Foreclosure is a situation in which the homeowner is not in a position to make mortgage payments as required in the mortgage contract. This allows the lender to evict the homeowner, seize the property and sell. If you’re a homeowner and you’re servicing a mortgage loan, it is very important to make the installments in time to avoid such a scenario. However, there are ways on how you can avoid foreclosure.
There are some programs meant to help the homeowners who are at higher risk of foreclosure or those seriously struggling to pay their monthly mortgage payments. One of the best decisions you can make toward avoiding a foreclosure is modifying or refinancing your loan for lower payments. Below are the methods.
Home Affordable Modification Program (HAMP)
This reduces your monthly mortgage installments by 31% of your monthly gross income. This makes it possible for you to pay your mortgage. This method results in a 405 drop in monthly mortgage payments. 18% of homeowners in this program are able to reduce their payment by 1000 dollars or even more depending on the actual mortgage loan.
Principle Reduction Alternative (PRA)
This program helps those whose mortgages are significantly less or whose homes worth are less than they owe the lender. This program aims at encouraging or advising the investors or servicers to lower the amount owed.
2nd Lien Modification Program
You will be eligible for a modification program if your first property mortgage was permanently modified under home affordable modification program and you also have a second mortgage under second lien modification.
Home Affordable Refinance Program
If you are on a mortgage program and you have not been able to get a traditional refinance because your home value has depreciated/declined, you will be eligible for a refinance through HARP. This program has been designed to make it possible for you to refinance into a new and affordable mortgage. Assistance for unemployed property owners/homeowners
- Home Affordable Unemployment program. If you are having a difficult time in making your mortgage payments because you are not employed, you may be eligible for an unemployment program. This program temporarily reduces/lowers or suspends your
mortgage payments for at least one year while you seek for an employment.
- Special Forbearance FHA. If you are not employed and you’re having difficulties in paying your monthly mortgage money, you may be eligible for this program called FHA special forbearance program. This program requires the lender to extend the period by which the homeowner is required to pay the full amount. It is always important to contact your lender if you’re having difficulties in paying your mortgage. This is actually one of the best and proven ways to avoid foreclosure. Inquiring about foreclosures is also very important as it will equip you with the necessary info con how you can avoid such an eventuality.
Apart from those people that intentionally participate in mortgage fraud without any intention or plan of making even a single payment, most genuine homeowners face extenuating circumstances that make it difficult for them to continue paying their mortgage. These are many reasons that can result in such a situation including job loss, unemployment, and death of a family member, sudden illness, divorce or loss of second income, excessive debt obligations and much more.
Ways to avoid a foreclosure
If you’re in a position where you can’t afford to pay your mortgage or meet your mortgage obligation, the best thing to do is call your mortgage lender and seek advice. Never at any one time ignore a letter from your lender as this would make the situation worse. The best way to avoid foreclosure is to prevent the filing of Notice of Default. Most lenders will be in a hurry to file this notice so as to protect their interests. Never allow for this eventuality. If you call your lender and explain your current financial situation, he will be in a position to offer more advice on your mortgage. Below are some of the options that the lender may consider:
Extend the period of repayment
You can request the lender to extend the period that you’re required to pay your mortgage. The lender may approve your request and wait before taking any legal action. This is what is called forbearance. You will be required to convince the lender beyond any reasonable doubt that you are committed to paying your mortgage. The lender may also forgive a payment. This may rarely happen but if you don’t have a lot of debt left and your current financial situation cannot allow you to offset the payments, the lender may decide to give you a break and waive your mortgage obligations. This is debt forgiveness and it rarely happens.
Depending on your requests and your current financial situation, the lender may decide to spread out the payments over a longer duration. If you owe a lender 1200 dollars and you are not able to pay the remaining amount within the specified/agreed period, the lender may let you add about 50 dollars to all your monthly installments until you pay the amount in full. You can also request the lender to change the terms of your loan.
If you are paying an adjustable mortgage loan, you can request the lender to freeze the interest rate before it rises. You can also request the lender to change the interest rate to a more manageable rate. The lender may also extend the amortization period.
Adding the back payment to your loan balance/Refinancing
If you’re a committed client and you have sufficient equity, the lender may decide to increase your loan balance so as to include the back payments and then re-amortize the loan. This is called refinance.
Request for a separate loan
If you’re not in a position to currently finance your loan, the lender and especially government lenders may decide to let clients that meet specific guidelines apply for another loan and then add the remaining balance of the previous loan. This is called partial claim.
