Homeowners who are trying to avoid foreclosure detest dealing with the facts that brought them here in the first place. It can be depressing to face the facts. When they first acquired the house, the thought of losing it was probably the last thing on their minds. Few homeowners intend to file for bankruptcy.
Pending Foreclosure: What Are the Causes?
Apart from individuals who actively engage in mortgage fraud with the purpose of never paying a single payment, most homeowners are forced to stop making timely mortgage payments due to unforeseen circumstances. Listed below are a handful of them:
Ways to Avoid a Foreclosure
Preventing the filing of a Notice of Default, for example, is the greatest approach to avoid foreclosure in California. California is included because it is home to roughly 40 million people and has a large amount of real land.
Lenders prefer not to foreclose, but if necessary, will submit a Notice of Default to safeguard their interests. The first thing you should do if you know you won’t be able to pay your mortgage is to contact your lender.
Don’t put it off, be humiliated, or disregard letters from your lender; doing so will only make things worse, not better. Depending on your specific scenario and hardship conditions, your lender may suggest one or more of the following loan modification options:
Time to catch up on payments: Your lender may agree to wait before pursuing legal action against you and work out an acceptable repayment plan with you. This is referred to as forbearance.
Forgiveness of payment: If you and the lender can come up with a plan to get back on track after missing a couple of payments (and having no way to pay them back), the lender may be willing to give you a break and let you off the hook. This is known as debt forgiveness, and it occurs infrequently.
Spread the missed payments out over a longer period of time: For example, if your monthly payment is $1,200, the lender may allow you to add $100 to each payment each month for a year until you are caught up. This is referred to as a repayment plan.
Changing the terms of your loan: If you have an adjustable-rate mortgage, your lender may choose to freeze the interest rate before it rises or change it to a more manageable rate for you. A lender may potentially decide to extend the repayment period. A note modification is what this is referred to as.
Past payments are added to your loan balance: If you have enough equity and match the lender’s lending criteria, the lender may increase your loan balance to incorporate the back payments and re-amortized your loan. This is referred to as refinancing.
Offering a separate loan: Certain government loans have provisions that allow borrowers who fulfill certain qualifications to apply for a second loan to cover the missing payments. This is referred to as a partial claim.
After a Notice of Default, You Have Options
Your alternatives are restricted when the lender files a Notice of Default. That is why it is preferable to contact your lender before you fall behind on your payments, as lenders are generally hesitant to work out repayment plans once foreclosure procedures have begun.
You will be granted a specific amount of time to catch up on your payments, pay the foreclosure costs, and stop the foreclosure. This is referred to as loan reinstatement. If you are unable to make up the missed payments and the lender refuses to cooperate with you, you may be able to avoid foreclosure by taking the following steps:
Sell your home: Speak with real estate professionals to acquire an estimate of market value and typical DOM. Although you may be tempted to engage a discount broker, many sellers believe that full-service brokers provide them with the exposure and marketing that they require. Compare the two to see which one best suits your demands and timeline.
Consider a short sale: If the value of your home is less than the amount owed on it, you may be eligible for a short sale. A short sale has a negative impact on credit, although it isn’t as awful as a foreclosure. To find out if your lender will cooperate on a short sale, you or your agent will need to talk with them. This is referred to as a redeemed pre-foreclosure.
To avoid foreclosure, sign a deed in lieu of foreclosure: deeding the house back to the lender is referred to as deeding the house back to the lender. The homeowner submits a properly written and notarized deed to the lender, and the lender forgives the mortgage, essentially ending the foreclosure process. According to lenders, deeds in lieu of foreclosure have the same impact on credit as a foreclosure.
Rental for a short period of time: The lender may also work out a plan for the homeowner to stay in the house until he or she finds a new place to live. Owners in default should negotiate the right to remain occupied, arguing that if the lender went through with the foreclosure, the owner would still have the right to possession.
Consider the following scenario: All foreclosure proceedings can be halted by taking legal action, such as filing for bankruptcy. Call a bankruptcy lawyer and request a detailed explanation of all your alternatives, expenses, and timeframes. It won’t stop a foreclosure from happening, but it can postpone it and buy you more time.
PS: This is not a legal advice, please seek a professional. This is for informational purposes only.
For information on foreclosure defense call us at (877) 399 2995. We offer litigation document review support, mortgage audit reports, securitization audit reports, affidavit of expert witness notarized, and more.