Foreclosure is a legal procedure that allows a mortgage lender to seize your property to pay off what you owe in arrears payments or back taxes. Knowing how to stop foreclosure may help delay foreclosure proceedings on your property or save your family’s home.
If you know that you may miss one or more monthly payments, it is imperative that you contact your lender immediately and explain the situation. Discuss possible solutions before foreclosure becomes the only option. Let the lender know if you have incurred unexpected expenses or have been laid off. It is definitely in the lender’s best interest, as well as your own, to not foreclose on your property, as it can be very costly for the lender to initiate foreclose proceedings. To the lender, receiving partial payment is often preferable to receiving no payment; they may modify the terms of your loan to get you paying something, even if it is less than the original amount. Possible ways to modify your mortgage payments include:
- Extend the amortization period. By extending the period of the loan, monthly payments will be reduced
- Get the interest rate on the loan reduced.
- Switch from an adjustable rate to a fixed rate. Switching from an adjustable rate mortgage (ARM) to a fixed rate can save a lot of money while making monthly payments more manageable.
While requesting forbearance is only a temporary way to stall the foreclosure proceeding, it often works. Forbearance allows you make partial or even no mortgage payments for a specific period of time agreed upon by you and the lender. However, you will eventually be required to repay the full amount forbore by paying one lump sum or making extra payments in addition to your monthly mortgage payments.
Although hiring a housing counselor who will help find a compromise between you and the lender, be wary of those housing counselors who guarantee a stall or stop in the foreclosure process. These counselors often charge exorbitant sums and sometimes only stall the proceedings, leaving you no better off than you were to begin with. If you decide to fight the foreclosure, file a written answer to the foreclosure complaint. Filing an answer and attending the hearing stops the lender from obtaining a default judgment against you.
- Consider selling before your home is auctioned off. If you sell your house before the foreclosure clears, you can keep whatever equity you have.
- Question the chain of title. Since so many mortgages were bundled into complex securities and traded on the marketplace before the so-called housing crisis, the chain of title is often ambiguous. If you can successfully question the database that keeps track of the chain of title, you may be able to keep your home, for a short time or even permanently. You will probably need an attorney to help you with this process, but it may well be worth the money if it saves your home from foreclosure.
- Negotiate a deed in lieu of foreclosure. If you have little other option, you can always ask the lender’s loss mitigation department if they’re willing to accept a deed in lieu of foreclosure. This is a document where you legally agree to transfer ownership of the deed over to the lender in exchange for the ability to walk away owing nothing to the lender. If you don’t think you’ll be able to hold onto your house, this option can be especially attractive if you owe a significant amount on monthly payments in arrears.
- File bankruptcy. Bankruptcy is the process of eliminating some or all of your debts in exchange for either liquidating your property (Chapter 7) or arranging for regular payments under a court-approved payment plan (Chapter 13). Filing bankruptcy may be the best way out of an underwater mortgage for many homeowners. When you file for bankruptcy, the foreclosure proceedings are stopped with an automatic stay.
- Do not sign the title of the property over to another company. All too often, this company pulls equity out of your home, lets foreclosure proceedings continue and then gets rid of the home. There is nothing you can do about this since the title of the property is no longer in your name.
- Seeking counseling; be sure to investigate any counseling service you use and check HUD’s list of approved housing counselors.
- Under no circumstances should you avoid court documents or requests as failure to do so may result in large fees and legal difficulties.
Before you file for bankruptcy, you need an experienced and knowledgeable bankruptcy lawyer with a national reputation fighting for you. Call us now to talk to a bankruptcy rep from Client First Bankruptcy; toll-free at 800-383-6004.