When a homeowner first learns that they may have to face foreclosure of their home it is easy to see that they will be unhappy about it. One might understandably start to believe that there is nothing that can be done towards preventing foreclosure.
Preventing foreclosure is, however, doable by following just a few
foreclosure stopping techniques. There are a number of essential steps that anyone in a bad financial situation needs to consider in order to save their home from the disaster of foreclosure.
One foreclosure stopping method to consider is to advertise for an investor who is willing to 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' comes in as a doable foreclosure stopping manoeuvre. In a short sale, once you have an investor's offer to purchase, you would submit the offer to your lender. If the lender approves, you could then walk away from the home. When the homeowner is not accepted for loan modification and is sure to lose their home, a short sale is a good method of preventing foreclosure. The homeowner will still be required to move, but they go without owing any more on the home. Your credit score is dinged by about 100 points, compared to an average reduction of 250 points in the case of a foreclosure and subsequent sheriff's sale. There is also the threat of a deficiency judgement whereby the homeowner would have to pay the difference between amount owed the lender and the auction sale price.
If you are unable to effect a sale to an investor, a variation of this can be achieved between just you and the 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 effect 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. Depending on the specifics of your situation, it may be possible for you to work out an agreement with your bank that will permit you to stay in your home. 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 lenders.
Also, both federal and state government agencies are providing the banks incentives, and pressuring them to modify loans. If you are falling behind on your ability to pay your mortgage, give your lender a call and find out what can be worked out. You might find that lenders are more flexible now than they once were.
As a homeowner interested in preventing foreclosure, be assured that you are not alone. 1 out of every 100 homeowners 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 entire country. 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.
If your home is at risk, it is important for you to educate yourself on these foreclosure stopping strategies.
James Sopher is a retired real estate professional and free-lance writer.
For more information on saving your home, visit http://WePreventForeclosure.org
You can stop home foreclosure with a
Loan Modification agreement
