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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
we have ask the lender to sell the propery for years and no one has offered to rent or buy the property , now thet want to foreclose on us and are taking us to court neither of us live in the home , I myself was the co-sighner and have a home of my own,we live in a non-recourse state, please help
Posted on: 06th Nov, 2010 10:57 am
Hi freddie!

Welcome to forums!

As the mortgage still remains in your name, the foreclosure will have a negative affect on your credit report. Unless you pay off the mortgage in full, the lender will not stop the foreclosure process.

Feel free to ask if you've further queries.

Posted on: 08th Nov, 2010 03:18 pm
My elderly parents home is in danger of being forclosed. Due to health issues (dementia) they did not pay their bills. Their home is set for a hearing this week to determine forclosure proceedings is there any help for them.

[Email address deleted as per forum rules. Thanks.]
Posted on: 03rd Jan, 2011 09:23 pm
Hi aro,

You can contact their lender and discuss their situation with him and check out if there is a way to avoid foreclosure. If possible, you can pay off the dues on behalf of your parents and stop the foreclosure sale.

Posted on: 04th Jan, 2011 08:17 pm
my current mortgage is @ 7.225% and i owe $135,000.00. most people in this condo community bought at the height of the market and are now walking away from their condos. i purchases in 2006 for $174k and now they are selling for about $50k. of course the hoa fees are increasing because of the amount of people that have walked away. my mortgage holder will not lower the interest rate unless i miss payments, i can't refinance because the property isn't worth what i owe on it.
any ideas on what i can do in this situation? i may just have to walk away!
Posted on: 18th Jan, 2011 04:35 pm
Hi lori,

It is true that unless you're delinquent on your mortgage payments, the lenders won't consider you for any hardship plan. Thus, if you want to go for a loan modification, the lender will want you to be delinquent on your payments.

Posted on: 18th Jan, 2011 09:32 pm
I bought a condo three plus years ago. I am current
On my payments. Paid 301k plus paid 5k in accessments
Since the purchase. I have tried to sell it twice with no
Luck. I have consulted short sale real estate specialist
And told the unit would bring about 210k in short sale.
On top of that, I just got hit up for another assessment
For 45k for exterior remodel. I do not have the money
To pay that and can't see putting any more cash into
This unit, it has become a bad investment. I have
Talked to two attorneys and advised to file chapter 13,
I still am reluctant to do so. I have great credit but
A lot of debt including two other mortgages. I make
Just enough to cover monthly expenses, no savings
Other than 401k. Need some advise
Posted on: 25th Jan, 2011 06:20 am
welcome colcond,

if it is property which is posing problem for you, then you should contact your lender and apply for a deed in lieu of foreclosure so that you can get rid of the property as well as the loan. however, if you have other unsecured bills as well, then you may think of filing chapter 13 bankruptcy.
Posted on: 25th Jan, 2011 08:52 pm
Posted on: 26th Jan, 2011 07:47 pm

If you want to get rid of the property or the mortgage, then you should contact your lender and apply for a deed in lieu of foreclosure. You should contact your lender and apply for it. If the lender is convinced about your financial situation, then your request will be accepted.

Posted on: 27th Jan, 2011 10:30 pm
I just find out that chase foreclosed on my home on january 4th is there any help for me in the state of GA?
Posted on: 28th Jan, 2011 02:21 pm
Welcome casandra,

Georgia does not allow the stature of redemption once the property is sold off at the foreclosure sale. Thus, you won't be able to claim back the property.
Posted on: 28th Jan, 2011 10:21 pm
The best thing to do to avoid foreclosure is to be responsible with all your obligations.
Posted on: 30th Jan, 2011 09:33 pm
I used my CA HELOC years after I sold the home. I bought another home in FL and hold the deed. I live in WY and now I can't pay the HELOC. They are threatening to foreclose on a home that was sold years ago. I am disabled now and my husband is self employed. What will happen to our credit?
Posted on: 01st Feb, 2011 04:33 pm
Welcome Krystal,

The lender cannot foreclose the home which was sold off years ago. Your lender can rather charge off the account and sell it off to a collection agency. You should negotiate with your lender so that you can get an affordable payment plan to pay off the dues.
Posted on: 01st Feb, 2011 10:18 pm
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