Foreclosure has become a real problem for many people across America with houses being repossessed daily. While the term foreclosure can apply to more situations than just a mortgage this article deals specifically with the mortgage situation. Foreclosure occurs when a borrower falls behind on their mortgage repayments and the lender then begins proceedings to have the house repossessed in order to recoup the loan.
Contacting the Lender
If you have fallen behind on mortgage payments and feel you are at threat of foreclosure do not bury your head in the sand. It is best to face the problem head on as dealing with it sooner gives you a greater number of foreclosure alternatives. The first step is to contact the institution which has provided the mortgage. They may be able to offer you a number of alternatives depending on how far down the track you are with your defaults.
1. Hardship Letter: This is your opportunity to explain your circumstances to your lender, and also the first step in any negotiation process to save your property. Remember there is a current crisis in the number of foreclosures. Therefore understand that the person reading the letter may well read hundreds of others on a daily basis and it is important to make your hardship letter short and to the point. This letter gives you a chance to document any short term issues which have caused you to default on the repayments such as unexpected illness, death of spouse or any natural disaster such as flooding which may have affected your ability to repay.
2. Forbearance: In specific situations of financial hardship such as unexpected illness and temporary loss of job it may be possible to talk with the lender about granting forbearance. This will put a hold on the repayments until the situation has improved at which point repayments, coupled with additional payments, will restart. This is not an option for everyone but can be a useful way of saving your property form foreclosure at times of temporary financial difficulty.
3. Loan Modification: The lender may offer to modify the original loan. In a way this is kind of a refinancing arrangement however it does not involve any closing costs and therefore may be more affordable. By modifying the loan you may be able to negotiate lower interest rates or a reduction in the amount owed.
4. Refinance the Loan: If you own an equitable portion of the property, for example if you outright own 50% of the property, you may therefore be able to refinance the mortgage based upon this as collateral. However there will be closing costs associated with refinancing and therefore it is only suitable for those who can afford such costs. Often in the case where a family or individual have fallen behind with mortgage repayments such extra costs are not affordable.
5. Sale of the Property: If you wish to sell the property but would like to avoid the negative consequences of foreclosure, such as a bad credit rating, you can discuss a short sale with the lender. You will need to talk with the lender about accepting the sale price as it may be less than the debt itself. Trained foreclosure attorneys can assist with such negotiations.
6. Chapter 13 Bankruptcy: This may provide the best solution to protect your property. If you have a regular income you may be able to work out a repayment plan with the court which allows you to repay the back payments over 3 – 5 years. However you will also have to continue with current payments.
7. Contact Other Agencies: If all else fails do not despair. While the lender may not be willing to discuss these alternatives you may be able to find assistance with government agencies whose interest lies in avoiding foreclosures. The Hope for Homeowners Act of 2008 may be of assistance in changing your mortgage into a more affordable one. For further information on what is available either contact an attorney or go online.
On Seeking Legal Advice
Always seek legal advice when you feel foreclosure is a real threat. Attorneys, specifically trained in the law surrounding foreclosures and also foreclosure defenses, will offer the best chance of protecting your property. They can explain the full foreclosure process to you and therefore assist you in determining the best action for yourself and your family. Your foreclosure attorney can draft all legal correspondence and represent you both in court and also at the negotiation table. It is also important to hire an attorney to carry out a thorough investigation into the behavior of the lender. If they have violated any of the law surrounding the issuing of mortgages this can then be used in your favor at the bargaining table. Make sure you hire a reputable attorney who has specific experience in the area of foreclosure law. Contact your local bar association or research online to find the best options. Remember that foreclosure defense tactics can vary from state-to-state therefore it is best to contact a local lawyer who knows the local variations in the law.
Foreclosure can be avoided but only if you take action the minute you feel unable to make repayments on your mortgage. Delaying will not help you save your house.