Ways to Stop a Foreclosure in Its Tracks

Have you gotten a notice of foreclosure in the mail? If this is the case, you must move quickly to combat it. Not only can a foreclosure damage your credit score, but losing your house is never a nice thing, and finding a good place to live after a foreclosure can be difficult. Fortunately, there are some options available to assist you in dealing with this essential issue. You don’t have to lose your home just because you’ve received a foreclosure notice. You can take the following steps:

1. Bring Your Loans Up To Date

Bringing the debt current entails paying the entire amount that is past due. You can avoid foreclosure by notifying your lender that you will pay the default amount plus any additional fees. Your lender would much rather have the money than your home, so unless there are exceptional circumstances, this should work out. Unfortunately, most people are unable to pursue this alternative because they lack the financial means to bring their loan current.

2. Modify the Loan

You may be able to adjust the conditions of your loan if you are unable to make your monthly mortgage payment. Depending on your present circumstances, changing the conditions of your loan could lower your monthly payments or interest rate. You might be able to negotiate a loan modification with your lender, or you might qualify for the government’s Homeowner Affordability and Sustainability Plan (HASP), which permits you to restructure your mortgage. HASP, according to Dickson Frolich, is designed to assist homeowners who owe more on their home than it is worth or who have more debt than income.

3. Selling the House

You don’t want to lose your home, but it’s possible that it will. You might try a short sale on your house to avoid some of the troubles that come with foreclosure. However, you must first obtain authorization from your lender, or you may find yourself in serious legal problems. The goal of a short sale is to sell your house for enough money to cover the amount you owe your lender. If you can’t sell it for that amount, you may have to pay the loan’s remaining sum. A short sale isn’t always the best option, so make sure you do your homework before deciding.

4. File for Bankruptcy

Bankruptcy should only be considered as a last choice because it has some serious effects and may not allow you to keep your home. When you file for bankruptcy, all of your lenders and creditors are issued a stay on your loans, which means they can’t collect until your case is resolved. However, this stay doesn’t last indefinitely. If your lender has initiated the foreclosure process, they will not be able to take possession of your house until all of the issues have been resolved. You may be able to restructure your debts and develop a payment plan to maintain your house depending on the type of bankruptcy you file, or you may be compelled to sell your property as part of a liquidation of your assets. Consult a financial advisor before declaring bankruptcy to ensure that it will not give you any more trouble.

However, it will be best to avoid going through the mental and physical stress of a foreclosure. Here are nine things to note in order to avoid a foreclosure:

1. Don’t dismiss the issue.

The longer you are behind on your payments, the more difficult it will be to get your loan reinstated, and the more likely you may lose your home.

2. As soon as you detect you have a problem, contact your lender.

Lenders aren’t interested in your home. They have choices to assist debtors who are having financial difficulties.

3. Read and react to all correspondence from your lender.

The initial letters you receive will provide you with useful information regarding foreclosure prevention measures that can assist you in overcoming financial difficulties. Important notices of pending legal action may arrive later in the mail. In foreclosure court, your failure to open the mail will not be considered an excuse.

4. Be aware of your mortgage rights.

Locate and study your loan documentation to see what your lender may do if you default on your payments. Contact the State Government Housing Office to learn about the foreclosure regulations and timeframes in your state (since each state is different).

5. Be aware of your possibilities for avoiding foreclosure.

On the internet, you can find useful information regarding foreclosure avoidance (also known as loss mitigation).

6. Make an appointment with a HUD-approved housing counselor.

HUD, the United States Department of Housing and Urban Development, support free or low-cost housing counseling across the country. If you need it, housing counselors can help you understand the law and your options, organize your money, and represent you in lender discussions.

7. Set spending priorities.

After health care, the maintenance of your home should be your priority. Examine your finances to discover where you can save money so you can make your mortgage payment. Look for things you can do without, such as cable TV, subscriptions, and entertainment. Defer payments on credit cards and other “unsecured” debt until your mortgage is paid off.

8. Make the most of your assets

Do you have any assets that you could sell for cash to assist pay off your debt, such as a second car, jewelry, or a whole life insurance policy? Is it possible for anyone in your family to pursue a second job to supplement their income? Even if these efforts don’t greatly boost your available cash or income, they show your lender that you’re willing to make sacrifices in order to keep your house.

9. Stay away from foreclosure avoidance firms.

You don’t have to pay fees for foreclosure avoidance assistance; instead, put that money toward your mortgage. Many for-profit firms will contact you, claiming to be able to work out a deal with your lender. While some companies may be legitimate, they will charge you a large price (typically two or three month’s mortgage payment) for information and services that your lender or a HUD-approved housing counselor will provide free of charge if you contact them.

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