Stop Home Foreclosure – End the Desperation

Monday, June 15th, 2009 at 12:52 pm

Home foreclosure is about the worst thing that can happen to a homeowner and their family. The loss of a loved one, a job or mounting medical bills can affect one’s ability to stay on top of their bills.

When it reaches a point that people can’t make their mortgage payments, it’s devastating. Banks generally give several warnings and (in most cases) are willing to work with homeowners before reaching the point of foreclosure. However, in some cases, the last resort for homeowners and banks alike becomes a reality.

Once a notice of default has been filed, the mortgage holder has the right to begin foreclosure proceedings. After this process has begun, there is very little that can be done to stop it. The time to negotiate with a lender about avoiding foreclosure is BEFORE they have started the process. The lenders are not as apt to talk options AFTER foreclosure has started because they believe that multiple delinquency notices are ample time for the homeowner to contact them.

During foreclosure, the mortgage holder must give the homeowner a set amount of time to bring the loan to a current status by paying all missing payments and fees. If a homeowner intends to do this, the lender can also require that the homeowner pay the costs of filing the foreclosure before they are obligated to stop foreclosure proceedings.

If it is impossible for the homeowner to catch up, there are few other options but do include selling the home, short sale of the home, or deeding the house to the mortgage lender. Selling the home is an obvious solution but requires that the home be in marketable condition – meaning that care of the home can’t just stop along with the payments. In addition, the sale would have to be able to cover the mortgage and fees associated with selling the property – which leads to the next possible option – short sale.

When a home is not selling for what is perceived as the market value, but can be sold for less than what is owed is considered a short sale. The condition of a short sale, though, is that the mortgage holder must be willing to take less than the total owed on the property, releasing its claim and therefore also willing to forgive the remainder of the loan. Not all mortgage holders are willing to do this, but some will to stop foreclosure. However, the homeowner does take a hit on their credit report for this option; although it’s not as bad as a bankruptcy or foreclosure.

The final option is a deed-in-lieu of foreclosure agreement in which the homeowner signs the deed of the home over to the mortgage holder in exchange for being released from the loan (again, a hit is taken to the credit report for this). This allows the mortgage holder to take control of and sell the property itself, including any profit it might make from the sale.

While none of the options are preferred methods for stopping a foreclosure, they can be effective and eliminate the humiliation of being forced from the home. Again, the key to stopping a foreclosure is prevention – and the best way to prevent a foreclosure is communication.