Methods Of Stopping Foreclosure

Foreclosure is not a solution - it is an unfortunate end result due to lack of information, knowledge, support, and most of all, fear. Statistics show that of every 10 homeowners delinquent in their mortgage payments, more than 6 are not aware that if they contacted their lender, they would find a full range of options that could help them save their homes. With 38% too scared, 35% too depressed and 85% of all homeowners with a mortgage delinquent by at least one month, foreclosure has risen to epidemic proportions, when all you had to do was pick up the phone.  

Call the Lender 
A vast majority of all foreclosures would be avoided if you, the default homeowners, would call as soon as you realize that you just do not have the money to pay your monthly mortgage payment.  Foreclosure and repossession are costly to the lending institutions; they would much prefer that you stay in your home and work out a program to bring your arrearages current and maintain monthly payments.  

It is critical to call the lender as soon as you realize that you are unable to make the payment. Find out what programs are available to help you keep your home, balance your debt, and maintain regular payments. The longer you wait, especially if you are already more than a month behind, the more likely that foreclosure proceedings have already begun. As time passes, fewer options are available to avoid foreclosure. Every day interest, penalties, and legal fees accrue until you have thousands of dollars added to the loan you already could not pay. 

Foreclosure Workouts 
Workouts are plans that you, the default borrower, and the lender negotiate to benefit you both. Both parties agree to the terms of various options other than foreclosure to handle your debt and pay for your home. The most common are addressed below. 

Loan Modification 
Loan Modifications work best for debtors with financial problems, who own their properties, can demonstrate an income, and have a mortgage principal less than $730,000. With the value of your home less than your mortgage, refinancing has not been possible. This solution is a restructuring of the original loan to only 38% of your gross monthly income. Then, the government assists the homeowner to lower the monthly payment to only 31%. For those homeowners who are currently in default, have a lending institution who is an approved servicer of loan modifications, and can pay with a lowered, restructured payment plan, this may work very well.  

Forbearance Agreements 
Forbearance Agreements are a set of rules on which you, the default borrower, and the lending institution agree to handle the payment of the mortgage. This is a temporary solution in the event that you have temporarily lost your job, had an income interruption, or a health situation. The lender agrees to not pursue foreclosure for a specified amount of time, until you can produce a payment that is agreeable to both parties. Should you default any of the terms, foreclosure will be activated. If you negotiated a Deed In Lieu of Foreclosure, you will transfer the deed to the lender.  
 

Deed In Lieu of Foreclosure 
Implementing a Deed in Lieu of Foreclosure is a last resort effort to keep your home, your reputation, and some shred of decent credit. In this solution, rather than suffer foreclosure, you write the deed over to the lender in place of the debt owing on the mortgage. You are immediately absolved from all or most of all personal indebtedness to the loan, are given much kinder terms than a foreclosure and may be left with sufficient credit to secure a new home. The lending institution accepts this loss of principal as long as the cost of the repossession and foreclosure make it financially acceptable and because the immediacy of the option assists them to avoid the debtor entering bankruptcy procedures. 

Short Selling 
After pursuing the options listed above with no success, short selling is your last option. Today, with so many default homeowners in houses that are valued less than the mortgage, refinancing has become a pipe dream. In this solution, the lender agrees to take a loss in the sale of the home and controls all the negotiations. Once you place your house for sale, you no longer have any power or control in the process. The bank reviews all the offers and makes the final decision. The benefit for you is that your debt is cleared and your credit is free of the damaging impact of foreclosure.