Stop Foreclosure
- Can Bankruptcy Stop Foreclosure?
- Is There Government Help To Stop Foreclosure?
- Are There Loans For People In Foreclosure?
- Is There Other Financial Help To Stop Foreclosure?
These are common questions when a homeowner is facing foreclosure, we'll try to get those answered for you, along with more frequently requested information on
stopping foreclosure.
First, we define foreclosure as the legal process lenders use to try to recover the loan amounts they are due on past due home loans and acknowledge most lenders,
in fact, do not want to own your house and would rather have the loan paid off, or the loan payments being currently paid. We will also use the term "lender" although
in many, if not most situations, you're really dealing with a loan servicer.
Repayment Plan
The preferred workout to get a loan current after the borrower has suffered a temporary financial setback is a payback plan. This will usually require a substantial "down payment" on the past due amount and increased payments over the next three to six months to bring your loan current. This type of plan is good if there was a fairly short term, one time financial setback, it doesn't make sense if there's long term loss/reduction in income. In many cases, the homeowner can successfully complete this process on their own if they have the time to properly assemble and submit a complete loan workout documentation package for lender review.
Loan Modification
HAMP is the widely promoted, government sponsored plan to try to assist homeowners facing either imminent default or foreclosure. There must be a defined hardship, which could be a loss in income or an increase in monthly payments, but the determination will have to be made that foreclosure is inevitable without a modification. The home must be owner occupied to qualify, but the loan amount can be greater than the property value. The borrower cannot have sufficient liquid assets to be able to make payments in the future. Income requirements are based on gross income and will be verified by the last tax returns filed by the borrower. The target payment is 31% of monthly gross income which is allotted to principal, interest, taxes and insurance on the home. Total debt payments need to be under 55% of monthly gross income. The payments are reduced by either/both of extending the repayment term to 40 years and reducing the interest rate on the loan, debt forgiveness is not currently used.
Produce The Note
While not a way to stop foreclosure, in states using a judicial foreclosure process, a produce the note strategy can postpone foreclosure for a significant time period. Most, if not all, states require the lender/servicer as part of the foreclosure process to confirm they are owed the debt. Produce the note is a defense asserting the lender/servicer is not the one to whom the debt is owed. With the increase in loan securitization and transfer of loan interests, it is sometimes difficult for a lender/servicer to provide a complete paper trail proving loan ownership.
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Keeping vs. Selling When Facing Foreclosure
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.
Loans for People in Foreclosure
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, it should be possible to obtain a new refinance or 2nd Trust Deed to bring your loan current. Expect higher interest rates and loan fees. If your existing loan(s) are close to the property value, this isn't a viable option.
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.
Bankruptcy and Foreclosure
This is a major step that will have lasting impact on your credit reports for 7 to 10 years. Seek appropriate legal advice. When bankruptcy is filed, an automatic stay is placed on collection activities, including foreclosure activities. In a Chapter 13 bankruptcy repayment plan, the past due loan amounts can be spread over a 3-5 year period, in a Chapter 7 liquidation, the lender will seek relief from stay allowing them to proceed with foreclosure. 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 public auction is going to be held very shortly, Chapter 13 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
FORECLOSURE RESOURCES FOR CONSUMERS
From the Federal Reserve Board
HOMEOWNERSHIP PRESERVATION FOUNDATION
Free counseling and planning for foreclosure prevention
NEIGHBORWORKS AMERICA
Local resources for assistance and foreclosure prevention
FREDDIE MAC AVOIDING FRAUD VIDEO
A short video on avoiding mortgage fraud
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 Forum.
HOW TO AVOID FORECLOSURE
Advice from HUD
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.
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.
