Compare Mortgage Quotes

Refinance Rates for Today

Please enable JavaScript for the best experience.

In the mean time, check out our refinance rates!

Company Loan Type APR Est. Pmt.

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 you give me a sample letter to send to my mortgage co. offering them a deed in lieu of foreclosure?
Posted on: 23rd Dec, 2009 07:06 pm
Hi Guest,

You will have to write a hardship letter to your lender asking for a deed in lieu of foreclosure. Check out the given page in order to know how you can write a hardship letter:
http://www.mortgagefit.com/problems/hardship-letter.html
Posted on: 23rd Dec, 2009 10:13 pm
I have an investment property which is vacant land, large bare acreage in California. I will be able to reinstate my deed of trust before the Trustee Sale. A Notice of Default and subsequent Notice of Trustee Sale have already been recorded with the County.

Can something be recorded with the County about the reinstatement?
Are there alternatives to have a reinstatement mentioned or picked up on the credit reports?
Is the credit score impacted less than it would be, that is what impact would just a Notice of Default have, a Notice of Default plus a Notice of Trustee Sale have; Notice off Default plus Notice of Trustee Sale resulting in a reinstatement versus a full foreclosure?

Thanks and happy New Year!
Posted on: 30th Dec, 2009 06:06 pm
Hi md,

I don't thing you'll be able to record something in the county recorder's office regarding reinstatement. In my opinion, you should inform your lender that you will be able to reinstate the loan. He will let you know what steps you need to take in this regard. As far as I know, your credit score will be affected due to the late payments for which the Notice of Default and Notice of Trustee Sale has been filed.
Posted on: 31st Dec, 2009 12:25 am
I have a home in CALIFORNIA that i use to live in but no longer do, i currently have renters in it. I was given a loan about 5 years ago for the home which i bought for 380,000. I put 80,000 dollars down for the house. I currently owe 325,000 because of neg-am loan putting money on the back end. I have a first mortage for 300,000 and a second for the rest. I haven't paid on either loan for 7-8 months. The first mortgatge company Back of AMerica has not contacted me at all, the second has and i told them i wanted help, they said they couldn't till i defaulted so that is what i did. The second has since given my loan to a debt collection agency. What are my options and what should i do? if there is anyone that has been through this or knows what to do i would love to hear from you.
Thank you good luck to you all

[Email address deleted as per the forum rules. Thanks.]
Posted on: 04th Feb, 2010 10:04 am
Hi patboo!

Welcome to forums!

Your query has been answered to in the given page:
http://www.mortgagefit.com/california/walkaway-debtcollection.html

Feel free to ask if you've further queries.

Sussane
Posted on: 04th Feb, 2010 10:54 pm
Kindly define these terms as I am not understanding how if I am paying insurance on the home (and I believe or am lead to believe this includes taxes) why am I paying additional in escrow and how does that get calculated ---
Posted on: 18th Feb, 2010 08:16 am
An account held in the borrower's name to pay the property taxes and insurance premiums is known as an escrow account. As far as mortgage insurance is concerned, it is an insurance policy which compensates the lenders for losses if you default on your home loan. You need to contact your lender and ask him to clarify the whole thing. This will help you know whether or not you are paying extra.
Posted on: 19th Feb, 2010 01:41 am
it's highly unlikely that you're paying "extra." you may be paying a bit more than is absolutely required for the lender to take care of taxes, insurance and mortgage insurance (if any), but lenders are required to analyze their escrow accounts and adjust accordingly (up or down) so as to not have too much or too little in the account to make the required payments.
Posted on: 19th Feb, 2010 10:57 am
i lost my job and my husband has been on unemployment also , I want to know if theres any thing i can do to save my home i tried modification but they tell me i have tomany bills so they cant help me.
Posted on: 05th Apr, 2010 08:41 am
Hi victoria,

As per the expansion of the Obama's loan modification program, temporary help will be provided to the borrowers who are presently unemployed. You need to contact your lender and check out if he is ready to offer you such help.

Take care
Posted on: 06th Apr, 2010 03:37 am
Posted on: 09th Apr, 2010 01:49 pm
Hi caldwellb,

A lender will give you a loan modification depending upon certain criteria. For example, if you do not have employment when you apply for a modification, your request won't get accepted. The lender will think that you won't be able to pay off the loan even if it is modified. The borrower should take proper steps in order to negotiate with the lender and get a modification.

Thanks
Posted on: 10th Apr, 2010 12:40 am
i don't think that is what caldwell is looking for, but that's okay. i don't need to continue reading about the hell people are going through to undertstand that lenders are not prepared to act quickly enough, borrowers don't understand the process, lawyers and their ilk are too quick to file frivolous lawsuits that inhibit the program further and that the entire mess was misinterpreted to begin with. i don't think our government gets what's going on - look at how many stories our fiscal "advisors" have provided already.

i'd just as soon not see more hell stories, but a few more favorable pieces of news so we can at least see that someone's being helped.
Posted on: 10th Apr, 2010 04:25 pm
Dear Jessica
I have a restaurant property which was vacant and I was unable to find a tenant so I fell behind in my mortgage payments. I have now found a tenant with lower rent and I am able to make payments but lower payments and bank has agreed to accept lower payments for two years but they want me to give deed in lieu and forebearance payment for two years and they will add all the interest payments in the back end with any and all costs due and payable as a baloon payment in two years. I am not sure if this is a good agreement Do you know of any attorney I can see before agreeing to this.
Posted on: 13th Apr, 2010 06:58 pm
Page loaded in 0.078 seconds.