It’s a tough time for many Americans right now. The longer our economy is in crisis, the more people will struggle paying their mortgages. As attorneys who provide foreclosure assistance, we hear the same story from so many of our clients—they work hard, make the right choices, do everything by the book, and one job loss or catastrophic illness causes them to lose it all. The good news is that there are ways to stop a foreclosure once it starts.
Here’s what you need to know on how to prevent foreclosure.
What Is a Foreclosure?
Very few people can purchase a home outright; instead, we borrow money from a lender in the form of a mortgage. Until your mortgage is paid off completely, your lender always has a stake in your property. If you default on your monthly loan payments, your lender has the right to start the foreclosure process, which involves repossessing your home and selling it to recover the amount you still owe your lender.
House foreclosures are lengthy, which buys you some time to stop the sale of your home.
One of the simplest ways to stay in your home is to ask your lender for a mortgage modification. It’s a good idea to have a foreclosure lawyer handle negotiations on your behalf, as they have experience working with lenders to get favorable outcomes for their clients. With a modification, your debt may be refinanced, you may qualify for a lower interest rate, or the length of your mortgage could be extended, all with the result of reducing your monthly loan payments.
Most lenders will want to see proof that your net income has been reduced since you first purchased your home. Once the bank agrees to modification, you’ll need to sign a new mortgage loan agreement and pay a lender fee, which may be rolled into your new loan payment plan.
A forbearance allows you to stop or reduce your monthly mortgage payments for a short time while you work with your lender to create a new repayment plan. In order to qualify, you’ll need to prove financial hardship. Note that once the forbearance period is over, your loan payments will be larger until you’re caught up, so it’s important to take this into consideration—if you’re paying $2000 a month now, when forbearance is over, you’ll have to pay $3000 a month (1 1/2 times more) for a period of time.
HUD Housing Counseling or Loan
The Department of Housing and Urban Development (HUD) is a fantastic resource for homeowners. If your lender is unwilling to modify your mortgage loan agreement, you can contact HUD to receive counseling about the foreclosure process, including having a counselor from HUD contact your lender on your behalf to attempt to find a compromise. There is usually no fee for these services.
HUD also offers one-time interest-free loans to help make your home loan current again. You’ll need to prove your ability to pay back this loan—so if, for example, you fell behind on your mortgage because you lost your job and you haven’t found another yet, you won’t qualify.
Chapter 13 Bankruptcy
Bankruptcy may be your best bet for how to stop foreclosure at the last minute if other options have failed, but even this option takes some time. Unlike Chapter 7 bankruptcy, which delays foreclosure, you can bypass foreclosure with a Chapter 13 bankruptcy, which allows you to work out repayment plans with all of your lenders. As long as you don’t fall behind again, you can avoid foreclosure.
Get Foreclosure Assistance
If you need advice on how to prevent foreclosure, it’s important to talk to a qualified attorney. Contact us today at 512-505-0053 to schedule a consultation.