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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
Can I see a deed in lieu agreement package? I was a home seller who attempted to help a friend with bad credit. I was retiring and my home was my only large asset. I sold for $235k and bought a smaller home for $185k. The market has tanked both homes. My buyer is behind 3 payments now and tonight we talked and he agreed to consider a deed in lieu and then rent the home back from me.

I really cannot sell the home for what I owe on the smaller home, and I NEED income in order to made the payments on my own home. Anyone? Suggestions? I do not want to ruin his credit or mine, or lose my current home. I am retired, but I could go back to work if the job market wasn't so awful too.
Posted on: 04th Jun, 2009 08:34 pm
my morgage make me pay 3 months trial that mean s I need ot send $926,00 each month and after that 3 months if I dont miss any payment maybe they give me modification loan but this is only if so that dont ofter any thing and they will keep my money for the 3 monts payment I dotn think is right . what can I do or whrere can I go to ask for help before Igo to forecloce?
Posted on: 05th Jun, 2009 11:27 am
I went to Bank america to ask for help im my morgage they say they cant find my morgage loan because my morgage was with Country wide but Contry wide morgace change to Bank america they whent Bankrupsy so I know I need to call Bank america but they dont want to help at all and now Country wide dont asnwer the phone they put home team and they send me papers so I can sign for 3 monts trial for 3 monts but if they say I dont get modification loan they wll keep the 3 monts payments I need we all need to send a lether to the Presicent Obama he nned to know the bank dont want to help they want to hurt people they shoudl say the amount for the payment and not to have to go to a trial I have kids and they are worry that the bank will take our home awy and not place to stay and maybe no to have money for food if we go foreclose and they will make us pay also for attorney fees I dotn think this is right alot of people lost they homes all this is very sad we nned help and the banks wont help .
Posted on: 05th Jun, 2009 11:38 am
Hi,

To Quandry,

I would suggest you to contact an attorney and ask him to draft a deed in lieu package for you. In my opinion, you won't be able to do it yourself. The attorney will help you in understanding the details of deed in lieu as well.

To ahawk,

It is very important for you to make the payments on right time during the trial period. If you don't do so, the lender will foreclose the property. You are liable to make the payments as you've taken the loan.

Thanks
Posted on: 05th Jun, 2009 09:58 pm
CAN I SEEK COURT PROTECTION,IN TAMPA FL,IS THERE ANY PROGRAMS THAT CAN HELP
Posted on: 24th Jul, 2009 04:44 am
Hi POP,

You can get court protection against lender in case of unemployment and underemployment. However, it would be better if you could contact an attorney and get his opinion in this regard.

Thanks
Posted on: 24th Jul, 2009 10:45 pm
my current loan is $416,000 but my property is worth $150,000.How can I get my lender to reduced my mortgage to $150,000
Posted on: 01st Aug, 2009 11:23 am
can I write a hardship leter to my lender requesting a loan reduction.
Posted on: 01st Aug, 2009 11:30 am
Hi HENRY,

You can definitely write a hardship letter and request for a principle reduction. You should explain your financial crisis clearly when you write the hardship letter. It depends upon the discretion of the lender whether or not he would accept the request for principle reduction.

Thanks
Posted on: 04th Aug, 2009 12:20 am
I've seen alot of people hurt by the foreclosure crisis. Recently I've created a website that will help people use their rights and fight back. The most important thing to do is STOP THE SALE! When someone misses a payment they have to send letters requesting their documents, but not just any letter they have to site the federal statute. If they're in a judicial state, file an answer, if in a non juducial state, file a lawsuit. Forget loan mods, I've spoken to people high up at the bank (Chase), there's an Obama line and they'll even answer it, but they'll ask you to fax your info to them. The only problem is the line is always busy! Make the bank stand by what they say they're going to do.

[Email address deleted as per forum rules. Thanks.]
Posted on: 17th Aug, 2009 05:50 pm
Here's that letter, good luck:




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Posted on: 17th Aug, 2009 05:57 pm
just curious, ivan...what are your credentials? what position do you hold that provides you with such expertise?
Posted on: 18th Aug, 2009 08:48 am
I think people should learn to do thier own loan modification to get out of trouble instead of paying thousands in fees to get others to do it all for you!
you can learn more ...

http: //loan-modification-kit.blogspot.com/
(copy that in your browser without the space and see)

peace,
David
Posted on: 21st Aug, 2009 12:38 am
Am i to understand that a person has to live in the home for the length of the mortage or face foreclosure.
Posted on: 31st Aug, 2009 12:03 pm
Hi Leon,

If you take a mortgage on the property, then you will have to pay it off. If you are unable to pay the mortgage dues, the lender would foreclose it to recover the dues. If you can pay off the loan accordingly, the lender will not foreclose the property and you would own it free and clear.

Thanks
Posted on: 01st Sep, 2009 12:42 am
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