Stop Foreclosures

How to stop foreclosure

Obviously, the best way to stop foreclosure is to avoid getting behind with mortgage and loan repayments. But if your account is already in arrears, there are a few steps you can take to avoid foreclosure, or least minimize the damage caused.

Whether you have a temporary cash flow crisis or a long term financial problem, it is essential to discuss the situation with your lender. Under no circumstances should you ignore letters and phone calls from lenders or trustees.

As a first step, review all the paperwork provided by the lender or trustee. If you can afford to pay the outstanding repayments and charges in one lump sum, do it. Most lenders will consider reinstating your loan if you quickly put your account back in order.

If you are unable to make repayments immediately, let your lender know. They may be willing to give you a little more time if you can guarantee to make all the outstanding payments by a certain date.

Some lenders may allow you to set up a repayment plan, where you pay a slightly increased monthly premium until your account is out of the red. Alternatively, you may be able to modify your mortgage payments or extend the repayment period to cover the outstanding amount. For all these options, it helps if you have no other outstanding debts.

Your lender may also be able to arrange a loan from the FHA Insurance Fund to bring your payments up to date, but you must pay this back once you clear your first mortgage or sell the property.

Some private firms offer assistance with foreclosure, but this may involves refinancing your assets at unfavourable rates. Many of these companies charge for things you can do for free yourself if you negotiate directly with your lender.

A more radical solution is to sell your home. Once the foreclosure process is officially underway, this may be your only option. Talk to your lender - they may be willing to stop foreclosure proceedings if you sell your home within a certain time period. However, if buyers discover you are facing foreclosure, you are unlikely to get a fair price.

A last resort is to file for a deed-in-lieu of foreclosure, where you voluntarily hand over your property to the lender. You will still lose your home, but you face less damage to your credit rating than if your house was sold at auction.