Explore different strategies to stop foreclosure

Explore different strategies to stop foreclosure

A borrower can stop foreclosure either by selling the home, short sale or deed in lieu of foreclosure. There are various other ways of stopping foreclosure which is explained later in this article.

Most of the homeowners face foreclosure problems due to few reasons:

Job loss

Sudden illness or medical emergency

Death in the family

Divorce

Job demotion

Excessive home maintenance expenses

Homeowners can avoid foreclosure if they prevent filing notice of default. Lenders are against foreclosure but if they want to protect their interests they have to file a notice of default. If you are unable to pay your monthly mortgage payment on time, the first thing you should do is call the lender. Never ignore your lenders letter or put if off as those responses will make the situation worse, not better. Here are a few options that your lender can suggest to avoid foreclosure.

Lenders always try to avoid foreclosure. They work out a repayment plan that is affordable by you. This is called forbearance. If you can agree on a way that you will be current after missing a payment or two, the lender might give you a break and waive your obligation. This is called debt forgiveness. If you are able to meet lenders lending guidelines, lender may increase your loan balance that will include back payments and re-amortize the loan. This is called a refinance. Government has certain loan regulations and if borrowers can meet their criteria, they can apply for another loan, which will pay back the missed payments. This is called a partial claim.

How to stop foreclosure:

Before lender files notice of default, it would be better if borrower speaks to the lender. Lenders are often hesitant to work out repayment schedule after foreclosure proceedings have been commenced. If you cannot make up for the missed payments and the lender is not ready to speak with you, here are a few ways to stop foreclosure:

Sell your home:

Speak to real estate agents as to what would be the market value of their house. Hire a full-service broker who has knowledge about the market and may sell your home at a better price.

Short sale:

If the value of your house is less than the amount you owe, you can go in for a short sale. A short sale can affect your credit rating but it is better than foreclosure. You or your agent has to negotiate with your lender to find out if the lender will cooperate on a short sale. This is called a pre-foreclosure redeemed.

Deed-in lieu of foreclosure:

In Deed-in lieu of foreclosure, homeowner prepares a notarized deed and gives it to the lender, and the lender forgives the mortgage, effectively canceling the foreclosure action. Lenders might also work an arrangement where a home owner can stay in the same home until he finds a new one.

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