How to Prevent a Home Foreclosure

Facing the possibility of house foreclosure is frightening and unfortunately, it is not always unavoidable. If staying in your home is no longer possible, there are several choices and services as well as loss mitigation measures available.

But first, let’s first define what Foreclosure means. 

To put it simply, imagine this scenario: When borrowers cease making payments on their mortgage loans, the banks and other mortgage lenders can recover their losses through foreclosure.

When a borrower takes out a mortgage to buy a house, they commit to pay their lender monthly installments until the house is repaid. The lender will try to recover part or all of what is still owing by seizing control of the house and selling it if a borrower is no longer able to make loan payments, sometimes due to financial difficulties such a job loss.

As a result, the homeowner gets removed from the house when it is foreclosed upon, and the foreclosure is shown on their credit report, which has a negative effect on their credit score.

Take note, your choices for halting the foreclosure process will depend on how far along you are and how your financial position is if you have missed three or more payments and are in default or in pre foreclosure. 

As soon as you anticipate missing payments, it is advisable to talk to your service provider about your choices so they can see what they can do to assist you catch up and even refinance to prevent foreclosure.

Before it's too late, use these steps to prevent foreclosure:

1. Discuss with your Lender.

If you recently overcame a brief setback that kept you from paying your mortgage payments for a while and are now able to do so in full each month but are unable to pay back the missing payments in full, this is a viable alternative for you.

If you won't have any problem making payments in the future, your lender could agree to work out a repayment schedule to bring your past-due loan back on track. As part of this repayment plan, the lender will add portions of the amount you owe for late payments to your normal monthly installments, enabling you to settle the debt over a predetermined period of time.

When negotiating a new payment schedule with your lender, be sure to be completely honest about how much you can really afford to pay each month. Avoid agreeing to pay more than you can comfortably afford. Ask about more alternatives for mortgage relief. Your lender could provide one of the following choices depending on the circumstances.

2. Request a Suspension.

Mortgage forbearance enables borrowers to suspend monthly mortgage payments for a certain length of time if they are momentarily having financial difficulties.

The loan servicer anticipates that you will utilize the forbearance period to get back on your feet and get ready to resume making your normal monthly payments at the conclusion of the predetermined time period, in addition to paying back any accrued debt during the forbearance period.

The main point to keep in mind about forbearance is that you'll be responsible for paying the amount that was suspended at the conclusion of the grace period. Therefore, if you were in forbearance for five months, you will be required to make up the five months' worth of missed mortgage payments. Usually, you may do this as a one-time payment or as a part of a payback schedule.

3. Submit A Loan Modification Request.

A loan modification, as you may have guessed, adjusts the terms of your existing loan. If you aren't qualified for a refinancing, a loan modification may be able to help you keep up with your payments and keep living in your house by lowering your monthly payments.

Extending the loan term to give you more time to pay it off and decrease your monthly payments is a popular sort of loan modification. This might or might not be done in addition to reducing your charge.

4. Consult A Counseling Organization Approved by HUD.

The Department of Housing and Urban Development (HUD) provides housing counseling organizations around the nation that offer loss mitigation counseling to those facing foreclosure if you need professional help. You may learn from them how to prevent foreclosure right away. Usually, these services are free or very inexpensively priced.

5. Implement a Short Sale.

If there are no choices for payment arrangement that would let you keep your property, your only remaining options to prevent foreclosure will include moving out. One of these choices is something called a short sale.

You sell your real estate in a short sale for less than what you owe on it. Your lender receives the selling proceeds and usually forgives all or a portion of the outstanding debt. Before you can explore this option, your lender must give their consent since they must agree to take less than what you owe on your loan.

6. Sign a Deed in Lieu of Foreclosure. 

Deeds in lieu of foreclosure, in which you voluntarily surrender ownership of your house to your lender in return for being released from your mortgage obligation, are occasionally accepted by mortgage companies to prevent foreclosure. You can avoid a formal foreclosure process by doing this.

FAQs about Foreclosure

How late may you intervene in a foreclosure?

Your lender will start the foreclosure process after you are many months behind on your payments and make no effort to bring the account current. A sale will then be set. Your state's rules will determine exactly how this process plays out and when you'll have lost your house permanently. Here are some broad expectations, though.

Your home will be put up for auction during the foreclosure sale, and the lender will use the profits to try to recuperate as much of their losses as they can. You can normally halt the foreclosure process in jurisdictions without a redemption period up until the day of the foreclosure auction, however the precise time varies from state to state.

Is it possible to halt foreclosure by making the overdue payment?

If your state offers a redemption period, you will have a certain length of time following the sale to either buy your property back outright or settle your mortgage and keep living in it.

The housing authority in your state will be better knowledgeable about the particular legislation there.

What can a lawyer who defends against foreclosure do for you?

A legal company that specializes in foreclosure can assist you in analyzing your debt and making an educated decision in the complicated world of foreclosure law if your mortgage lender files a foreclosure action against you.

You may choose. If it's too late, a foreclosure attorney may be able to assist you in filing for bankruptcy. They may also assist you in resuming the mortgage.

Conclusion: The best defense is to avoid foreclosure.

The sooner you take steps to avert or prevent foreclosure, despite the temptation to ignore it, the better off you'll be.

Source:

https://www.quickenloans.com/learn/how-to-stop-foreclosure