How to Stop Foreclosure
Negotiate with your lender., See if your lender will agree to a forbearance plan., Reinstate your loan., Sell your property.
Step-by-Step Guide
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Step 1: Negotiate with your lender.
If you are behind on your mortgage and think that your lender may try to foreclose on your home, you should attempt to negotiate a new payment plan.
Many lenders are willing to negotiate because they do not want to foreclose on the property.
Instead, most lenders would prefer for you to keep your home and keep making payments on your mortgage.
Two popular plans that lenders often offer to people who are behind on payments are “repayment” and “modification.” Repayment is a plan where the homeowner continues to make his regular monthly mortgage payments while paying back the amount that he is deficient over time.
For example, if someone was 3 months behind on a $1,000 per month mortgage (for a total of $3,000), the lender could agree to let the homeowner continue to make the $1,000 per month payment, and pay back the $3,000 that is owed over time.
Under this type of plan, the homeowner may pay $1,100 for 30 months or $1,500 for 6 months, depending on his financial situation.
Modification allows a homeowner to lower his mortgage payment permanently, usually because his income has gone down or expenses have gone up.
Under this plan, the homeowner would pay the lender back over a longer period of time, but the monthly payments would be lower.
Keep in mind that lenders often will only offer a modification if you are not already behind on your mortgage.
The sooner you tell your lender you are having problems staying current on your mortgage, the more options you will have.
Therefore, you should tell your lender as soon as possible if you have having trouble making the payments. -
Step 2: See if your lender will agree to a forbearance plan.
If you “forbear” on your loans, your lender will suspend all payments for a certain amount of time, with the expectation that you will make the full payments plus any deficiency once the forbearance period is over.
This plan works best for someone who has lost their job or has encountered an unusual circumstance that makes it difficult to make mortgage payments.
During the forbearance period, the lender expects that the homeowner is getting his financial affairs in order so that he can resume paying off the loan.
Keep in mind that a forbearance plan requires you to agree with your lender about missing payments ahead of time.
You probably will not be able to get a forbearance for payments that you have already missed.
Lenders typically will allow a homeowner to forbear for 3 to 6 months.
A longer time is less common. , If you are behind on your loan payments, you can stop any impending foreclosure action by “reinstating” your loan, i.e., bringing the loan back to current status.
To reinstate the loan, you must pay the entire delinquent amount plus any fees that the lender has had to incur as a result of your delinquency.
You can also “redeem” your loan by paying it off in full.
This is an option if you are able to refinance the loan. , If you do not think that you will be able to afford to catch up on payments, and your lender will not agree to a modification plan, you can still stop a foreclosure.
Although you will not be able to stay in the home, selling the property takes the control away from the lender, and will not hurt your credit score the way a foreclosure would.
If you have equity in your home, you will also keep that for a future home purchase as long as you can sell your current home for enough to pay off the mortgage. -
Step 3: Reinstate your loan.
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Step 4: Sell your property.
Detailed Guide
If you are behind on your mortgage and think that your lender may try to foreclose on your home, you should attempt to negotiate a new payment plan.
Many lenders are willing to negotiate because they do not want to foreclose on the property.
Instead, most lenders would prefer for you to keep your home and keep making payments on your mortgage.
Two popular plans that lenders often offer to people who are behind on payments are “repayment” and “modification.” Repayment is a plan where the homeowner continues to make his regular monthly mortgage payments while paying back the amount that he is deficient over time.
For example, if someone was 3 months behind on a $1,000 per month mortgage (for a total of $3,000), the lender could agree to let the homeowner continue to make the $1,000 per month payment, and pay back the $3,000 that is owed over time.
Under this type of plan, the homeowner may pay $1,100 for 30 months or $1,500 for 6 months, depending on his financial situation.
Modification allows a homeowner to lower his mortgage payment permanently, usually because his income has gone down or expenses have gone up.
Under this plan, the homeowner would pay the lender back over a longer period of time, but the monthly payments would be lower.
Keep in mind that lenders often will only offer a modification if you are not already behind on your mortgage.
The sooner you tell your lender you are having problems staying current on your mortgage, the more options you will have.
Therefore, you should tell your lender as soon as possible if you have having trouble making the payments.
If you “forbear” on your loans, your lender will suspend all payments for a certain amount of time, with the expectation that you will make the full payments plus any deficiency once the forbearance period is over.
This plan works best for someone who has lost their job or has encountered an unusual circumstance that makes it difficult to make mortgage payments.
During the forbearance period, the lender expects that the homeowner is getting his financial affairs in order so that he can resume paying off the loan.
Keep in mind that a forbearance plan requires you to agree with your lender about missing payments ahead of time.
You probably will not be able to get a forbearance for payments that you have already missed.
Lenders typically will allow a homeowner to forbear for 3 to 6 months.
A longer time is less common. , If you are behind on your loan payments, you can stop any impending foreclosure action by “reinstating” your loan, i.e., bringing the loan back to current status.
To reinstate the loan, you must pay the entire delinquent amount plus any fees that the lender has had to incur as a result of your delinquency.
You can also “redeem” your loan by paying it off in full.
This is an option if you are able to refinance the loan. , If you do not think that you will be able to afford to catch up on payments, and your lender will not agree to a modification plan, you can still stop a foreclosure.
Although you will not be able to stay in the home, selling the property takes the control away from the lender, and will not hurt your credit score the way a foreclosure would.
If you have equity in your home, you will also keep that for a future home purchase as long as you can sell your current home for enough to pay off the mortgage.
About the Author
Nancy Jimenez
Writer and educator with a focus on practical organization knowledge.
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