subject: Steps To Prevent Foreclosure [print this page] Apart from those who knowingly participate in mortgage fraud -- with the intention of never making a single payment -- most homeowners face sudden extenuating circumstances that force them to stop making timely mortgage payments. Here are a few of those reasons:
oJob loss / unexpected unemployment
oSudden illness or medical emergency
oDeath in the family
oDivorce / loss of second income
oExcessive debt obligations
oJob demotion or promotion denials
oInability to pay an adjustable interest rate that increases
oUnexpected major home maintenance expense
The best way to avoid foreclosure is to prevent the filing of a Notice of Default. Lenders will file a Notice of Default when they are forced to but normally they do not want to do that. Call up your lender and inform them when you realize that you will not be able to keep up with the financial commitment.
Do not delay, feel humiliated or not read letters from your lender as not responding will cause the situation to decay, not improve. Depending on your particular situation and hardship circumstances, here are some options your lender might propose to you:
oTime to make up your payments - Lenders might agree to wait before taking legal action against you and let you work out a repayment plan that is affordable for you. It's known as forbearance.
oForgiving a payment - If you can agree on a way that you will be current after missing a payment or two (without the means to pay it back)Occasionally, the lender may waive your financial obligation and give you some breathing space. One calls this rare occurrence debt forgiveness, which does not happen often.
Payments that are paid over a longer period of time- For instance, if the amount you owe is $1,200 per month, the mortgage company might simply require that you pay an additional $100 each month until you have paid off any balances. It's a repayment schedule.
o Altering your loan terms - If you have an adjustable loan for your mortgage, the lender could stop the interest rate from getting higher or alter the rate of interest so you can manage it better. It is possible that the lender could prolong the amortization time period. It is known as note alteration.
oAdd the back payments to your loan balance - If you have sufficient equity and meet the lender's lending guidelines, the lender might increase your loan balance to include the back payments and re-amortize the loan. That just happens to be known as refinance.
Some borrowers who have government loans, and who meet certain requirements, can borrow money from other sources to pay back their original loan. This is called a partial claim.
