Tips To Prevent Foreclosure
Foreclosure CAN be Avoided.
Are you three or more payments behind on your mortgage? If so, your mortgage lender has the authority to file foreclosure proceedings against you, proceedings that can result in the repossession of your property and a negative impact on your credit. Foreclosures remain on your credit report for at least seven years.
The foreclosure process allows your mortgage lender to seize your property in order to pay off whatever amount you owe them in mortgage payments. However, just because your lender files a foreclosure complaint against you, this does not automatically mean they will win. There are ways you can stall, postpone, and/or stop foreclosure proceedings so that you can keep your home a lot longer. There are some things you can do to completely avoid foreclosure altogether.
Preventing Foreclosure Before It Happens
The best way to avoid foreclosure, of course, is to prevent it from happening in the first place. If you find yourself in any kind of financial trouble, the best thing to do is to notify your mortgage lender as soon as possible. Believe it or not, it is actually in your lender's best interest to avoid foreclosure, because the proceedings cost them a lot of money, and they would rather avoid dealing with it, if at all possible.
If your financial situation is a temporary one, your lender may be able to temporarily freeze your payments. They may also be able to give you a reprieve until you are able to give them a lump sum payment.
If your financial situation is more long-term, you can try to modify the terms of your mortgage loan. This could result in one of three things:
- an extension of the amortization period
- a decrease in your current interest rate
- a conversion from an adjustable rate to a fixed rate
An extension of the amortization period will extend the life of your loan and your monthly mortgage payment will decrease. A decrease in your current interest rate will result in more affordable payments. And, if you currently have an adjustable rate mortgage and are able to convert it to a fixed rate, you can end up saving a significant amount of money and make your monthly mortgage payment a lot more affordable.
Forbearance is a temporary way of stalling foreclosure proceedings, where you can either pay partial payments or possibly even no payments for a specified amount of time, depending on the agreement between you and your mortgage lender. Eventually, you will have to pay the full amount forbore, but it can either be paid in one lump sum amount or in extra payments in addition to your monthly mortgage payment.
You do also have the option of hiring a housing counselor. A housing counselor is someone who works on your behalf to both resolve your financial issues and to help you and your lender find a compromise to avoid foreclosure. This could be a good option if the counselor can help keep you from losing your home.
What To Do If You Are Already In Foreclosure
If you are already in foreclosure, there are ways to fight it. The first step towards fighting a foreclosure complaint is to file a written answer to the complaint. When you answer the initial foreclosure complaint, be sure to include your defense to the foreclosure in your answer. You should carefully research the defenses to the foreclosure, and choose the defense to foreclosure that fits your specific circumstances. You should then submit your written answer to the county court where the lender originally filed the foreclosure complaint.
Making the Mortgage Lender "Produce The Note"
Whenever you sign a mortgage document, there is always a promissory note that lenders are supposed to hold on to, that details all of the specifics of any original loan agreement. If the lender cannot find the note, this can effectively postpone, or even stop the foreclosure proceedings.
Selling The Property
You can avoid foreclosure by selling the property before it's auctioned off. Now, this can be a difficult option, but it's not entirely impossible. And, you are able to keep any equity you still have invested in your home.
Questioning the Chain of Title
You will usually need a lawyer for this option, and it can be a bit expensive, but it can also be very effective. Whenever a property is about to be foreclosed on, a database attempts to make sure that the ownership of the mortgage is clear and unambiguous, from the time you signed the mortgage, all the way up to the present moment. This is the way the court is able to recognize the legality of the foreclosure. This database is called the Mortgage Electronic Registration System or MERS. This system was established specifically to track the chain of title. Some courts are skeptical of the MERS’s legitimacy; therefore, if you can successfully question the database that keeps track of the chain of title, you may be able to keep your home.
Negotiating a Deed In Lieu of Foreclosure
If you happen to have a significant amount of monthly payments in arrears, you may be able to negotiate a deed in lieu of foreclosure. Now, you will not be able to keep your home, but you may be able to transfer the deed over to the lender in exchange for the ability to cancel your debt. The deed is accepted as “payment in full” on the loan.
Last, but not least, you always have the option of filing bankruptcy. When you file for bankruptcy, foreclosure proceedings can be stopped with what is called an automatic stay. A lot of people would like to avoid bankruptcy if they can, while others think its the only way to avoid losing their homes.