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How to avoid foreclosure-17 ways to get out of mortgage mess

Posted on: 18th Feb, 2008 02:00 am
if you're in severe financial crisis and can't pay down your mortgage or manage your daily expenses, it's time for some quick action in order to get better control over your money.

if you find yourself unable to make your mortgage payments, one of 2 things may happen depending on where you live. they are:

  1. judicial foreclosure: depending on your state's law, the lender may file for a foreclosure with your local circuit court and send you a summons.
  2. non-judicial foreclosure: some states permit a lender to foreclose without having to go into court as long as the lender follows that state's foreclosure procedures. this is called non-judicial foreclosure. here, the lender will send you a default letter, and a notice of default will be filed. if you do not cure the default after a certain period, the lender will mail you a notice of sale, record it, and publish it.
however, you can avoid foreclosure. it can be as simple as planning your budget each month so you have an emergency fund to meet your monthly mortgage payments. if these options don't work, try loan modification. with a loan modification, you will be able to reduce your monthly mortgage payments and extend your loan term. read on to find out how you can avoid foreclosure.

11 ways before lender files foreclosure

  1. build emergency fund:
    apart from creating a budget, put some of your paycheck into an emergency savings account fund to ensure that you have enough cash to continue paying the loan.

  2. cut down on expenses:
    if you're having a tough time paying your bills, try and find areas where you can minimize your spending.

  3. cash-out assets/take up a second job:
    try cashing out assets like stocks, savings accounts and investment property that if sold can give you a lump sum you can use to pay down your debts. you might even consider getting a second job.

  4. enroll with a credit counseling service:
    if you are having problems paying off your loan and want to avoid foreclosure, contact a housing/credit counselor for financial advice. there are fha and hud approved counselors to help you with the following:
    • analyze your finances and prepare monthly budget to ensure that you can meet your daily expenses and repay your debts.
    • call the lender and discuss about workout options that can help you keep your 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-by-state list of hud approved counseling agencies in the "related references" section below. you can also contact counselors associated with the national foundation of credit counseling or the association of independent consumer credit counseling agencies.

  5. obama's making home affordable program:
    if you have a sallie mae or freddie mac mortgage, then you may be eligible for mortgage assistance as part of barack obama's making home affordable program. you can also get assistance with short sales and deeds-in-lieu.

  6. refinance the existing loan:
    if there's enough equity in the home and you satisfy the lender's guidelines, then refinancing may be a good option to avoid foreclosure. when you refinance, don't get lured in by the low initial rates on arms or interest-only payments; the chances are good that you will face even higher interest payments on these loans once the rates start adjusting.

  7. emergency mortgage assistance programs:
    if you have lost your job or your income has been reduced, and you feel it's not possible to pay down the loan, you can get help from an emergency assistance program in order to avoid foreclosure. hope now is one of the many programs available in the market.

  8. forbearance and repayment plans:
    with forbearance, the lender may reduce your the amount you pay each month or even suspend it for a few months so you can get back on track and continue paying. often the lender suggests a repayment plan so that the arrears are rolled into the amount of the loan balance and you can continue repaying the debt once the forbearance period is over.

  9. reinstatement:
    the lender may be willing to accept the entire amount you owe in a single payment on a specific date. then you can continue repaying the debt on a monthly basis as though you were never behind.

  10. loan modification:
    loan modification is one way you can avoid foreclosure on your home. this involves an agreement between you and the mortgage company where the original terms and conditions of your loan will be modified so that you can afford to pay on the mortgage.

  11. foreclosure intervention program:
    there are agencies that grant funds to delinquent borrowers and help them negotiate with lenders about rescheduling payment. in order to qualify you for these grants, the agency will look at a number of factors such as:
    • your income,
    • the reason for the late/missed payments or inability to pay,
    • your housing ratio
    • your ability to pay in future.

    while there is a maximum amount of money these agencies can lend, if you have fha insured loan, you may qualify for an interest-free or a payment-free loan to pay off the debt and get current on the loan. the loan needs to be paid back only after you've repaid the mortgage.

6 ways after lender files foreclosure

  1. seek court protection:
    if you are unemployed or underemployed, then depending on your state's laws, you may be able to seek the protection of the court. in this case, the court may postpone foreclosure for the next 6 months so you can try and gather the funds to get current on your loan.

  2. file chapter 13:
    you may file chapter 13 bankruptcy and avoid foreclosure sale if your other debts are preventing you from becoming current on your mortgage. chapter 13 is designed to help you restructure and pay back your debts within 3-5 years.

  3. sell off your property:
    if you no longer wish to keep the home, you can try to sell it off at a price equal to the fair market value. the best way to try and sell your property is to list it with a realtor or real estate agent.

  4. try for short sale:
    a short sale is where you try to sell your property for less than the amount of your loan. if you attempt a short sale, you must get any offer approved by your lender. learn how a short sale works.

  5. ask your lender to accept a deed-in-lieu:
    if a short sale isn't working, then you might want to try to get the lender to accept a deed in lieu of foreclosure. however, most lenders are reluctant to accept a deed in lieu because they have to manage the property until they can find a buyer.

    with a deed in lieu, you give the house to the lender in exchange for being released from the debt. this will also lower your credit score. learn more...

  6. file chapter 7:
    filing chapter 7 will put a temporary stop to a foreclosure. however, depending upon your state laws, you may or may not be able to keep the home. learn more...

what if none of the options work for you?

if you fail to use of any of the options stated above, there's no other option but to let your home go into foreclosure.

prior to judgment, you may be able to redeem the loan by using the right of redemption if your state grants you this right. this allows you to pay off the mortgage along with the lender's court costs and attorney fees.

foreclosure is one of the worst things that can happen to you. the best thing to do if you're in danger of falling behind on your mortgage is to contact your lender or a credit counselor and discuss how you can avoid foreclosure.

related readings

related forum discussions
related references
Welcome Rociel.

