Although foreclosure is the way lenders try to recover the loan amounts they are due, most lenders do not want to own real estate and would rather have the loan paid off, or the loan payments current. Most homeowners who have suffered a financial setback also would like to avoid foreclosure and keep their home, but often do not have the background to be able to determine which of the available foreclosure help options will work for both the homeowner and the lender. Fannie Mae, Freddie Mac, HUD and the VA all endorse programs designed to keep homeowners in their home if it is at all possible, or to minimize the credit and financial damage if it is not possible to avoid foreclosure.
The process of determining whether a homeowner is likely to be able to recover from a financial setback is similar to the process used when the home loan was first approved. Personal and financial information along with supporting documentation is collected and forwarded to the existing lender, who will then approve or decline a possible workout. In many cases, the homeowner can successfully complete this process on their own if they have the time to properly assemble a complete documentation package.
The paragraphs below cover individual aspects that should be considered when facing a foreclosure action.Once the decision has been reached about keeping or selling the home, topics are listed in order of which options are typically least expensive for the homeowner up to those which are more expensive/credit damaging. Links to various resources are below those topics.
You can also request a free personalized evaluation by clicking:
Free Foreclosure Options Evaluation
Workouts for Home Loans
A link explaining the various types of workouts available from many lenders. You can also click on the following link to ask questions on our Foreclosure Discussion board.
Ultimately, the only thing that will end foreclosure proceedings is repayment of the debt, everything else is delay of the proceedings.
KEEPING THE PROPERTY VS. SELLING THE PROPERTY
If your monthly house payment (including property taxes and insurance) does not exceed 40% of your gross monthly income, it should be possible for you to keep the property. If the payment is greater than 40% of gross monthly income, consider selling or transferring the property to avoid negative impacts to your credit. The objectives in order of importance should be:
1. Keeping the property if possible.
2. Don't give away equity if you can keep it or liquidate and put it in your pocket.
3. Minimize damage to your credit. You will need it later on.
Before exploring new options, have you tried to come to terms with your existing lender? Lenders want the loan to be current, not to have to complete a foreclosure. Can you make up the defaulted amount over a period of months? Can you re-write the note and include the defaulted amount? Can you give the lender a deed-in-lieu of foreclosure and preserve your credit? These are questions you should ask yourself and possibly your lender if you haven't done so already. They will want to know why the loan is in default and why you think you will be able to make the payments in the future. Temporary financial setbacks that have since been cured are the best candidates for this. Your lender will probably not be inclined to discontinue foreclosure proceedings if they have reason to believe they will have to start again in 6 months.
REFINANCING AND NEW JUNIOR LOANS
Basic lending guidelines will require all home loans will total up to less than 70% of the current market value of the property. If you have more equity than that, you should have no difficulty in obtaining a new refinance or 2nd Trust Deed to bring your loan current. Expect higher interest rates and loan fees.
LOANS TO GET YOU CURRENT
If you experienced a temporary financial setback that has since been cured and are going to be able to keep the property, first consider family and friends for a loan to get current. It's much cheaper than hard money loans, but MAKE SURE you will be able to pay them back. You do not want to put them in the position of having to foreclose to get their money back. Hard money loans are typically private investors who will lend money based on equity in the property. Credit and income are not issues of importance and loan approval is usually a matter of days with funding following shortly. Loan amounts will usually be enough to bring existing loans current, pay the financing costs and put some money in your pocket. Loans will be amortized over 30 years to keep the payments lower and the balance will be due in 2 to 5 years.
This is a major step that will have lasting impact on credit reports. Seek appropriate legal advice. If the Notice of Default or Lis Pendens has just been filed on your home, you have sufficient time to explore the options for new loans or selling the property. If the foreclosure sale is going to be held very shortly, bankruptcy is a very common way to delay the sale. When you file bankruptcy, your financial matters fall under the jurisdiction of the courts which could limit your options. SEEK LEGAL ADVICE.
FORECLOSURE ASSISTANCE LINKS
HOW TO AVOID FORECLOSURE
HUD Foreclosure Advice
DEPARTMENT OF VETERANS AFFAIRS
Advice when you have trouble making payments
CONSUMER CREDIT COUNSELING SERVICE
Non-profit help for establishing a direction or plan to avoid foreclosure.
PRO-BONO LEGAL ASSISTANCE
If you feel you need legal help and cannot afford it, this is the ABA directory state by state of legal providers doing pro-bono (without fee) work.
DEBT WORKOUT LINKS
What appears to be useful information and links for getting your financial house in order.
REINSTATEMENT SERVICES, INC.
Fee for service. Lender workout assistance for preventing foreclosure.
VOLUNTEER LAWYERS PROJECT
MAINE Pro-bono assistance
AVOID FORECLOSURE - FORECLOSURE HELP NATIONWIDE
Foreclosure prevention utilizing nationally recognized Mortgage Assistance Programs. Foreclosure help without Bankruptcy. Keep your home.