How To Stop Foreclosure
There are several ways to stop foreclosure. This might sound like a fantasy but if you know how to stop foreclosure, you can stop the problem before it starts. The sad truth is that everyone who loses their home to foreclosure knew they were on the path to foreclosure even before they missed their first mortgage payment. The easiest way in the long run but is to face the problem before it even begins.
It is difficult when you are in a vulnerable position to sit down with pen and paper and write out a list of the money you need to pay that month and another list of the money that is coming in that month. There is nothing to be gained by not facing facts so you might as well know the truth sooner rather than later. You are not going to be able to make your mortgage payment that month. The best way of avoiding foreclosure begins right here before you miss that first payment. You still have options at this point.
Be Proactive!
For instance, you can simply refinance your mortgage. Sometimes you can find people who are willing to remortgage and offer you a longer term for a lower monthly payment. You could also ask the current lender to make changes to the mortgage you have. They might be willing to cut your interest rate or extend the amortization. This can give you a little bit of time to decide what you want to do.
The number one thing that you should not do is to avoid the situation. If you are proactive and call the mortgage company before they call you, the question of how to stop foreclosure becomes a lot easier to answer.
If you have already been contacted, do not wait to respond. The longer you wait, the fewer options you have. If you call first to rearrange financing, then the mortgage company is stopped in its tracks. If they contact you and you call them immediately, they are more willing to work with you because you are willing to work with them.
There is a second step to taking immediate action when you first realize you have a problem and that is to make the decision about what you plan to do in the long run. If the financial problem is temporary, you might be able to simply resume your old lifestyle once the mortgage is renegotiated but if the situation is still a little rocky, you might want to consider selling your house.
The fastest solution I ever saw was when this woman I knew lost her job and sat down and realized just how fine a line she was walking. She called a real estate agent and asked that the house be listed. She was planning to call the mortgage company the next day, once the “for sale” sign was up. The real estate man was putting the sign on her lawn that evening when a couple stopped and said that they had been looking for a house in the neighborhood and were in the habit of going for drives in the evening looking for houses for sale. They made the offer to purchase and the woman’s problems were solved. She even made enough profit on the house to carry her over until she got another job.
Reinstatement
Reinstatement might be possible when you are behind in your payments but can promise a lump sum to bring payments current by a specific date.
Forbearance
In forbearance, you are allowed to delay payments for a short period, with the understanding that another option will be used afterwards to bring the account current.
A Repayment Plan
If your account is past due, but you can now make payments, the lender might agree to let you catch up by adding a portion of the past due amount to a certain number of monthly payments until your account is current.
Solutions for Longer-Term Problems
Mortgage Modification
If you can make your regular payment now, but cannot catch-up the past due amount, the lender might agree to modify your mortgage. One solution is to add the past due amount into your existing loan, financing it over a long term.
Modification might also be possible if you no longer have the ability to make payments at the former level. The lender can modify your mortgage to extend the length of your loan (or take other steps to reduce your payments).
Selling Your Home
If catching up is not a possibility, the lender might agree to put foreclosure on hold to give you some time to attempt to sell your home.
Deed in Lieu of Foreclosure
When the lender allows you to give-back your property--and forgives the debt. It does have a negative impact on your credit record, but not as much as a foreclosure.
The lender might require that you attempt to sell the house for a specific time period before agreeing to this option, and it might not be possible if there are other liens against the home.
For FHA Loans
The lender might be able to help you receive a one-time payment from the FHA Insurance fund. Your loan must be at least 4 months but no more than 12 months past due and you must show you are able to begin making full mortgage payments.
- You must sign a promissory note which allows HUD to place a lien on your property for the amount received from the fund.
- The note is interest free, but must eventually be repaid.
- The note becomes due when you pay off the loan or when you sell the property.
For VA Loans
VA VA Regional Loan Centers offer financial counseling that's designed to help you avoid foreclosure. Call 1-800-827-1000 and ask for the phone number of the Loan Service Representative in your area.
Contact a HUD-Approved Counselor
If you don't want to talk with your lender first, contact a HUD-approved counseling agency. A counselor can help you determine which options might be available to you and negotiate with your lender to work out a repayment program. You can find an approved agency on the Web.
Put the Process in Motion
Your lender won't automatically put you into a program to bring your loan up-to-date. You must put the plan into motion and provide the lender with the documentation they require to analyze your financial situation.
Although lenders do not want to foreclose if it can be avoided, they do want to make sure you can follow-through on any promises you make to bring your account current.
Be prepared to share all details about your financial situation with your lender.
- An explanation of your current financial circumstances.
- Details about your current income.
- A list of your household expenses.
- The lender will review and analyze your situation before offering a solution to bring your loan up-to-date.
Repairing Your Credit
If your home loan is past due, your other obligations probably are too. A nonprofit credit counseling agency might be able to help you work with your creditors to reduce your monthly payments by lowering interest rates or extending repayment periods.
The key word here is nonprofit. Steer clear of companies that promise you quick, easy results for all of your credit problems--if you pay them a large fee.