How To Prevent Foreclosure On Your Family Home
Posted by Nakoma DeMitro Edelstein // November 2, 2016
Have you missed mortgage payments and now the bank is calling you? Now is the critical time to learn how to prevent foreclosure on your family home. Many people mistakenly believe that once their home is in default, they have to let it go to foreclosure. While many houses do go to foreclosure, you have options that you can start to exercise to avoid having the bank take back your home.
Loan Reinstatement
Most states allow homeowners defaulting on their mortgages to reinstate their loans and avoid the inevitable foreclosure. When you fall behind on your mortgage payment, you will usually receive some type of warning along with late fees. If you still do not make your mortgage payment, the note that is held on the home will then go into default. When this happens, you will receive a letter from the bank that tells you that your home is in default. It will say that your entire unpaid balance that is owed, plus late fees, is due immediately. If you cannot pay the entire mortgage balance immediately, your bank will start the process of foreclosure on the house.For example, if you’re three months delinquent on your mortgage payments, you can catch them up, pay late fees and other costs, and the lender can not foreclose on the property. In some cases, the cost to reinstate a mortgage on a property may be significant, but it’s also very expensive for mortgage lenders to foreclose their loans, and they generally welcome borrowers’ reinstatement attempts.
Repayment Plan
Assuming that the reason you fell behind was because of an unexpected expense or loss of income, you may not be ready to pay everything all at once, even if your financial situation has improved. If the mortgage company has not yet offered you are repayment plan, you need to ask about it. If you will not have the money you need to start a repayment plan until two weeks from now when you get paid, do not wait for then to call. Call your mortgage company now and advise them of your pay dates. They can set the plan in place with your first payment due when you get paid. By doing this, you may be able to stop additional fees from going onto your account.
Once you begin talking with your lender about a repayment plan, he or she is most likely going to ask you why you fell behind. Even though this may seem like a personal question that you would rather not answer, it is in your best interest to tell them everything. Be honest and make sure that you fully explain your situation. The more open and honest the mortgage company believes you to be, the more they will be willing to work with you. And also, they consider it their right to know why you haven’t paid, and often times get upset if you refuse to answer their questions. After all, if you let someone borrow a hundred thousand dollars of your money (or more), wouldn’t you want to know why they weren’t paying it back?
They will then ask what your income is. Do not lie about this because this is a big part of the information that will be used to determine the monthly amount of your repayment plan. You do not want payments that are too large but you do not want them too small either. Take into consideration your regular income and any side work that you do on a regular basis as well such as cutting grass or babysitting. Next, you will be asked about all of your monthly expenses. You want to make sure that you are being careful with this. They will most likely run down a list of your bills such as car notes, other mortgages, student loans, food expenses, gasoline expenses, and utility payments.
In the end, when they calculate the difference between your income and your utilities, there has to be a surplus. If there is not a surplus in your monthly income, at least enough to make an additional one-third payment each month, they may deny your request for a repayment plan. The repayment plan that is set by your lender is something that is set in stone. If your home is currently in foreclosure, but your first payment is not for a week from the time you set the plan, the foreclosure action will not be stopped until you make that first initial payment on the plan. That first payment shows the lender that you are serious and legally, once any kind of payment is accepted on the account foreclosure action must stop that same day.
Make sure that you are making your payments on time. If you are late, even by a day, the lender may cancel your repayment plan and you will have to start it all over. There is even the chance that they could refuse you a second plan and foreclosure could pick up where it left off or simply begin again, depending on how far past due your account is when the plan was deleted.
Forbearance
Forbearance is a temporary postponement of your mortgage payments. A forbearance of mortgage is a form of repayment relief granted by the lender in lieu of forcing a property into foreclosure. Loan owners and loan insurers may be willing to negotiate forbearance options because the losses generated by property foreclosure typically fall on the lender.
A mortgage forbearance can provide you time to repay what is owed. This is advantageous to the struggling borrower, and offering forbearance benefits the loan owner, which frequently loses money on a foreclosure after paying the fees associated with the process. On the other hand, loan servicers, which collect payments, but do not own the loans, may be less willing to work with borrowers on forbearance relief because they do not bear as much financial risk.
The terms of a forbearance agreement are negotiated between you and your lender. The opportunity for such an agreement depends on the likelihood that you will be able to resume your monthly mortgage payments once the temporary forbearance is over. Moreover, the lender may approve a full, or only a partial reduction, of your payment depending upon the extent of your need and the lender’s confidence in your ability to catch up at a later date. In some cases, the lender might grant you a full moratorium on making mortgage payments for the forbearance period. Other times, a lender will require you to make interest payments, but not pay down principal, or you can pay only part of the interest with the unpaid portion resulting in negative amortization. Another forbearance option is for the lender to reduce the borrower’s interest rate on a temporary basis.
Being awarded a mortgage forbearance requires contacting the lender, explaining the situation and receiving approval. Borrowers with a history of making payments on time are more likely to be granted this option. You must also demonstrate cause for repayment post-ponement, such as financial difficulties associated with a major illness or the loss of a job.
How to Prevent Foreclosure With More Solutions
There are more solutions that you can exercise such as:
- Loan modification
- Selling your home
- Bankruptcy
- Short Sale
- Deed in Lieu of Foreclosure
Don’t just sit on your couch wondering how to prevent foreclosure on the family home that you have worked so hard for. If you need help, contact us and one of our representatives will sit and talk with you about your options.