tips to prevent foreclosure of your property
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tips to prevent foreclosure of your property

15 Jan

If you cannot make your monthly mortgage payment, you can try modifying the terms of your loan. Modifying the terms of your loan may reduce your monthly payments or interest rate, depending on what your current circumstances are. You may be able to modify your loan with your lender, or you may be eligible for the government Homeowner Affordability and Sustainability Plan (HASP), which allows you to restructure your mortgage.

The legal process is known as a “foreclosure,” and will result in the loss of your home, foreclosure fees, additional legal fees, and possibly a deficiency judgment if your outstanding liens exceed the current value of your home. Your credit will also be shot when all is said and done.

Banks want their money repaid in a convenient way and the interest that comes with it; they don’t want your house. If you seem to be a good risk, the bank will offer to help keep your contract afloat. But be warned. If you seem like a bad risk, the bank may cut its losses by taking steps to foreclose and remove you as quickly as possible.

Your contract servicer should also give a contact person, who should be reachable by phone to solve your questions and provide detailed information about your choices for avoiding foreclosure. By law, this person should be allocated to you within 45 days after your loan becomes due, according to the Consumer Financial Protection Bureau.

Mortgage repayment plan: If you endure a short-term financial setback (i.e. expensive car repairs, a medical emergency), your lender may provide some breathing room by agreeing to let you pay off your missed payment in two installments over the next two months.

Loan modification: Contract servicers can adjust the terms of your loan - most often by increasing the amortization schedule, lowering the interest rate or rolling the delinquent amount into the loan, and re-amortizing the new balance - to help you make the loan current.

Deed-in-lieu of foreclosure: A deed-in-lieu of foreclosure is when you turn over your home to a bank voluntarily to avoid foreclosure procedures. In some cases, going this way could help you avoid paying the leftover loan balance on your contract but that depends on your lender’s practices and the state you live in. Before you get a deed-in-lieu of foreclosure, ask your bank if they will waive any loss, which is the difference between your home’s value and what you still owe on the contract.

Short sale: A short sale occurs when the bank allows you to sell the house for less than the outstanding loan amount, takes the proceeds, and releases any remaining debt. A real estate agent with expertise in short sales may be able to help you find a user and guide you through the long method of taking the necessary bank permissions.

Low refinance: The bank forgives some of your Amount and refinances the rest into a new loan. This type of refinancing was more common as the result of the contract change and may not be available for most homeowners now.

Refinance with a “hard money” loan: You won’t like the high prices and fees of a hard money loan - one from a private bank, often an individual - but it may get you time to sell your home and avoid foreclosure.

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