Prioritize your spending
If you’re paying a mortgage loan, it is important to know that most of your money will be committed to important things only. After paying your healthcare the most important thing to do is to pay for your mortgage. If you don’t have enough resources, you should review your finances and cut your spending so that you will be able to finance your mortgage.
Sell some of your assets
If you have assets such as cars, jewelry, piece of land and much more, you can decide to dispose one or two so as to offset the debt. Most people will sell one of their items to help reinstate the loan. This is one of the best decisions you can make to avoid foreclosures.
Beware of mortgage scammers
In a time when a homeowner is facing hard times in repaying their mortgage, there are scammers who come with false and promises that they will negotiate with the lender on your behalf. Always avoid such people as you might give them the title or ownership to your property. Most people have fallen victims of these scammers.
The best thing is to contact the lender in person and review your mortgage terms. This will help you make the right move toward avoiding foreclosure. Foreclosures are painful and can leave your family in a very desperate situation. The lender is able to advise you on the way forward and how you can continue paying the remaining balance.
If you are facing this problem, it is very important to contact the bank or lender sooner than later. Calling soon makes it possible for you to work out and exhaust all the alternatives. Calling sooner than later shows commitments. The lender may choose to accept partial payments for the remaining months or extend your payment period.
If you have exhausted all the avenues and things are not working out, you can decide to stop a foreclosure. When the lender decides to file a notice of default, your options are very limited. This is actually one of the most important reasons to call a lender if you’re unable to pay your monthly installments. It is important to avoid the situations where a lender will be forced to file a notice of default. A notice of default is the final thing a lender does. This letter is followed by immediate legal action and your house is seized and sold.
If you will not be able to comply with all the demands of the lender, there are few options that you need to exhaust. Below are ways to stop foreclosure:
Sell your home
You might be in a position where the only option is to sell your home and pay the lender the remaining balance. This will be a good idea as you will also pocket some money. When you’re selling your home, you will need to interview real estate agents so that you can get the prevailing market value and the minimum or maximum amount you can sell your home. A circumstance may also tempt you to hire a discount broker even though most sellers would prefer services offered by full-service brokers. You should compare both and determine which is the best and most convenient for you.
Consider a short sale
If your house value is less than the amount you owe a lender, you may be a candidate for short sale. This will affect the credit but not as worse as a foreclosure. You will need to negotiate and find out if the lender will cooperate on this. This is called pre-foreclosure redeemed.
Signing a deed in lieu of foreclosure
You can also deed the home back to the lender. At this point, you will need to give the lender a perfectly prepared and notarized deed so that the lender will forgive the mortgage by canceling foreclosure action. Deeds in lieu of foreclosure will affect the credit the same way as
foreclosure. The lender can also weigh alternatives and work out an arrangement where you will remain in the house until you find another place to move into. The owner can also negotiate the right to occupancy during the foreclosure procedure.
If you file for bankruptcy, all the foreclosure processes will stop and the lender will not be in a position to seize the property. You will need to hire a highly qualified lawyer who deals with bankruptcy cases. Inquire everything from him about filing for bankruptcy and the effect it will have on your home. Bankruptcy may not permanently stop foreclosure but can postpone it for enough period of time.
A foreclosure is the worst experience if you have a family living in the home. Your family will suffer mentally and psychologically when a parent is undergoing through this demanding foreclosure process. This is why it is very important to learn ways on how to avoid foreclosures or stop when necessary. Most homeowners are undergoing this process. The best thing is to have sufficient info on how you can avoid this eventuality. As a homeowner, you will need to read the mortgage terms before applying for a house loan. This will help you understand on what to do in case you find yourself in a situation where your house will be seized and sold. Most people are ignorant about these facts but they are enormously important. As an alternative you may want to learn more companies that market with the slogan, ” we buy foreclosures,”
It is also very advisable to avoid foreclosures prevention companies. It is not realistic to pay some fee for foreclosure prevention. It is better to pay that amount to the lender and minimize the amount you owe him. There are companies that usually take advantage of foreclosure situation and lie to homeowners that they will negotiate with the lender for the house not to be seized. This is actually a legitimate business. The company will charge you a hefty amount of money and they will do nothing to change the current foreclosure situation or procedure. Never allow anyone to lie to you that they will negotiate your situation. It is you who can do it by just calling the lender and negotiating. Other companies who promise to offer this service are scams.