7 Ways To Stop Foreclosure

November 5, 2009 by  
Filed under 7 Ways To Stop Foreclosure, Blog

Here are 7 ways to Stop Foreclosure:

If you have not missed a payment yet, but know you are going to, the first step is to contact your lender and let them know your situation.  If you’ve lost your job or have some other type of hardship going on let them know.  They can give you time to help  get your life back together, but you must call them as soon as you know you’re going to miss a payment. The longer you wait until you actually miss your payment, makes it more difficult to ultimately get the problem solved.

Ask for forbearance. This allows you to delay payments for a short period of time, with the understanding that another option will be used afterward  to bring the account current.

Ask for a repayment plan. This is where the lender agrees to add a certain amount of the first missed payment onto each of the subsequent two payments.  These plans provide some breathing room for you if you only have short term financial problems, such as a sudden expensive repair or medical expense that makes it too difficult to pay your mortgage one month.

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If you have already missed 2 or 3 payments and owe a couple thousand dollars in lender legal fees, the lender of your mortgage may still try to arrange a repayment schedule.  But you will likely have to pay a third to a half of the delinquent amount up front, and then pay off a portion of the remaining balance each month for a year or more.  Also, never ignore the lender’s letters or phone calls. Ignoring the problem won’t make it go away- and if you’re going into a foreclosure process, there are other fees and costs involved and ignoring them only makes these worse.

You may also be eligible for a loan modification plan, designed for people who can’t afford repayment plans.  In a modification, the lender actually adjusts the terms of the loan to make it affordable. It may lengthen your amortization schedule or lower the interest rate to cut the monthly payments, or roll the past due amount into the loan and re-amortize the new balance so you can pay the additional debt back over time.

Some companies may be willing to offer you a “short refinance” too.  With these, the lender agrees to forgive some of your debt and refinance the rest into a new loan.  This way, teh lender still gets more money than they would by foreclosing on you.

A Deed in Lieu of foreclosure is an option in which you voluntarily deed your property back to the lender in exchange for a release from all obligations under the mortgage. Unfortunately, there is no way to do this without hurting your credit, unless you get the mortgage company to report your mortgage account as paid in full.  You may face income tax issues resulting from the lender forgiving part of the debt, but you might be able to get yourself out of the hole and start over again sooner rather than later.

If you can afford your normal monthly payment, but can’t afford to make up the delinquent amount and legal fees because your lender offered a really harsh repayment plan, you may want to consider filing Chapter 13 bankruptcy. Doing so temporarily halts the foreclosure process and can force the mortgage lender to accept a more friendly repayment plan.  This is a last resort, and will still negatively affect your credit.

If none of these strategies work for you there is still one option which is a short sale.

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