Stop Home Foreclosure

Step 2: Slow down the foreclosure process

The first and easiest thing you can do to stop home foreclosure is to contact your lender. It may sound counter-intuitive, but keep reading. If you don’t contact your lender, they will attempt to contact you after the first missed mortgage payment. If you then miss a second payment your lender will aggressively try to contact you.  If your lender is still unable to contact you they will likely turn your case over to an attorney and begin the foreclosure process. If you contact them and explain your current financial situation, they will have you fill out forms and provide documentation (Step 2: How and why to communicate with your lender) to document your financial status.   Take time to look at the information your lender provides to you, and then start discussions with them about options (Step 3: Understand your options and home foreclosure alternatives). During this time of discussion and open information exchange the one thing your lender won’t do is start the foreclosure process.

The worst possible thing you can do is ignore your lender. You need to contact your lender as soon as possible, and if possible before you have any problems. Your best chance to keep your home occurs if you start immediately. There are many reasons that people don’t want to contact their lender. Some of these reasons are: Hoping the problems will resolve themselves or just "go away", Feeling ashamed of struggling with one's bills; Fear the mortgage company will immediately foreclose if they know there is a problem.   

To understand why contacting the lender is so important we need to understand how the lender thinks. Lenders want to make money, pure and simple. You can use the lender's desire to make money to your advantage. The current weak housing market actually gives you quite a bit of leverage when dealing with your lender. In a strong real estate market the lender will foreclose on a house and sell it at auction, thus making their money back on the defaulted loan PLUS any equity on the property. In today’s real estate environment, that assurance of selling a property at auction does not exist. Currently,  it is in the lender's best interests to work with you to find a solution to the problem, and thereby ensure continued repayment of their loan. 

Temporary payment troubles: If your payment problems are temporary (Step 3: Understand all of your options and home foreclosure alternatives) the banks will almost certainly work with you, however they are not obligated to do so.  It is up to you to convince the lender that your troubles are temporary and working with you to resolve the problem is in their best interests.

Permanent payment troubles: If your payment problems are permanent (Step 3: Understand all of your options and home foreclosure alternatives), the lender will be looking to reduce their losses. A foreclosure is the final solution to a permanent problem.  However, due to the current nature of the real estate market, this option is not in the best interest of the lender. Foreclosures take time (see the laws of your state for a timeline) and have high expenses for the lender (legal fees, auction expenses, realtor fees, etc.).  There are other options available to you other than letting your property be foreclosed on (Step 3: Understand all of your options and home foreclosure alternatives).

There are two circumstances that have considerable bearing on your options to stop home foreclosure:

You have a lot of equity in your house: Unfortunately, if you have an appreciable amount of equity in your home the lender will be more likely to foreclose. Make no mistake, foreclosures are expensive for the lender.  The proceeds from a foreclosure go toward the remaining mortgage balance, unpaid interest, and toward the foreclosure expenses themselves. The more equity you have in your home means the lender will be able to recoup their expenses, and the more likely they are to foreclose. If you have equity in your home it is in your best interest to work with the lender and stop home foreclosure, by selling your house to pay the lender if necessary. 

You have little or no equity in your house: Ironically if you have little equity in your home, you are actually in a better bargaining position with your lender. With little equity your lender will certainly lose money by going through the foreclosure process and will be more likely to work out a solution. It is in the lender's best interest to work with you to come up with a solution where you keep your home and the lender keeps receiving money from you. If that is not possible, they may be more likely to work out other solutions (Step 3: Understand all of your options and home foreclosure alternatives) where you may still lose your house but you can stop home foreclosure. You may ask, “Why do I need to stop home foreclosure if I ‘m going to lose my home anyway?” If you go through a foreclosure and you owe more than your house is worth you have two big problems. First: your credit will be devastated.  This will affect everything from getting a job to hooking up utilities to finding a new residence. Second: you may not be free of financial trouble. If you owe more than your house is worth and you are foreclosed on, your lender can forgive the outstanding debt.  What's so bad about that, you ask.  You will then be required by law to claim that amount on your income taxes as income and be forced to pay income taxes on it. In some states (see State information for your specific state) your lender could also seek a deficiency judgment where you will still be liable for the outstanding balance even though you no longer have your house. These are just a few reasons to use the information here to stop home foreclosure.  

Under certain circumstances your lender is actually required to work with you. If you have an FHA or HUD loan or a loan that is owned by Freddie Mac or Fannie Mae those organizations require the lender to attempt to work with you to stop home foreclosure. Primary mortgage insurers also put pressure of lenders to stop home foreclosure. 

To summarize the most important point of step 1 to stop home foreclosure: call your lender immediately and give yourself some time to start working out a solution..

• Step 1: Understanding how foreclosures work
• Step 2: Slow down the home foreclosure process
• Step 3: How and why to communicate with your lender
• Step 4: Understand all of your options and home foreclosure alternatives
• Step 5: Where you can go for foreclosure help
• Step 6: How to avoid foreclosure scams
• Step 7: Get on a budget

Enter your search terms

Web www.foreclosurefactfinder.com Submit search form

 
Home          Stop Home Foreclosure Guide          Stop Home Foreclosure Glossary          Contact Us 

The information contained in this site is based on our opinions, research, and experience dealing with the foreclosure process.  It does not constitute legal advice.  If you need legal advice specific to your personal situation, please consult an attorney.