How To Stop Foreclosure.
The standard measure of whether to
keep the property is that if the monthly house payment, (including
property taxes and insurance), is less than 40% of your gross monthly
income, you should be able to hold on to it.
If greater than 40%, one should consider selling or transferring
it, to avoid a negative effect on your credit rating. Borrowers
who have equity in the property would more likely do this. They
could pay off the mortgage, and keep any remaining equity.
Aside from not paying their loans on time, homeowners get into
foreclosure by ignoring calls or letters from their lender or just
giving up in the hope that things will get better.
Do not take a 'wait and see' attitude. Put your plan into action.
Contact the appropriate people. Provide any requested information
to the lender and/or its trustee (representative). Put everything
in writing. If you have a telephone conversation with your lender,
or the trustee, follow it up with a letter stating what was decided.
If it's not in writing, it never happened. Do what you said you'd
do - lenders foreclose every day; you don't want them to think you're
another deadbeat.
Alternatives to foreclosure or repossession:
- If procedural errors were made in the foreclosure or in the loan
origination, you may consider filing a lawsuit to enjoin
or stop the foreclosure. Consult with a solicitor.
- Bankruptcy is a temporary solution. It will stop the foreclosure
for a short time only. It may give you some leverage in resolving
the situation. Again, consult with an lawyer.
Chapter 13 bankruptcy: you should be able to keep your home
and your car.
Chapter 7 bankruptcy: you will keep both for a while but
you might ultimately be faced with repossession for liquidation.
The trustee of that bankruptcy may be charged with liquidating both
your car and home to pay your debts.
This depends on which U.S. state you live in, and what the state
laws say.
- A counselor can help you determine what options may be
available to you, as well as help you negotiate with your lender.
- A reinstatement may be possible, if you can promise to
pay a lump sum to make your payments current (up to date) by a specified
date.
- A 'special forbearance' may be arranged by the lender whereby
the homeowner receives a payment schedule adjustment. They may also
receive a suspension of payments for a certain period of time. This
can be arrived at by discussion with the lender.
- A repayment plan is another option. Usually the lender
adds a portion of the past due amount, to a specified number of
payments, in order for the borrower to catch up. It's used for homeowners
who are behind in their mortgage payments, who can begin making
payments on time again, but who don't have the money to make up
the past due amount with a lump sum.
- Another option is 'mortgage modification'. The homeowner
extends the loan period or refinances their current loan to get
a lower rate and thereby have lower monthly payments.
- Another option is remortgaging. If you have enough equity
in your property then you might be able to change lenders and start
afresh.
- Selling is another option. One can ask lender to put the
foreclosure on standby to give one time to sell. Otherwise, people
will learn through estate agents about the foreclosure, and you
will not get a good price. If you must sell quickly, this also can
lower your sale price. Some find that selling their home is best
and they do so with a pre-foreclosure sale. They sell their home
for an amount less than the total mortgage amount.
- Submit a deed in lieu of foreclosure. You may be able to
deed the real estate over to the lender. This forgives your debt
to the lender and has less of a negative effect on your credit rating.
This won't prevent you from losing your home, but it will help you
by not having a foreclosure on your credit history.
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