand what you are going through. The most important thing for you to do in this situation is to first, understand that you are not the only one. Millions of people are going through this same situation right now. In most cases, there is nothing that could have been done to prevent it. The most important step at this point is to make sure that you understand your options and take advantage of the solutions that are available to you.
Once you have fallen behind on your mortgage, your lender will start the foreclosure process and you will receive information and lots of not so subtle suggestions from many people who want to take advantage of your temporary misfortune. Most will tell you that time is your enemy and that you must act immediately to save your credit. Some will try to steer you towards one option that benefits them, and others may follow with a proposal to solve your problem by selling or deeding your property to them.
Don’t do it! Don’t do anything until you understand your options. And please make sure to read our section “Beware of Scams” to make sure you understand what to watch out for.
Stop The Foreclosure Sale Date
If you are deep in the foreclosure process and in a position that your foreclosure date is coming up soon, the options below may not be available. If you need to stop your foreclosure immediately, we have an option. We have attorneys that can stop your foreclosure all the way up to the week of the scheduled sale. You can read more on our Stop Foreclosure Immediately page or contact us today to learn more.
Options to Avoid Foreclosure
If you are behind on mortgage payments but do not have a pending foreclosure date, here are the options you may have available to you to avoid foreclosure. Also, make sure to download a copy of our book “Avoiding Foreclosure; How not to go broke saving your home.”
Loan Workout / Repayment Plan: If you experience difficulty paying your mortgage, you should immediately contact your lender or a housing counselor to try to work something out. If you just need a little time to get back on your feet, your lender may agree to a loan workout plan to temporarily reduce or suspend your payments, allow you to repay what’s past due in monthly installments, or provide some other type of relief.
One form of loan workout programs is a “forbearance agreement”.
Forbearance Agreement: In a forbearance agreement, the lender will give you a set period of time that you do not need to make your mortgage payments, or will offer you a reduced payment amount. Typically, a forbearance plan will last between 3 to 6 months. A longer period may be an option depending on your situation and the lender’s guidelines.
Lenders typically offer one of three options at the end of a forbearance plan:
- The balance of the missed payments is due as a lump sum payment.
- The missed payments are spread out over a fixed period of time and added to your existing payment.
- The missed payments are added to the balance of the loan.
Often times when a borrower completes a forbearance program they then go into a loan modification to work out a more permanent solution.
Loan Modification: If you wish to keep your home, the very first thing you should do is check if you qualify for a loan modification. A loan modification is an agreement between you and your lender to adjust or “modify” the terms of your loan. The goal of a loan modification is to bring the mortgage payments current and lower the monthly mortgage payments.
A loan modification can involve reducing the interest rate, extending the term of the loan, writing of a portion of the balance, adding the delinquent payments to the loan balance, or forgiving them all together. In some loan modifications, the lender may designate a portion of the balance as a “principal forbearance”. That amount of the balance does not accrue interest and that portion of the loan is due when the loan is paid off.
Sell Your Home: If you are facing a financial hardship that your lender feels you cannot rebound from, you may not qualify for a loan modification program and you will need to sell your home to pay the mortgage and missed payments. If you need to sell your home, it’s important to start sooner than later so you have enough time to properly market your home for sale, and get top dollar.
If you do not have enough equity in your home in order to sell, a short sale may be your best option.
Short Sale: If you need to sell your home, but do not have enough equity, a short sale is going to be an option. A short sale allows you to sell your home for less than what is owed on the mortgage. In a short sale, your lender will write off the remaining balance and all delinquent payments.
To sell the home as a short sale, you should list it with a real estate professional that’s well versed in these types of sales. The short sale process is very complex. You will be contacted by numerous agents claiming to be “experts” or “specialists”. The truth is, most have completed very few if any. And a short sale designation does not mean anything. If you want a truly experienced agent, verify they have closed at least 20 short sales.
Deed In Lieu of Foreclosure: Generally, if a borrower makes a good faith effort to sell the property but is not successful, a servicer may consider a deed-in-lieu of foreclosure. With a deed-in-lieu, the borrower voluntarily transfers ownership of the property to the servicer— provided the title is free and clear of mortgages, liens, and encumbrances.
Chapter 7 or Chapter 13 Bankruptcy: If you want to keep your home, you may want to file for bankruptcy. Bankruptcy is a federal court proceeding for settling your debts with your creditors under a judge’s supervision. If you are facing foreclosure, filing bankruptcy may provide an “automatic stay” to temporarily stop the foreclosure proceedings.
Chapter 7 Bankruptcy typically will not help you keep the home unless you are current on payments and have little equity. Often times, chapter 7 is used to eliminate the 2nd mortgage. A chapter 7 bankruptcy will allow you to delay a foreclosure by at least a couple of months. But, it not often advised unless you have a lot of other outstanding debts that you can include in the bankruptcy to eliminate (discharge).
Chapter 13 Bankruptcy is a program that reorganizes your payments. In chapter 13 you may be able to keep your property, but you must generally repay the overdue amount in a three-to-five-year plan along with your regular mortgage payments.
Other Alternatives: There are many other alternatives to foreclosure. You may be able to borrow money from family or friends. You may be able to supplement your income by renting out a bedroom or getting a second job. You may have a struggling small business that qualifies for an interest-free, deferred-payment America’s Recovery Capital (ARC) loan up to $35,000 from the U.S. Small Business Administration. You may also be able to come up with some other alternatives to foreclosure not mentioned here. For any of these alternatives to foreclosure, carefully consider their pros and cons, including possible credit, tax, legal, and other consequences.
The bottom line is to be proactive and start the process as early as possible when you have realized you are no longer able to afford your home. If you feel that you may want to keep your home, your first step is to contact your lender.
Best Way To Avoid Foreclosure
Each person’s situation is unique and there isn’t a “Best Way”. You need to talk with a professional to explore all of your options and determine the best solution.
Our team can help you evaluate all of your options to determine the best option for you. There is never any obligation or fee for our time. We have the experience necessary to successfully complete a short sale on your property. Contact us today to learn more. We can make things easier than they seem and will assist you in finding the solution that makes the most sense for YOU.
