If you are in danger of losing your home in a foreclosure, it can be very stressful. However, it is important to understand there is no need to just sit back and allow it to happen. There are ways to stop foreclosure, but the potential varies among banks. You need to become educated on the various methods of preventing or stopping foreclosure.
Discuss Options to Avoid Foreclosure with the Lender
One of the most important things you can do for yourself when you either fall behind on mortgage payments or foresee the possibility is to contact the lender to discuss what available options. When you plan and implement a budget, you won’t need to stop the foreclosure process, except under extenuating circumstances.
A Workout Plan
Some lenders offer what is called a workout, which means you and the lender come to a compromise whereby the lender agrees to temporarily or permanently decrease the mortgage terms to make them more affordable, or in the case of default, adjust the terms so the borrower can more easily bring the payments current.
What Options Are Available to Avoid Foreclosure?
Most lenders are more than happy to provide homeowners with ways to stop foreclosure immediately. While bankruptcy can certainly provide a stay, it also has a long-term effect on your credit. Instead, look at some of the other alternatives to which lenders may agree:
- Maintain a fixed interest rate or payment on an adjustable-rate mortgage.
- Extend the introductory rate or payment.
- Provide the borrower with a forbearance agreement that allows cessation of payments for as long as six months.
- Push some payments to the end of the loan, thereby extending the maturity date.
- Add extensive back payments in a lump sum into the total balance of the loan, so it can be paid over the lifetime of the loan in small installments.
- Provide mortgage loan modification to extend the length of the loan and lower the monthly payments.
- Eliminate any penalties and legal fees the homeowner has incurred.
- Agree to a short sale of the property, meaning the lender agrees to allow the homeowner to sell the home for less than the mortgage balance and forgive the remainder.
- Allowing mortgage assumption that would not ordinarily be allowable.
Before engaging in any type of workout or compromise agreement, you need to understand how it will appear on your credit report. Making sure you understand all the implications of the agreement on your credit will prevent any future surprises or misunderstandings. The goal is for the compromise to show you are paying as agreed. However, you must get the lender to agree to this upfront or it will not happen.
Can You Put a Stop to a Pending Foreclosure Once It Starts?
If you have been notified your home is pending foreclosure action, you must act quickly to prevent it. In addition to damaging your credit, you risk losing your home. Foreclosure can make it difficult for you to find a decent place to live, but all is not lost. Some of the options you have available to resolve this crucial situation include:
- Bring your payments up to date. This means you must contact the lender and advise them you will pay all past due payments and fees. The lender is more interested in receiving the money you owe than having to take your home. While this is always an option, most people are unable to bring their mortgage payments current once it reaches this stage.
- If it is difficult for you to make your mortgage payment, you can attempt to modify the loan. This action may reduce the monthly payment or interest rate. It may be possible to be approved for loan modification with your current lender or it may be possible to take advantage of the government’s Homeowner Affordability and Sustainability Plan (HASP). This program is designed to help those who are under water on their mortgage or whose home debt exceeds their income.
- While you certainly don’t want to lose your home in a foreclosure action, it may be unavoidable. One option worth considering to stop foreclosure is a short sale. The lender must agree to this option, so you never want to attempt a short sale without consulting with the lender. This is not always a feasible option, so you need to make sure you conduct research beforehand.
- Although filing bankruptcy places an automatic stay on foreclosure, it also has other consequences as well. For instance, you could still lose your home once the bankruptcy settlement is complete. You can possibly develop a plan to restructure payments to creditors and keep your home, but the bankruptcy judge could also force you to liquidate the equity in your home and repay creditors.
How Long Can You Stay in Your Home During Foreclosure?
The length of time varies by state and type for foreclosure (judicial vs. nonjudicial), but once your legal right to remain in your home ends, you must vacate. If you fail to leave, the new owner will take action to remove you through the eviction process. Sometimes the eviction is initiated during the foreclosure, but it may also be filed separately.
Is It Ever Too Late to Stop the Process of Foreclosure?
When your home reaches the point of auction, the lender will auction it off and use those proceeds to recover as much of its losses as possible. In states that do not have a redemption period, it is possible to stop the foreclosure sale right up to the date of the auction. However, the actual time frame varies by state. In states with a redemption period, you are given a specific amount of time following the sale to redeem your home or pay the mortgage in full to avoid eviction.
Do I Need a Lawyer to Stop the Process of Foreclosure?
You don’t always need a lawyer to stop a foreclosure, but there may be certain circumstances where it is crucial. Some of the circumstances that may warrant hiring a foreclosure attorney include:
- You believe you have a defense to stop foreclosure and do not want to leave your home. Those issues might be the lender failed to follow proper procedures for foreclosure; the party filing the foreclosure is unable to prove it has the right to foreclose; or the lender made an error in your account.
- You are an active member of the military.
- The lender is refusing to stop foreclosure while you are waiting for approval for loss mitigation (dual tracking).
Can You Prevent Foreclosure by Paying the Past Due Amount?
You can reinstate your mortgage by paying all past due amounts. However, you must pay the following:
- All past due payments including principal and interest.
- Any late charges
- Total costs related to the foreclosure.
- The expenses the lender or servicer paid such as property taxes or homeowners insurance.
Most states have a deadline for mortgage reinstatement. This can vary but could be by 5:00 p.m. on the business day preceding the sale. In other cases, it might be five days prior to the sale or even another time. It is in your best interest to take care of reinstatement as soon as possible and not wait until the last possible minute.
The Key to Finding Professional Help
Understanding the foreclosure process is essential before even attempting to determine what your options are. Certainly, the best option is to avoid falling behind on mortgage payments in the first place, but sometimes unforeseen things happen. If working with the lender fails, the next step is working with a professional. We at Credit-Yogi have many experienced professionals who can help guide you and provide professional advice.