Foreclosure: Ways to Avoid or Stop Foreclosure

Rex Camposagrado asked:

In facing foreclosure, besides those who intentionally participate in mortgage fraud, most homeowners face unseen circumstances that prevent them to keep up with or stop making timely mortgage payments. Here are a few of those reasons:

Unexpected unemployment or job loss due to lay offs or termination Job demotion / pay cut or hours Divorce / loss of second income Excessive debt obligations that exceed income or bankruptcy Inability to pay an increase of an adjustable interest rate Sudden illness or medical emergency or Death in the family Unexpected major home repair or automobile expense

Ways to Avoid Foreclosure

The best way to avoid foreclosure is to prevent the filing of a Notice of Default. Most lenders do not want to foreclose, but they will file a Notice of Default to protect their interests. If you know you are in a situation where you can’t pay your mortgage, the first thing you should do is contact your lender.

Don’t procrastinate, be embarrassed or ignore letters from your lender because it will just make the situation worse. Depending on your specific situation and hardship circumstances, here are some options your lender might offer to you:

Forbearance – Allow time to make up your payments.

Lenders may agree to wait before taking legal action against you and let you work out an affordable repayment plan for you.

Debt Forgiveness – Forgiving payments.

If you can agree on a way that you will be current after missing a payment or two (without the means to pay it back), the lender might give you a break and waive your obligation.

Repayment Plan – Spread out the missed payments over a longer period of time.

For example, if your payment is, $1,400 a month, the lender might let you add $100 a month to each payment for a year until you are caught up. This is called a repayment plan.

Loan Modification – Changing the terms of your loan

If your mortgage is an adjustable loan, the lender might freeze the interest rate before it increases or change the interest rate to a more manageable rate for you. A lender might also extend the amortization period. You may also try to do a Do-It-Yourself / D-I-Y Loan Modification or if you do not want to do all the paperwork, you may contact a loan modification specialist to help you. Help can be found on loan modification websites like iLoanMods.com.

Refinance – Add the back payments to your loan balance.

If you have sufficient equity and meet the lender’s lending guidelines, the lender might increase your loan balance to include the back payments and re-amortize the loan.

Partial Claim – Make a separate loan to you.

Certain government loans contain provisions that let borrowers who meet specific criteria apply for another loan, which will pay back the missed payments.

Ways to Stop Foreclosure

When the lender files a Notice of Default, your options are limited. That is why it is better for you to contact your lender before falling behind on your payments, because lenders are often reluctant to work out repayment plans after foreclosure proceedings have begun.

A Reinstatement of your loan is where your lender will give you a specific time period to bring the payments current, pay the costs of filing the foreclosure and stop the foreclosure. If you cannot make up your missed payments and the lender will not work with you, here are a few other options to stop foreclosure:

Try to Sell Your Home – Interview real estate agents to get an opinion of market value (CMA – Comparative Market Analysis) and average DOM (Days on Market) to sell your home. You might be tempted to hire a discount broker, but many sellers feel they need the exposure and the marketing that full-service real estate brokers offer. Compare both to determine which best meets your needs and time frame. Consider a Short Sale – Pre Foreclosure Redeemed. If your home is worth less than the amount you owe? Then, you might be a candidate for a short sale. A short sale affects credit but it’s not as bad as a foreclosure. You or your real estate agent or attorney will need to negotiate with your lender to find out if the lender will cooperate on a short sale. Sign a Deed-in-Lieu of Foreclosure – Deed-in the home back to the lender. The homeowner gives the lender a properly prepared and notarized deed, and the lender forgives the mortgage, effectively canceling the foreclosure action. Lenders tell me that deeds-in-lieu of foreclosure affect credit the same as a foreclosure. “Produce the Note” – Produce the note is a phrase that refers to a strategy available to stall or throw a monkey wrench into a foreclosure procedure. When a home is being foreclosed on, there is a hearing before a sales date is set where the lender and home owner can appear to plead their cases. It is at this hearing that the home owner can request that the lender “Produce the Note” meaning that the lender has to produce the original mortgage note with the home owners signature and often they can’t. This ‘foreclosure trick’ has been in the news lately and is picking up steam as an easy way to keep your home for an extra couple of weeks or months. Basically, “Produce the Note” just stalls the foreclosure process until the lender can come up with the original note or an adequate substitute. This can take several weeks or months since home loans are typically sold multiple times before they get to the lender foreclosing on your property.

The lender might also work an arrangement where a home owner can remain in the home until the property is sold, so that the homeowner can find a place to move into. Owners in default should negotiate the right to retain occupancy, arguing that if the lender followed through on the foreclosure, an owner would still enjoy the right of possession during that procedure.

More foreclosure information, articles and foreclosure listings can be found at http://www.foreclosed-home-info.com

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