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Stop Foreclosure

As soon as you receive your first warning from your lender, it is time to sit down and consider your options. Ultimately, the only way to stop foreclosure is to repay the debt. But this is not always a simple process and your credit rating could be negatively affected if you do not make the right choices.

The first thing you need to consider is what ratio of your total monthly income is consumed by all monthly payments made on your home. If your home payments are less than 40 percent of your monthly income, you should consider ways of keeping the property. However, if your home payments are more than 40 percent, you need to think about selling the property or transferring it. An attempt to keep it will invariably lead to a stain on your credit record for all future transactions.

Most lenders are willing to come to some sort of agreement with those clients which are facing foreclosure. There are a few different options available.

Your lender may be prepared to suspend or temporarily reduce your monthly payments. Or they may be prepared to accept little extra each month until you have paid off the outstanding amount. This is called “special forbearance”.

You may also attempt to refinance your mortgage or extend the period of time over which you will repay your loan. This will make your premiums more affordable and is called “mortgage modification”.

If you were unable to make payments for a few months, but are now financially stable, you may attempt to get a “partial claim”. This is when you get a once-off payment from the FHA Insurance fund. The money will help you to update all outstanding payments. You are only eligible is your loan has been outstanding for between four to 12 months and you are in the position to resume proper payments.

Your lender will likely wish to know why you are in default and how you plan to acquire the money in the future. Ultimately, you will need to convince the lender that they will not have to restart foreclosure proceedings within the next six months or more.

If you have seemingly no way out, you may look at a “pre foreclosure sale” in an attempt to avoid getting a bad credit record. You can sell your property and use the resulting money to pay off your loan. Unfortunately, this usually results in you not getting the full value of your house back. It will only help if your house has a high-resale rate and you are able to sell it relatively quickly.

Failing all these options, you may make use of “deed-in-lieu of foreclosure”. This is when you give the property to the lender so that they can sort out your debt. You may not save your home, but at least this action does not damage your credit rating as much as a foreclosure would.

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