subject: How to Avoid Foreclosure of One's Home [print this page] How to Avoid Foreclosure of One's Home How to Avoid Foreclosure of One's Home
Foreclosure is an option that very few home owners would go for; as home is the last thing anybody would want to lose. With the webs of debt which is spreading like never before, the debt relief options like debt settlement, debt consolidation, credit counseling etc is also falling short to help the debtors out of their rising monetary troubles. Apart from people who knowingly take part in mortgage fraud, most homeowners face sudden diminishing circumstances that force them to make timely mortgage payments that leads to foreclosure of their dear home. The reasons may vary from sudden job loss or unexpected unemployment, sudden illness or medical emergency, demise in family, divorce, excessive debt obligation, and inability to pay an adjustable and increased interest rate to sudden major home maintenance expense.
The lender is likely to file a Notice of Default to protect their interests, so the best way to avoid foreclosure in the first place is to prevent this from being filed as a Notice of Default limits the debtor's options. As soon as the debtor finds out his inability to repay the mortgage payments, he should at once get in touch with his lender about the same as lenders are often reluctant to work out any repayment schedules after the commencement of foreclosure proceedings. Do not ignore the lender's threats and warning letters by being embarrassed, as these unanswered responses worsen the situation. Get in touch with your lender and let him know about your financial conditions well before the damage is already done. On knowing your hardships and tough circumstances, the lender might propose the following options to the debtor:
- The lender might wait before taking any legal action against you by letting you work out a repayment plan that is affordable for you, and this process is called forbearance.
- The lender may also forgive your debt by waiving off one or two payment obligations, in case you assure of continuing the later payments regularly to him. However, this happens rarely.
- The lender may propose a repayment plan by spreading out the missed payments over a longer term. For example if someone's payment is $ 2,300 a month, the lender would ask to add $180 a month to each payment for a year until the debtor catches up with the full payment.
- The lender may apply the process of Note Modification, where the amortization period is extended, or the interest rate is adjusted or managed to a more affordable amount, in case the debtor's mortgage is an adjustable loan.
- The lender at times may increase the debtor's loan balance to include the back payments and to re-amortize the loan, in case the debtor has sufficient equity to meet the lending guidelines, and this process is called refinance.
- The debtor on fulfilling certain criteria can avail for another government loans to pay back the missed payments. This is called a partial claim.
At circumstances when the lender fails to avail any of the above mentioned ways to prevent foreclosure or if the lender himself does not agree to forbear or forgive any payment structure, the debtor, to avoid foreclosure may sell their home to a real estate agent to meet his needs and time frame. Some other ways like short-selling one's house or deed-in-lieu of foreclosure also works out to stop foreclosure process.
