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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
mortgage debt balance-165,000 in a 4br ranch house in roanoke, virginia
montly payment-1,600
not able to pay mortgage amount d/t lack of funds/hours cut off from work
value of house is less than debt balance
opting to leave the house and rent another house with 300 less than our mortgage montly payment
is this a good idea?
Posted on: 06th Oct, 2009 08:30 pm
Hi villabong,

If you want to get rid of the property, then short sale is a good option. It will help you in selling off the property. However, you should remember that you would be liable for the deficient amount resulting from the sale of the property. If you cannot pay off the deficient amount, the lender would place a lien on your other properties or can garnish your wages.
Posted on: 07th Oct, 2009 12:22 am
we were denied modifcation loan because we didnt come up with 5.000 payment at the end of the contract. now i am looking at the deed in lieu of foreclosure option? how long will we be able to live in our house if we go this route?
Posted on: 21st Oct, 2009 06:08 am
Could you quickly reply, I may be without internet next
Posted on: 21st Oct, 2009 06:11 am
hi thresa!

welcome to forums!

deed in lieu of foreclosure is a good option in order to get rid of your property. you will have to write a hardship letter to the lender in order to apply for a deed in lieu. it will take around 90 days to complete the whole process. once you surrender the property to the lender, you will have to vacate it.

feel free to ask if you've further queries.

sussane
Posted on: 22nd Oct, 2009 12:40 am
We got served with foreclosure papers last week. We requested the total amount from the banks attorneys and are being charged an additional $6000 on top of the late payments. We would like to pay back what we're behind but want them to waive the $6000 fee. Is that something that banks will do? Also, if we reinstate the loan, can we still ask for a modification after? We just don't want to lose the house and don't want to take a chance on losing the house if we don't get a modification for one reason or another.
Posted on: 09th Nov, 2009 07:33 am
Hi Ana,

It would be the bank's discretion whether or not it would waive off the fees. However, you should negotiate with the lender for the same. Inform the lender that you would be able to pay off the loan dues and reinstate the loan and in turn want the fees to be canceled. He would let you know whether or not it would be canceled.

You do not need to modify the loan after bringing it current. You can even apply for a loan modification now. However, I don't think after reinstating the loan, you would become ineligible for a modification.

Thanks
Posted on: 09th Nov, 2009 10:11 pm
We can avoid foreclosure by paying our obligation regularly, but due to some circumstances happened like you lose job and you can never pay your lender, you can go straight to them and ask for an extension of the mortgage.
Posted on: 10th Dec, 2009 12:50 am
okay...
Posted on: 10th Dec, 2009 08:59 am
my wife and i are current on both the 1st and 2nd mort but the 2nd mort has a high interest rate and we are upside down with the two mortgages and when we call the 2nd mort company they are not trying to hear us about lowering the rate. what should we do?
Posted on: 15th Dec, 2009 11:33 am
NJ, you cannot simply ask for the rate to be lowered. You need to show the bank (in writing) what your financial situation is. You need to show your monthly cash flow and detail what payment would work for you. If you have a plan, they will be more willing to listen.
Posted on: 15th Dec, 2009 03:38 pm
if we go with a quick sell of our first mortgage, what can the second mortgage holder do?
Posted on: 17th Dec, 2009 02:38 pm
Hi Mark,

Though you short sale your property, you would still be responsible for the second mortgage dues. The second lender will have the rights to collect the dues from you. If you're unable to pay off the dues, the lender will charge off the loan.

Thanks
Posted on: 17th Dec, 2009 09:17 pm
here's the joke. my wife and i both have fico scores over 850. never been late on a payment on anything in 30 years. had two slow years of work, burned through my savings on the house. the cheapest we could find in the market 5 years ago. first house. all lenders said no worries, rates will be great for years to refinance. the year i got in i made over $160,000. close to $200,000 combined. combined both my wife and i make over 70,000 normally. never went to hawaii, all cars paid off, no cable tv. need a bit of help and none of our creditors will even so much as let me skip one month payment to catch bills up. joke is many of our friends who have been footing the bill for this country for 30 years are all scrambling for apartments. well, i guess at least that way we'll have more in our pocket to keep bailing out the banks. we're walking from it all. not worth the headaches. quality of life is more important than a crappy house. the great american nightmare. unless you are super wealthy or have help. do the deed in lieu. short sale is nightmare.

p.s. out of all of our friends who have done short sales, deed in lieu, begged for (or paid) to get a modification and gone into foreclosure not one of them or myself has had the bank come back and say, ‘hey don’t move. we’ll help you with a modification.’ do you see any posts here referencing that? we have been trying to get a modification for 9 months. they string you along saying hey you forgot to check this box or dot that ‘i’ so they can squeeze every last cent out of you before the ship finally sinks. do yourself a favor; find a nice apartment while your credit is still intact if it is and take care of your survival first because no one will be there to help when you are out on the street and homeless.
Posted on: 20th Dec, 2009 07:24 pm
Your query has been answered in the given page:
http://www.mortgagefit.com/forbearance-1.html#140331

Please take a look at it. I hope it will help you.
Posted on: 20th Dec, 2009 09:18 pm
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