How You Can Stop A Foreclosure Step By Step

You, on the other hand, must get organized, move quickly, grasp the foreclosure process, and be aware of your possibilities. You’ll have a higher chance of keeping your home if you do these things.

What Can You Do to Stop Foreclosure?

The following are ten things you can do to try to avoid a foreclosure.

1. Set up a case file with all of your loan documentation.

The first thing you should do is get organized before you miss a mortgage payment or if you’re already behind on your installments. Create a file for all of your home’s records, and place critical documents in it. Your loan paperwork, such as copies of the mortgage (or deed of trust) and the promissory note, should be included. You should also add the following:

• your billing statements every month
• a list of all the money you’ve paid
• escrow declarations (if applicable)
• information on property taxes
• information about insurance
• any correspondence you’ve received from your servicer, as well as
• a copy of any correspondence you’ve written to the servicer

2. Find out what your legal options are.

After you’ve acquired your documents, read them thoroughly to understand what will happen if you don’t make your payments. Important information will be included in the mortgage (or deed of trust) and the promissory note, such as:

• whether you can get the loan reinstated by paying the past-due amounts (state law might also provide a right to reinstate)
• the amount of the monthly late fee, and
• what extra costs the servicer may levy if you fall behind on your payments.

The lender can’t commence a foreclosure in most situations until you’ve missed 120 days of payments, according to federal law.

3. Organize all of your financial data.

You should also gather and organize your financial information in addition to the loan documentation. Gather your most recent pay stubs or, if you’re self-employed, a profit and loss statement, bank statements, federal tax return, and supporting documents for any extra income you get, such as Social Security, rental income, and alimony.

You should also calculate your total monthly income (for example, your monthly gross wages, overtime, self-employment income, unemployment income, Social Security, child support, and alimony) and monthly expenses (for example, your mortgage, credit card payments, car payments, student loan payments, food, entertainment, utilities, HOA/condo fees, and so on).

This information will be required by your servicer in order to evaluate whether you are eligible for an alternative to foreclosure.

4. Examine your financial situation.

Now that you’ve calculated your income and costs, it’s important to examine your spending habits and build a budget that you can stick to until your financial situation improves.

Begin by looking for methods to save money on a daily basis. These costs might mount up quickly if you buy a cup of coffee every morning or eat lunch out every day. You probably have a few extra expenses, such as gym memberships, cable television, and other forms of leisure, that you could cut off. You might be able to negotiate a lower monthly payment if you have certain monthly expenses that you can’t get rid of, such as credit card debt.

Consider how you might reduce or eliminate specific expenses so that you can make your loan payments more easily.

5. Recognize your choices.

Borrowers often have permanent or temporary loss mitigation alternatives available to them to assist them to avoid foreclosure. Here are a few examples of what you could do:

Modification of a loan. A loan modification is a change to your loan terms that is permanent. A modification could, for example, prolong the time you have to pay off the loan or lower the interest rate. The servicer can typically add any past-due sums to the loan balance when a loan is modified. You may be eligible for a Fannie Mae or Freddie Mac Flex Modification or a proprietary (in-house) loan modification, depending on your circumstances.

Agreements of forbearance and repayment schemes. You may be qualified for a forbearance arrangement if your inability to make your monthly payments is temporary. The lender agrees to lower or suspend payments for a set period of time under a forbearance arrangement. You bring the loan current at the end of the forbearance term by paying back the missed or reduced payments in full, either through a repayment program or a modification.

6. Contact your service provider.

Don’t put off seeking assistance until the last minute. If you miss a payment—or suspect you will miss a payment—call your servicer as soon as possible to see if you qualify for a foreclosure option. The sooner you take care of the issue, the better.

7. Make an appointment with a HUD-approved housing counselor.>

Contacting a free HUD-approved local counseling agency is also an excellent idea. A housing consultant can aid you in figuring out how to avoid foreclosure and will be aware of any special programs that may be available to you.

8. For-profit foreclosure rescue and loan modification firms should be avoided.

For-profit foreclosure avoidance firms that claim to be able to secure you a loan modification, give debt counseling, or provide some other type of foreclosure relief for a charge should be avoided. The majority of these businesses are con artists who offer little (if any) assistance to distressed homeowners.

9. Learn about the foreclosure rules in your state.

The regulations and timelines for foreclosure differ from state to state. You should familiarize yourself with the foreclosure laws in your state so that you are aware of the following:

• how much time you have to work out a bargain before the house goes into foreclosure, and
• during the foreclosure process, the rights and protections you have.

Do some legal study or speak with a local foreclosure lawyer to learn more about your state’s foreclosure rules.

If your state, county, or city offers foreclosure mediation, take advantage of it.

Foreclosure mediation brings the borrower, the lender (or its representative), and a neutral mediator to the table with the objective of resolving the arrears. According to one study, homeowners who participate in mediation are 1.7 times more likely than those who do not to avoid foreclosure.

10. Obtaining Assistance

Consider speaking with a lawyer if you have questions about how foreclosure works in your state and what rights you have under federal and state laws, or if you think you want to fight a foreclosure in court. If you can’t afford to employ a lawyer to represent you during the process, schedule a consultation with one who can advise you on what to do, explain how foreclosure works in your state, and explain your legal rights and duties.

PS: This is not a legal advice, please seek a professional. This is for informational purposes only.