Are you unable to pay down your mortgage? Have you maxed out your credit cards and are using them to pay for daily expenses? Or, do you need to choose which bill to pay off first?
Being in any of the above situations can be a warning that things aren't ok with your finances and you need to gear up and take better control over your money.
Now, if there's a mortgage and you don't pay accordingly, you may come across 2 situations: - The lender files a notice of default within 90 days of missing a single payment. The notice of default implies that foreclosure has been declared.
- In case you don't pay off the loan within 90 days of filing foreclosure, the lender will send you the Notice of Sale. Within a period of 15-30 days of sending the Notice, the lender will set up the auction.
In order to avoid foreclosure and protect your home from being taken away by the lender, follow the steps given below:
Before lender files Notice of Default
- Build Emergency fund:
Apart from a tight budget, maintain some cash flow from your paycheck into an emergency fund. This is to ensure that you have enough cash to continue paying the loan in times of financial crisis.
- Cut down expenses:
In case you're having a tough time paying your bills, forget about any kind of extravaganza and find out areas where you can minimize your spending.
- Cash-out assets/Take up second job:
Try cashing out assets such as stocks, savings accounts and personal property which if sold off can give you lump sum amount. You may even take up a part time job to supplement your primary source of income.
- Avail Counseling service:
If you are in problems paying off your loan, contact a housing counselor for financial advice. There are FHA approved counselors to help you with the following:
- Analyze your finances and prepare monthly budget to ensure that you meet daily expenses including debt (mortgage and other loans, if any) payments.
- Call the lender on your behalf and discuss about work out options that can help you keep the home.
- Protect you from future credit problems before you are too far behind on your mortgage.
- Provide information about assistance programs/services in your area.
You'll find a state-wise list of HUD approved counseling agencies from the "Related References" section below. Besides, you can contact counselors associated with the National Foundation of credit counseling or the Association of Independent Consumer credit Counseling Agencies.
- Talk to housing non-profit:
You may seek financial advice from a housing non-profit such as HOPE National helpline. The counselor there can help you analyze your financial situation and then take important steps to get out of the mortgage mess.
- Refinance the existing loan:
If there's enough equity in the home and you satisfy the lender's guidelines, then refinancing can be a good option. While you refinance , don't just get lured by low initial rates on ARMs or interest-only payments; chances are that you may face even higher payments with these loans once the rates start adjusting.
- Emergency Mortgage Assistance programs:
In case you have lost your job or there is loss of income, and you feel it's not possible to pay down the loan, you can make use of emergency assistance programs. Contact your state housing finance authority or the HUD to find out more on such programs.
However, not all lenders/banks will allow for these programs. In case the bank allows, it will send a notice asking you to seek assistance.
- Forbearance and Repayment plan:
Through forbearance, the lender may reduce your payment amount or even suspend it for a few months, so that you can get back on track and continue paying as usual. Often this is accompanied by the lender suggesting a repayment plan such that the dues are adjusted with the regular monthly payments after the suspension/reduction period is over.
- Reinstatement:
The lender may be willing to accept the entire amount you are behind as a single payment within a specific date. Then you can continue with the remaining debt on a monthly basis.
- Loan Modification:
This involves an agreement between you and the mortgage company after which the original terms and conditions of your loan will be modified so that you can afford to pay.
- Foreclosure Intervention program:
There are agencies which grant funds to delinquent borrowers and help in negotiating with lenders for payment rescheduling. But one has to qualify for such grants. For instance, your income, reason for late/missed payments or inability to pay, housing ratio and your ability to pay in future etc are some of the factors considered here. And, there's a maximum limit up to which the agency can offer the funds.
However, if you have FHA insured loan, you may qualify for an interest-free as well as payment-free loan to pay off the dues and get current on the loan. The loan needs to be paid back only after you've repaid the mortgage.
After lender files foreclosure:
- Seek Court Protection:
If you are unemployed or underemployed, you can seek the court protection. In such a case the court may postpone foreclosure for the next 6 months. Within this period, you should try and gather funds to make up for the dues.
- File Chapter 13:
You may file chapter 13 bankruptcy and avoid a foreclosure sale. Through this process, you will be able to repay at least a certain percentage of the debt with the help of a trustee-approved repayment plan, that too, within a short period of 3-5 years. Know more….
- Sell off your property:
If you no longer wish to keep the home, you may sell it off at a price equal to the fair market value. But while you do so, take help from a realtor or a real estate agent in determining your home value, listing your home and quoting a price for it.
- Try for Short sale:
It may happen that you owe more than your home is worth in the current market scenario. In that case, you may negotiate with the lender for a short sale, although it will affect your credit score. Know how short sale works .
- Request for Deed-in-lieu:
In case you can't go for a usual sale, you can opt for this method. However, not many lenders initially agree to accept a deed-in-lieu. This is because they are not interested in your home; rather they'd like you to pay down the balance.
In this process, you relinquish your rights, give away property to the lender and get a mortgage release certificate in return. However, this too will bring your score down. Know more….
- File Chapter 7:
Filing Chapter 7 will put a temporary stop to foreclosure. However, depending upon state laws, you may or may not be able to keep the home. Know more….
What if none of the options work for you?
In case you fail to make use of any of the options stated above, there's no other way but to let your home go into foreclosure.
However, prior to the court declaring the date of foreclosure, you can redeem the loan by using the right of redemption. This allows you to pay off the mortgage along with the court costs and associated fees. You may even appeal to extend the date of sale if required.
Foreclosure is no doubt the worst choice to look for. So, do not ignore if you are upside down on your mortgage. Simply call up the lender and discuss ways of avoiding the foreclosure trap.