Whether the lender will accept the deed in lieu or not that totally depends upon the lender. But first try to contact with the lender ASAP and you should try to go for short sale. Short sale will have less negative affect on your credit report than deed in lieu or foreclosure.

Let me know if you have any further queries.
Posted on: 12th Aug, 2008 02:55 am
Hi Rociel,

So, you filed chapter 13 and now you think the payments are huge. Did you talk to your trustee about it? usually the trustee prepares a payment plan keeping in mind the debtor's affordability. But it's not so perhaps in your case.

A deed in lieu is possible if the bankruptcy is dismissed but what I'd like to know is, did the lender ever declare a foreclosure? In case the lender has done so, the bankruptcy has put an automatic stay on the foreclosure. Hence, after the chapter 13 dismissal, the lender will hopefully release the stay and resume foreclosure proceedings again.

Take Care
Posted on: 12th Aug, 2008 04:38 am
I have ten vacant properties which I cannot make the payments on but am current on payments. If I do a BPO and agree to pay the difference if there is one can I just quit claim or grant deed these non owner occupied properties back? What if I just deed back without approval what can happen?
Posted on: 16th Aug, 2008 10:17 am
Welcome chuck.

You cannot deed the property back without the approval. As the property is mortgaged you cannot also use a grant deed. By the way, if you cannot make payments then talk to the mortgage company and find out if there are any options available for you to avoid foreclosure.
Posted on: 18th Aug, 2008 06:07 am
How and why would a lender offer a loan modication. What can a borrowere expect to see in a loan modification
Posted on: 03rd Oct, 2008 12:28 pm
Well, a loan modification is offered by lenders as a part of foreclosure prevention program. It involves changing the terms and conditions of the loan so that the borrower can afford to pay it off.

However, at times in case of loan modification, the mortgage payment may be increased instead of reducing it as because any payment which is due may be added to the loan balance. Know more on loan modification from an article on this topic.

Good luck
Posted on: 10th Oct, 2008 05:45 am
Will it be best to get a lawyer to represent us and let them speak on our behalf.
Posted on: 23rd Oct, 2008 05:56 pm
Hi ar white!

Have you applied for a deed in lieu with your lender? You will have to first apply for it. If they reject you then you can go in for negotiations and consult the lawyers.

Thanks.
Posted on: 24th Oct, 2008 02:59 am
I'm unemployed right now. been in my home 12 years. not upside down have some equity. my adjustable rate is too much. my credit is shot cant refi. behind now 3 months. is there any help for those unemployed?
Posted on: 26th Dec, 2008 06:46 am
Hi fusterated!

Welcome to forums!

As you have already defaulted on your payments for 3 months, there are chances that the lender will foreclose the property. You should immediately speak to the lender and check out the options of loan modification, short sale or a deed in lieu foreclosure. To know more about ways to avoid foreclosure, check out the following link:
http://www.mortgagefit.com/foreclosure/17ways-avoid.html

Feel free to ask if you have further queries.

Sussane
Posted on: 28th Dec, 2008 10:47 pm
attourney had me sign a quit claim deed to his firm, to as mhe put it , to insure he got his fees. i lopst my mjob, was charged exorbanant fees and now am being threated by forclosure from his firm. i dont have the funds to go to court over the billing in the divorce and he is now asking fro 20000. 5000 more than the orig bill he sent , incidently i paid him overe 7000 to date. how can i stop this action? my home mortgage payments are current , even though the amount owed on this 50 year old home is at least 50,000 more than the properety would be able to bring in sale. please help. single mother of 3. awaiting back msurgury next month.
Posted on: 13th Jan, 2009 07:33 pm
If you owe him the money, then the lawyer has all the rights to ask you to pay. However, if you are not in a position to pay the money, you can negotiate with him. You should tell him about your hardship and I'm sure he'll understand it.
Posted on: 15th Jan, 2009 01:11 am
I live in Michigan and my house went into Foreclosure November 12, 2008. It will not be sold until November 12, 2009 since we have over 3 acres. I was told by the mortgage company that we could reinstate the loan by paying all past due amounts and foreclosure fees. I called to get the actual amount to pay and was told by the Law firm that we had to pay the full balance of the loan unless the mortgage company contacted them instructing to give us the all past due amounts. I then called the mortgage company and they said there was no way to reinstate the mortgage, we would have to pay the entire loan off. Is there anything we can do or someone that can help us get this resolved? Is it absolutely out of the question to reinstate the loan?
Posted on: 26th Jan, 2009 06:19 am
Welcome ckmjlee,

Did the mortgage company give you any reason as why you will not be able to reinstate the loan? If the lender is not ready to reinstate the loan, then you will have to pay off the entire amount to save the property.
Posted on: 26th Jan, 2009 10:16 pm
I have a mobile home in a park. I am unemployed (collecting unemployment) and can't afford the enormous interest rate( 12.5%) my mortgage company is charging. I have paid on time for 7.5 yrs. Now I can not. I make good faith payments but they have told me if I don't pay in full they are just going to take my home away. They say they will work with me in one breath and call me a deadbeat in the next. I am not sure what my options are at the moment. I am sole support for 2 kids and there doesn't seem to be much help for mobile home owners here in Michigan. We fall through the cracks. Any advise?
Posted on: 28th Jan, 2009 06:40 am
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