Lost jobs and unexpected major medical expenses can lead to homeowners’ worst nightmares, foreclosures. However, state rules vary for the duration before foreclosure sales are made. If you find yourself in this situation, here are some of the best ways to prevent foreclosure.
8 ways to prevent foreclosure
Missing your home payment for several days won’t put you at risk of foreclosure. If you are going to make payments immediately after the due date, let us know that you have recently paid your mortgage lender or servicer.
However, if you haven’t paid by the end of the grace period (usually 10-15 days), if your mortgage lender has sent you past notices, or if you have delayed payments on multiple mortgages, you will need to act promptly to return your mortgage to good condition and prevent foreclosure procedures.
You may want to seek legal advice before you go on any of these routes, but here are some of the best ways to prevent foreclosure.
1. Don’t ignore the problem
Contact your lender to let you know with the first sign of financial trouble. In doing so, lenders will have the opportunity to share solutions that may help avoid foreclosures. Additionally, connecting quickly with your lender and solving the problem can mean getting your loan payments back on track faster. However, if the foreclosure process has already begun, there are other strategies to stop it.
2. Mortgage tolerance
Mortgage tolerance is an option that helps homeowners prevent foreclosure by temporarily suspending or reducing it amid financial difficulties. However, the tolerance process is not automatically implemented. First, you need to reach out to the lender or its loss mitigation department to demand tolerance and provide evidence of the financial difficulties you are experiencing. Not everyone qualifies.
3. Mortgage repayment plan
If you are struggling with a short-term economic setback (such as a costly car repair or a medical emergency), your lender may provide a breathing room by agreeing to be able to repay the missed payments in two installments over the next two months.
4. Modifying the loan
A mortgage servicer will permanently adjust the terms of the loan. This allows you to lend the terms of your loan and redepreciate your new balance by extending your amortization schedule, lowering your mortgage rate, or redepreciating your late amounts into the loan and redepreciating your new balance. However, changes to the loan may not reduce the principal’s payments.
5. Foreclosure act
Foreclosure entails handing over your home to a lender to avoid foreclosure proceedings. In some cases, going this route can help you avoid paying off the remaining loan balance on your mortgage, but it depends on your lender’s rules and the state in which you live. Before getting a foreclosure act, ask the lender if it will spare the difference between your home’s value and what you still have on a mortgage. (If there is a shortage, the lender can ask for the decision to collect even after you leave the house.)
6. Short sale
Short sales occur when the lender allows the house to be sold for less than the outstanding loan amount, receives revenue and allows for the remaining debt. Short selling can help save some of your fairness, but lenders must first approve it. Realtors with experience in short selling may be able to help you find a buyer and guide you to get the necessary approvals.
7. Short refinance
With a short refinance, the lender will allow some of your debts and refinance the rest for a new loan. This type of refi is more common in the aftermath of the mortgage crisis and may not be available to most homeowners today.
8. Refinance using a hard money loan
I don’t like the high interest rates and fees of hard money loans. This is a loan from a private lender, often from a private lender, but you may buy time to sell your home and prevent foreclosure. However, this should not be your first option.
What should I do if I can’t prevent foreclosure?
If you contact your lender and do everything you can to prevent foreclosure, that still seems inevitable. The last thing you can do is file for bankruptcy. This will negatively affect your credit and limit your ability to apply for a loan, but it will help you get out of the financial crisis.
In particular, bankruptcy filings will result in an injunction known as automatic stays being put into effect. Automatic stays will suspend foreclosure procedures as long as bankruptcy is in effect.
Talk to your attorney before taking any drastic steps like filing for bankruptcy.
How to contact a lender before seizing
Again, if your goal is to avoid foreclosure, contact your lender immediately if there is a problem with your mortgage payments. Most lenders have a customer service phone number or email to contact. The sooner the lender knows your problem, the more help it will be able to provide. you too:
- Ask your lender or servicer about “loss mitigation.” Federal law requires mortgage servicers to help delinquent borrowers and work with them to return to good health. Tell your bank or lender what you want to learn about the “loss mitigation” option, a technical term for avoiding foreclosure.
- Please note communications from lenders: After initially missing a payment, the lender can send you a warning letter, along with instructions on how to avoid foreclosure and application of programs that may apply to you. They may also try to contact you by phone. It is important to make this first call and explain the situation.
- Establish direct contact with the servicer. Your mortgage servicer should provide you with contacts available over the phone to answer your questions and provide accurate information about your options to avoid foreclosure. By law, according to the CFPB, this person should be allocated within 45 days of your loan being arrears.
If you feel that you are not getting the proper assistance from the mortgage servicer, please file a complaint online with the CFPB or call (855) 411-2372.
Additional resources to avoid foreclosure
If you’re not going anywhere with your mortgage company, you can get free advice and support from a housing counselor sponsored by the U.S. Housing and Urban Development Agency (HUD). A housing counseling agency expert can guide you when you try to work with your mortgage company to avoid foreclosure.
To find a local HUD approved housing counselor, you can:
- Search for one on the HUD Exchange website
- Call HUD’s Housing Counseling Office at (800) 569-4287
