Finding out that your home is about to be foreclosed on can be extremely disturbing. A person might understandably become convinced that there is nothing that they can do along the lines of preventing foreclosure.
Preventing foreclosure is, however, doable by following just a few
foreclosure stopping techniques. There are a number of critical steps that anyone in a bad financial situation needs to proceed with in order to save their home from an unwanted foreclosure.
One foreclosure stopping method to explore is to advertise for an investor who will buy your home for at least the amount you owe. This makes it possible to pay off your debt without further impact to your credit. Depending on how much you owe, this might be unrealistic to do because the large number of distressed properties means that there is much competition for the investors' dollars.
That is where the 'Short Sale' presents itself as a possible foreclosure stopping manoeuvre. A short sale is where the bank reduces the amount of the loan payoff to coincide with the amount the investor is willing to pay and you walk away from the home. When the homeowner is not accepted for a modification of mortgage and is sure to lose their home, a short sale is a good technique of preventing foreclosure. The homeowner will still have to move, but they go without owing any more on the home. Your credit score is dropped by about 100 points, as opposed to a typical drop of 250 points in the case of a foreclosure and subsequent sheriff's sale. If the house is foreclosed, the home owner may still owe the difference between the sale price and the amount owed to the lender.
If no short sale investor is forthcoming, a variation of this can be achieved between just you and the mortgage lender. In this case, a Deed in Lieu of Foreclosure is issued and the bank will take possession of your home in exchange for you walking away from the home and leaving it in good condition.
Short sales and Deeds in Lieu of Foreclosure will both have a negative impact on your credit. Generally, this will last for approximately two years compared with five or more years for a foreclosure.
Another foreclosure stopping method is to negotiate either a forebearance agreement or a loan modification agreement with your lender. You may be able to work something out with your bank to remain in your home though. The banks currently have a lot at stake in preventing foreclosure. Hundreds of thousands of bank owned homes are sitting vacant. They represent liabilities, not assets, to the banks.
Also, both federal and state government agencies are giving the lenders incentives, and pressuring them to approve loan modifications. If you are falling behind on your ability to pay your mortgage, contact your banker and see what can be worked out. You will find that banks are more receptive now than they once were.
As a homeowner interested in preventing foreclosure, be assured that you are not alone. 1 out of every 100 borrowers are experiencing trouble with their mortgage payments. Millions of people have already lost their homes. And, while some of them have been fortunate enough to have found suitable rental homes or shared accomodations with friends, many have become homeless. So clearly, preventing foreclosure is not something to be taken lightly.
The high rate of foreclosures is also an important issue for our nation as a whole. Americans with a sense of social justice are interested in seeing that their fellow citizens are adequately housed. Beyond that, the economics of the situation demand the these problems are addressed before they become even more widespread. At last, Washington is taking serious measures to help homeowners in their attempts at preventing foreclosure.
Before it is too late, you should learn all you can about the various foreclosure stopping methods.
James Sopher is a retired real estate professional and free-lance writer.
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