Many situations can result in a bank foreclosure on a property, including medical emergencies, loss of a job or divorce. If you are in a position where your mortgage payments cannot be met, it is important to contact your lending institution right away to see what can be done about avoiding a bank foreclosure.
Foreclosure is the legal process by which a borrower in default under a mortgage is deprived of his or her interest in the mortgaged property. This usually results in the mortgagee selling the property by auction and the proceeds being used to service the mortgage debt.
Foreclosure is a process that allows a lender to recover the amount owed on a defaulted loan by selling or taking ownership (repossession) of the property securing the loan. The foreclosure process begins when a borrower/owner defaults on loan payments (usually mortgage payments) and the lender files a public default notice, called a Notice of Default or Lis Pendens.
The foreclosure process can end one of four ways:
1. The borrower/owner reinstates the loan by paying off the default amount during a grace period determined by state law. This grace period is also known as pre-foreclosure.
2. The borrower/owner sells the property to a third party during the pre-foreclosure period. The sale allows the borrower/owner to pay off the loan and avoid having a foreclosure on his or her credit history.
3. A third party buys the property at a public auction at the end of the pre-foreclosure period.
4. The lender takes ownership of the property, usually with the intent to re-sell it on the open market. The lender can take ownership either through an agreement with the borrower/owner during pre-foreclosure or by buying back the property at the public auction. These properties are also known as bank-owned or REO properties (Real Estate Owned by the lender).
The purpose of foreclosure is to get the bank out of debt, because you defaulted on your home loan. If you want to avoid bank foreclosure there is still help.
Foreclosures cost the banks money and time. Reaching an agreement with you to get payments back on track is generally the preferred option for both parties.
In order to come to an agreement with the lender, you must be willing to contact them and explain the situation. Depending on how much time has elapsed and whether or not your financial problems are temporary, there are several potential remedies that may be offered to you.
In many cases, working with your lender is all that is needed to avoid a bank foreclosure. You may work out an alternative payment plan, or the mortgage company may offer assistance in selling your property quickly to get both of you out of trouble. If a bank foreclosure does proceed, your home will most likely go on the auction block to be sold to another home owner or investor "as is". A foreclosure will go on your credit report for many years, making it difficult to buy another home or take out a loan for a car. If you find yourself unable to make your mortgage payment for whatever reason, contact your mortgage company right away. It is your best chance of avoiding a bank foreclosure and keeping your home.
Well here are some ways to help stop foreclosure:
• Most mortgage companies do not want to foreclose on their clients properties; they would rather work towards a solution. They may require you to provide them with bank statements and other financial documents so that they can evaluate your economic condition and can possibly extend your grace period for late payments or allow you to skip anywhere from 1-6 payments over a one to two year period.
• If you have just fallen behind on your payments but feel like you can recoup sometime down the line, you might want to consider renting your home out for one year or two. While you are renting your place out, you can move into a more affordable house or apartment that will allow you to save more money that you can put down to refinance or weather some future hard times.
• If the bank offers you interest only payments, what this means is that you only pay the interest portion of the loan for a period of time - usually a year or two. This will lower your monthly payments and give you a chance to catch up. A loan modification can be negotiated for this option directly with your bank.
• If your property has enough equity and you have a stable income, a refinance may be the best choice for home foreclosure help. Refinance loans are also the subject of several new government initiatives to stop foreclosure. People who took adjustable rate mortgages in recent years may be eligible for federal help to refinance their ARM's to fixed rate loans to avoid the balloon payments that land many people in foreclosure.
• If it is possible for you to borrow the money from family or a private investor, you can use that to bring your mortgage current and avoid foreclosure. Of course, this option would involve you taking on additional debt at what is likely to be a high interest rate. Still, if your problems are the result of a temporary financial problem, this option is easy and effective.
• The first thing you need to do is to decide whether it will actually help your financial problems to allow the foreclosure to happen. If your problems are of a temporary nature, such as a sudden job loss, then it may be only a matter of time before you are again financially viable. On the other hand, your debt problems may be so great that foreclosure would be the best way to erase them.
• Credit counselors can give professional advice and help with debt problems. They can negotiate with lenders to lower interest and repayments to enable you to avoid foreclosure. They will help assess your financial and debt situation and create a plan to help you with credit and debt problems now and in the future.
• Another option is to contact your lender directly. Lenders make money by collecting your principal and interest payments. It is not in their best interest to proceed with a foreclosure. If you are in temporary financial difficulty and can create a plan that is to the benefit of you and the lender, then the lender may be sympathetic.
• Contact the lender's Loss Mitigation Department and inquire about lowering payments for a few months until you are financially viable again. You may even be able to suspend payments for a few months. If you come to an agreement, make sure that you receive written details regarding the suspension or reduced payment plan.
• A further option may be to renegotiate your current loan. You may have bought your house when interest rates were high and your repayments may reflect this. You can try to refinance your loan at a lower interest rate in order to solve your cash flow problems. Obtain quotes from different lenders in order to receive the best interest rate on refinancing.
• A final option to avoid foreclosure is to simply sell your house yourself. Your debts may have become too large to handle, and selling your house may eliminate them and stop a bad credit record due to foreclosure. You may not get your ideal price if you are trying for a quick sale, but it is a more financially sound option than foreclosure.
The majority of these options require you to contact your lender and negotiate. Many people do not feel comfortable handling their own negotiations.
The HomeAssure website has been created to provide homeowners in danger of losing their houses with relevant and important information, news, and resources. The site describes various methods that may be used to save a home, such as foreclosure loans, mortgage modification, cash for keys, deed in lieu of foreclosure, and more. Visit the site to read more articles about how foreclosure works and how the process may be avoided before it is too late: HomeAssure
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