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How To Stop The Foreclosure Process
There are a myriad of
ways that unforeseen hardships can change the joy of owning a
home into an incredible burden. Maybe you've lost your job, or
have unexpected medical bills beginning to pile up, or your
monthly mortgage payments have increased beyond your current
budget. No matter what the cause of your troubles, ignoring the
problem won't help, it will only make it worse. You must act
quickly to resolve the issue.
The following are a few examples of how to stop a
foreclosure on your home:
1. Look for Other Sources - Most homeowners
don't realize they have a variety of resources that can aid in
making mortgage payments to avoid foreclosure. Consider the
income created by unemployment or disability insurance and your
savings as possible cash-flow resources. Other examples include
slashing the household budget by trading in expensive items like
cars, boats, and motorcycles for cash. Even retirement funds can
be used, but beware that many people with access to their
retirement funds can be penalized for early withdraw and face
increased income taxes.
2. Contact Your Lender - If you have reviewed
all possibilities of creating cash-flow to pay your mortgage,
then it's time to reach out to your lender. Do this as soon as
possible! Your ultimate goal in contacting your lender is to
create an agreement that will alter your mortgage so that
foreclosure proceedings can be stopped before they are
finalized.
3. Review the Options - After contacting your
lender, or in some cases the servicing company that handles the
loan for an investor, you may have other options available.
Typically lenders are not required to make adjustments to your
loan, but many will consider it a viable option--one that
benefits the lender and you and can include refinancing.
Possible options to discuss with your lender include:
- Deed in Lieu of Foreclosure - In this
option, your lender may accept the return of the title to your
home, but beware that the lender may still sue for loss and
report any uncollected funds due to loss to the IRS as taxable
income to you. This option may have negative effects on your
credit report.
- Claim Advance - If you have a private
mortgage lender, they will often provide a cash advance to bring
your loan payments up to date. Sometimes this money is interest
free and may not have to be repaid for years.
- Re-Amortization - In this option the
payments you have missed are added to the balance of the loan,
making your account current. Your debt will increase and your
monthly payments will be higher unless the lender also agrees to
extend the term of the loan.
- Short Sale - Considered by many one of the
best options available to avoid foreclosure, the short sale is
an increasingly popular option. In this option, the lender
accepts less than what you owe on the property, relieving the
homeowner of debt. Lenders are often willing to accept a short
sale because it greatly reduces the expense and time involved in
foreclosure proceedings. In most cases, a short sale does less
damage to your credit than a foreclosure. A qualified REALTORŪ
will be exceptionally helpful in completing the short sale
process with you.
One note of warning, beware of any company claiming that they
guarantee they can stop any foreclosure no matter what you owe. The
Federal Trade Commission recently compiled a list of warning signs
that a "foreclosure fixer" company may be a scheme. Those warnings
include any company that requires you to pay for services upfront,
tells you to send mortgage payments to it directly, or asks you to
turn over the property deed, or tells you to avoid contacting your
lender directly.
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