Related Articles: Related References: |
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Mac_7
Guest
0.10 Dollars($)
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 Posted: Mon Feb 18, 2008 4:02 am Post subject: |
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| One may even consider renting out the home so that he/she can pay off the loan using the rent payments and thus prevent foreclosure. |
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adonis
Joined: 22 Oct 2005
Posts: 1236
Location: ALASKA
105.68 Dollars($)
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| Posted: Mon Feb 18, 2008 4:37 am Post subject: |
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There are intiatives taken by the govrnment to help those behind on their home loans. one such intiative is the rate freeze program for borrowers having ARMs that will reset rom January 1, 2008 and 31st July, 2010.
The community has discussed on the rate freeze at http://www.mortgagefit.com/tennessee/newlaw-variablerate.html .
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Procrastination is the enemy of your financial sucess |
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Ryan
Guest
0.10 Dollars($)
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| Posted: Mon Feb 18, 2008 4:59 am Post subject: |
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| is it limited to tenessee only adonis? |
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Caron
Moderator
Joined: 19 Jul 2005
Posts: 1340
Location: florida
222.64 Dollars($)
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| Posted: Mon Feb 18, 2008 5:39 am Post subject: RE: avoid foreclosure |
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Hi Ryan,
The Rate Freeze Plan isn't limited to Tenessee, but throughout the nation. It's meant for borrowers who are likly to fall behind on their adjustable rate mortgages but haven't yet defaulted.
There's a new program now – "Project Lifeline" initiated by the government to prevent houses being foreclosed. Under this program, banks will delay foreclosure proceedings for 30 days and this is applicable to borrowers having any type of mortgage, not just ARMs. At the same time, lenders will try to modify loans so that these can be afforded by the borrowers.
good luck
_________________
Mortgage Shopping made easy with booklet |
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jbarto65
Joined: 04 Nov 2007
Posts: 591
4.82 Dollars($)
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| Posted: Mon Feb 18, 2008 5:59 am Post subject: |
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What a great article, it explains everything so clearly, thank you.
I fortunately have mine all caught up and present and am happy to say that I am back on track and plan to stay there, in fact, come the end of the month, I will be one payment ahead. thank god that stress will be gone. |
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larry
Joined: 27 Jun 2007
Posts: 2910
403.53 Dollars($)
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| Posted: Mon Feb 18, 2008 6:23 pm Post subject: |
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Hi,
This is really very helpful article. When this year is heading towards 1 millions of foreclosure, this article is really going to help the debt-stricken borrowers.
As Caron has mentioned above Project Lifeline is another government sponsor program to prevent foreclosure. Here Servicer will send letters to the seriously delinquent borrower to contact the servicer within ten days for counseling and trying to modify the loan term. But if the borrowers fail to respond the letter, then foreclosure proceeds.
Thanks,
Larry |
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enriko
Joined: 05 Mar 2008
Posts: 59
16.37 Dollars($)
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| Posted: Tue Mar 18, 2008 2:04 am Post subject: |
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man, thanks this is a great post!!
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http://www.ezylet.co.uk/- Life of landlords and tenants made ezy! |
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kpatrick
Joined: 29 Oct 2007
Posts: 78
Location: Atlanta, Georgia
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imdcorp
Joined: 14 Mar 2008
Posts: 4
2.80 Dollars($)
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| Posted: Thu Mar 20, 2008 3:30 pm Post subject: |
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| Great article. The homeowner should also be aware that for many of the solutions above that "forgive" debt such as short sale and bankruptcy. They may become liable for taxes as the IRS treats it as taxable income. |
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Caron
Moderator
Joined: 19 Jul 2005
Posts: 1340
Location: florida
222.64 Dollars($)
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| Posted: Mon Mar 24, 2008 5:29 am Post subject: RE: tax liability after mortgage forgiveness |
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Hi imdcorp,
I agree with you here. However, the tax liability remains if the homeowners does not qualify for mortgage debt forgiveness by satisfying the criteria as given at http://www.mortgagefit.com/deficiency/form1099a.html#44186 .
Morepover, if he's in California, he is liable for taxes on canceled debt unlike in other states.
good luck
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Mortgage Shopping made easy with booklet |
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fireyone_02
Joined: 20 Mar 2008
Posts: 267
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| Posted: Mon Apr 21, 2008 4:19 pm Post subject: |
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| Kudos...very good post indeed. |
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jbarto65
Joined: 04 Nov 2007
Posts: 591
4.82 Dollars($)
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| Posted: Sat May 03, 2008 5:20 pm Post subject: |
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| very informative |
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AlaskaDES
Joined: 04 May 2008
Posts: 27
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| Posted: Mon May 05, 2008 3:22 pm Post subject: |
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Great Article!
I do, however believe in not letting cash flow limit one's potential. If you have the assets to free up, I feel that using a strategy to use the bank's money to pay the bank back would be another alternative to look at.
Living life on an Average Daily Balance system rather then an amortized system may be a possible alternative.
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DJ Jennings
Alaska Debt Elimination Services |
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cliff
Community Experts
Joined: 05 May 2008
Posts: 220
Location: Houston
48.01 Dollars($)
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| Posted: Wed May 07, 2008 1:42 pm Post subject: |
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Great Post! Good also to note even if your lender has posted your home for foreclosure it is still "not" to late. Your lender will still modify your loan and/or do a repayment plan. In addition, project lifeline only includes the six of the nations mortgage companies. There are some mean mortgage companies out there who are still refusing to offer project lifeline. Make sure and call your lender and speak with a supervisor in the loss mitigation department they will help you with your options to save your home.
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Cliff Pape
Market Analyst
www.home-buddies.com |
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