If you experience a temporary hardship that has ended and you can begin making regular or reduced payments again but not catch-up payments , a loan modification may be your best option. Substantially better results are achieved with help from non-profits, law firms , or loss mitigation consultants that can help navigate the process.
Unfortunately government-sponsored programs such as HAMP have been discontinued due to a reduction in need and overall ineffectiveness of the program. If you can no longer afford your mortgage payments or just need to get out of your situation, disposing of the property may be your best option.
If you have equity, seek out an investor to purchase via a quick sale, but make sure the transaction closes prior to the foreclosure auction or hire a foreclosure defense law firm to stop the foreclosure via a Temporary Restraining Order. Typically, mortgage companies prefer a Short Sale as possession of the property passes directly to a new owner. For that reason, they usually require the house be on the market for a minimum of 90 days before they will consider a Deed in Lieu.
Disposing of your property is a good option when you have little or no equity and no ability or desire to pay the ongoing mortgage.
But you will likely get a delay of a couple of months until the lender can get relief from the automatic stay. It's not a good idea to file for bankruptcy just to delay a foreclosure.
But if you have many other outstanding debts that you can discharge eliminate through the process, filing for bankruptcy might make sense. Talk to a bankruptcy lawyer to learn the pros and cons of filing Chapter 13 or Chapter 7 bankruptcy during a foreclosure. For some people, it makes economic sense to give up their house and move on. If so, there are a couple of ways to say goodbye to it; you'll want to choose the method that causes the least financial and emotional upset to you and your family.
If your lender agrees, you might be able to avoid foreclosure by selling your house for an amount that's less than your outstanding loan balance. This transaction is called a "short sale. Though, if the lender forgives the deficiency, you might face tax consequences.
You might be able to get your lender to let you deed the property over so that no foreclosure is necessary. This process is called signing a " deed in lieu of foreclosure. Again, you might face a tax liability if the lender forgives a deficiency. You should know if one of these agencies has purchased, insured, or guaranteed your mortgage because you will have been informed in writing.
But if you don't remember and don't want to tear your house upside down looking for the paperwork, ask your housing counselor, servicer, or lender. If you're facing a foreclosure, look into your options and don't wait to ask for help if you need it.
Contact a HUD-approved housing counselor , who will help you for free, as soon as possible to explore different foreclosure avoidance options. Also, consider talking to a foreclosure attorney to learn more about your state's foreclosure procedures and what you should do in your situation. The information provided on this site is not legal advice, does not constitute a lawyer referral service, and no attorney-client or confidential relationship is or will be formed by use of the site.
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Your Money. Personal Finance. Your Practice. Popular Courses. Home Ownership Mortgage. Table of Contents Expand. What Is Foreclosure Action? How Foreclosure Action Works. Special Considerations. Economic Downturn. Key Takeaways A foreclosure action is a legal process initiated by a lender after a borrower defaults on their mortgage.
After issuing a public notice, the lender gives the borrower a grace period to allow the mortgagor to bring the loan up to date.
The action moves to pre-foreclosure if the borrower can't make arrangements. An auction allows the lender to sell the home. Enhanced protections for borrowers prohibit lenders from filing first notices before days of delinquency. In response to the economic downturn of to help struggling homeowners, the government extended a moratorium on mortgage foreclosures for a final time through July 31, and allowed the enrollment period for mortgage forbearance to extend through September 30, Article Sources.
Investopedia requires writers to use primary sources to support their work. Generally, homeowners have to be more than days delinquent before a foreclosure can begin. The day preforeclosure period gives the homeowner time to: get caught up on the loan or apply for and, hopefully, work out a loss mitigation option, like a mortgage modification.
Applying for a foreclosure avoidance option might delay the start date even beyond the day period. Applying for Loss Mitigation Before Foreclosure Starts If you turn in a complete loss mitigation application during the day period, the servicer must evaluate the submission and inform you of the results before it can start to foreclose.
Applying for Loss Mitigation After Foreclosure Begins If you don't apply for loss mitigation during the day preforeclosure period, you can still apply for a loss mitigation option after the foreclosure begins. Under federal law , so long as you submit your complete application more than 37 days before the foreclosure sale, the servicer can't ask for a judgment or order of sale, or conduct a foreclosure sale unless: the servicer denies your request and any appeal period expires you decline the loss mitigation option offered, or you fail to abide by a loss mitigation agreement.
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