The fear of losing your home is a big deal and an emotion shared by millions of other homeowners so you’re not alone. However don’t let fear control what may be the most important financial decision of your life so try to relax and take the time to learn everything you can about the Foreclosure Process and understanding that you have Ten Different Ways to avoid foreclosure sales. Once you know that there’s hope for a good outcome you take the fear and emotion out of the picture and make decisions that are best for you and your family.
This post will briefly discuss ten ways to stop foreclosure and methods to stop foreclosure sales. You can also find more in-depth coverage and Sample Foreclosure Documents for each of the Foreclosure Options discussed here by visiting our Foreclosure Options section.
The most frequently discussed foreclosure option is a Short Sale which involves selling your home for less than the amount of your loan after getting bank approval for the sale. If you try for a short sale to avoid foreclosure it’s also important to know how to avoid Deficiency Judgments and what to include with your request for short sale approval.
The second foreclosure option is a Loan Modification from the original lender or re-financing from a new lender to lower your overall monthly payments. This option is the primary feature of the recent Nationwide Foreclosure Settlement discussed in a related blog and will be the focus of more advertising and financing options in the next several months because of the agreement. Results can vary greatly with different lenders so be sure to put together the right information needed to convince the bank that your request is real and that a loan modification is essential to help you avoid foreclosure rather than an easy way to save money you already have.
The third most popular alternative is a Deed in Lieu of Foreclosure which is the quickest and easiest way to stop foreclosure sales and avoid foreclosure lawsuits. The process simply involves transferring your property to the bank with a document similar to a quitclaim deed but it may not release you from a possible deficiency judgment or income tax consequences so be sure you understand the possible consequences before moving ahead.
A fourth way to stop foreclosure is closely related to the Deed in Lieu of Foreclosure and is called Deed-For-Lease and is becoming more common with Fannie Mae and other lenders. What this involves is executing a Deed in Lieu of Foreclosure together with a Deed-For-Lease which lets you rent your home from the bank and stay in your current property. This is a new and exciting foreclosure option that we’ll cover in more detail in future posts but you can get more information now by visiting KnowYourOptions.com which is a site sponsored by Fannie Mae.
The fifth way to stop foreclosure is renting out your home for 2-3 years while temporarily moving to a cheaper location to reduce your expenses and get back on your feet financially. You can also rent out rooms or any portion of your home but either way the obvious advantage is the ability to save your home and avoid foreclosure completely. Read More on Foreclosure Rentals to Stop Foreclosure.
The sixth foreclosure option is Defending Your Own Foreclosure Lawsuit or hiring a lawyer to help you. As a result of the numerous mistakes and fraudulent documents used by banks and loan servicers to support their lawsuits, there are a number of very strong defenses available to help fight foreclosure cases. Although we recommend hiring a lawyer to handle your case or at least consulting with one for an hour or two to help understand local laws and procedures, you can defend your own foreclosure lawsuit.
The seventh foreclosure option is filing for bankruptcy protection which results in an automatic stay of all foreclosure actions. Although its the single most effective way to stop foreclosures and avoid foreclosure sales at the last minute, the stay is temporary and is not a long term solution. If you feel that bankruptcy may be the best option for you, meet with an experienced bankruptcy attorney in your area and make sure that your first meeting or consultation is free. Read More About Foreclosure Bankruptcy
The eighth foreclosure option is called “Forbearance” in which lenders agree to temporarily suspend or reduce monthly payments for a specific period of time if you’re in a situation where the short time off will help resolve your financial crisis. There are many programs available for veterans and other homeowners with additional information at Fannie Mae’s KnowYourOptions.com and directly from participating lenders. Forbearance to Stop Foreclosure
Strategic Default is the ninth foreclosure alternative and actually a combination of one or more of the earlier foreclosure options we’ve covered. Essentially, Strategic Default is the decision to stop making mortgage payments that you can otherwise afford to pay with the goal of reducing the principal balance of the loan, the interest rate or both to more accurately reflect the value of your home in today’s depressed housing market. With home values down 50% or more in many places it can be a very effective way to improve a dramatically under performing asset and is nothing more than a business decision with no moral implications or obligations whatsoever. Blame the Banks for the Foreclosure Crisis.
The last option to avoid foreclosure is to Walk Away which for reasons covered in our foreclosure options section has the highest risk of a negative outcome with the least to gain as a result of doing it. It’s listed last for a reason and don’t even think about doing it until you understand more about the foreclosure process and how much time and how many different options you have.
Photo by Simon Howden