How To Stop Foreclosure

Foreclosure. It's that situation that most homeowners hope they never go through there entire life, but in today’s economy it seems more common than ever. It's a scary word filled with many questions and uncertainties. Can I save my home? What options do I have? These are just of a few of the questions that most people think about when foreclosure is lurking. Whether you have an adjustable rate mortgage, lost your job, have medical bills, death in the family, divorce, separation, or any other obstacle life has thrown at you, foreclosure can happen to anyone.

The good news is there are actions you can take on how to stop foreclosures and the sooner you take action the better your chances are of saving your home. Just because you ignore those letters in your mail box does not mean nothing will happen. Foreclosure is the last step taken by the lender to get their money. Lenders do not want to take your home. It is more of a hassle for them so if you show signs that you are willing to work on saving your home, they will work with you. Just remember, you are not the first, nor the last person to be in this situation, so don’t be embarrassed or afraid to ask for help. Banks are willing to work with people more now than ever so you have that on your side. The biggest thing you can do to help stop foreclosure is TAKE ACTION. The worst thing you can do is think it will take care of itself.

The foreclosure process varies from state to state so check your local laws regarding how to stop a foreclosure.

If you are not in the foreclosure process yet, here are some options you should look into

• Sit down with all of your bills and figure out where you can cut some fat. Consider cancelling or suspending luxury items like cable TV, gym memberships and eating out.
• Look around your house and see what you can sell. Craig’s List and garage sales are a great way for you to get rid of some of those things that you don’t need and to get some cash quick. Consider selling second cars and jewelry that you can part with. This may even be a good way to convince your husband/wife to sell those items you are sick of seeing laying around the house or in the garage.
• Get a second job. Deliver newspapers in the morning, Wait tables at night, mow lawns on the weekends or take on a few side jobs. Every penny counts and it shows the lender that you are trying

If you need help reviewing your finances consider contacting a housing counselor. However, there are so many scams out there today regarding foreclosures so make sure to do your homework first. There are a lot of scam artists that charge a lot of money saying they can immediately stop your foreclosure process. If a firm claims they can stop home foreclosure immediately, if you sign a document appointing them to act on your behalf, you may well be signing over the title to your property and becoming a renter in your own home! NEVER sign anything without consulting a trusted Lawyer, Real Estate Agent or HUD counselor that has been vetted by the U.S. Department of Housing.

If you are trying to save your home you want to avoid the lender filing a notice of default. When a notice of default is filed you have severely limited your options.  Once the foreclosure process has begun it is much harder to work out a repayment plan.   Plus, it can be very costly to you as they may ask you to pay for the costs of filing the foreclosure and to stop the foreclosure process.

Before contacting your lender figure out if your situation is temporary or long term. If it is temporary a lender might freeze up your mortgage payments until you are caught up or give you an extended amount of time to make up your payments called a repayment plan. They may let you add an additional amount to each future payment until you have paid back all the past due amounts.

On a rare occasion the lenders may forgive a payment all together, called debt forgiveness.  Although it is rare it does not hurt to ask.  If it helps bring you up to date on your payments and you explain to them that your situation was a very temporary set back, they may be willing to consider this.

If you meet the lenders guidelines and have a good amount of equity in your home, they might increase your loan balance and include the back payments and re-amortize your loan.   Even if you do not have equity in your home, the lender may still consider extending your amortization period.  If you have an adjustable rate mortgage the lender may temporarily freeze the interest rate before it increases or change it to a lower or fixed rate for you.

Make sure that whatever modification you make with your lender that this will be a plan that works for you on a long term basis.   Too often modifications are made and the homeowner is back in the same situation less than a year later.  Make sure you know all the facts and terms agreed upon with you and your lender and that it is something you can truly afford today, tomorrow and a few months from now.

How to a Stop Foreclosure

Selling your home would be the best choice if you can do so and break even or if you realized that you have bitten off more than you can chew with your current mortgage. Contact a few local real estate agents to find out what your house is worth in the current market.  Ask friends and family for real estate agent referrals and interview each of them to find out who will be the best fit for you. 

If you can’t sell your home for the full amount you may qualify for a short sale. A short sale is where your lender will accept an amount less than what is owed on your loan if they feel tht it will result in a smaller financial loss than foreclosing as they are responsible for all fees associated with a foreclosure. You or your real estate agent will need to get in touch with your lender to see if they will work with you in regards to a short sale.  Make sure you find out how these situations will affect your income taxes and know that a short sale still affects your credit score however it is not as bad as a foreclosure.

With this process you are deeding the home back to the lender.  You prepare and notarize the deed and the lender forgives the mortgage. The advantage to the borrower is that it immediately releases you from most or all of the debt associated with the loan and also avoids the foreclosure proceeding.  The advantage to the lender is the reduction in time and cost to which they repossess the home from the borrower.

If the lender will not work with you in stopping foreclosure, talk to your real estate agent about the best plan of action and then consult a lawyer. 

Life happens. It's a hard thing to do deal with but at the end of the day, it is what it is. The best thing you can do is to make sure this never happens to you again and get your finances back on track. Work on rebuilding your credit score. It will take time but slow and steady wins the race. Get a game plan in place for your financial future. Make sure you have at least two savings accounts

• An Emergency Savings – This is not an “oh my goodness I need that new pair of shoes” emergency. This savings account is for when you need car and home repairs, natural disasters and things that are beyond your control and unexpected. You should have at least $1500 in this savings account. Make it a habit, even if you add $25 to this account each week you will get there!
• A regular savings – This is a savings account that you would keep for a specific goal or in case you lose your current income. You should have at least enough money in this account to cover 6 months worth of your bills in case you ever lose your job.

You have to take action now to change your financial situation as you don't want your next financial venture to be filing for bankruptcy. And remember, you are not alone. You will get through this.