How to Stop Foreclosure?

What can you do if you are upside down in your mortgage payments and cannot seem to catch a break?   How can you stop your home from being foreclosed upon?

Here are a few ways to avoid a home foreclosure:

  • Catch up on your payments – Mortgage lender may agree to wait before taking legal against you and let you work a repayment plan that is affordable.  This is also commonly known as a forbearance.
  • Forgive a payment – If you agree on a way to be current after missing a payment or 2, without the means to pay it back.  The mortgage lender may give you a break and waive your obligation, which is also known as debt forgiveness and rarely happens.
  • Spread out the missing payments over a longer term – If you payment is $1,400 a month, they may let you add $100 a month to each payment until you are caught up, which is also known as a repayment plan.
  • Change or do a loan modification on the terms of your home loan – If your mortgage is an adjustable rate mortgage (ARM), the lender may freeze the interest rate before it increases and change it to a more manageable rate and the lender may also extend the amortization period.  It is also called a note modification.
  • Add the back payment to the total home loan balance – If you have enough equity and meet the lender’s lending guidelines, the mortgage lender may increase your home loan balance to include the back payments and re-amortize the home loan, which is also known as a refinance.
  • Make a separate home loan to you – Also known as a partial claim, there are certain government home loans contain provisions that let borrowers who meet specific criterias apply for another home loan.

Here are a few ways to stop a home foreclosure:

If the bank or mortgage lender files a Notice of Default, your options become much more limited as you will be given a time period to bring your payments current, pay the costs of filing the foreclosure and stop the home mortgage foreclosure.  The reinstatement of your home loan would enable you to keep the home, but if you cannot pay the missed payments and the mortgage lender will not work with you on the loan, there are still a few other options:

  • Sell your property – Interview real estate agents to get an opinion on the market value of the home.
  • Consider selling your home in a short sale – If you find that your home is worth less than the amount you owe, you may be a candidate for a short sale.  A short sale affects FICO credit score but it is not as bad as a home mortgage foreclosure.  You or an agent will need to negotiate with your mortgage lender to find out if the mortgage lender will cooperate on a short sale.
  • Sign a deed-in-lieu of home mortgage foreclosure – The homeowner gives the bank or lender a notarized deed, and the mortgage lender forgives the mortgage, which cancels the home mortgage foreclosure action.

The mortgage lender may or may not work on an arrangement to have the homeowner stay in the home until they have a place to move into.  The owners in default should negotiate the right to retain occupancy.

How do many end up in a foreclosure situation?

It can be more many reasons, but there are the most common:

  • Job loss
  • Sudden illness
  • Death in the family
  • Divorce or loss of 2nd income
  • Excessive debt obligation
  • Job demotion or promotion denials
  • Inability to pay an ARM rate that increases
  • Unexpected major home maintenance expense


Foreclosure