So you found yourself in foreclosure or pre-foreclosure, and it could have been for any number of reasons – Now, you are seeking solutions to get you out of it! Well, today I will be giving you a few tips that hopefully will be able to help you in your situation.
The first and most obvious way of stopping a foreclosure is simply paying off the debt owed on the loan. Understandably this amount can be very large but at times can be doable as Massachusetts requires lenders to offer borrowers a final opportunity to “cure” their mortgage loan debt before starting foreclosure. Some homeowners opt to get a personal loan from a family member or friend to help pay down this amount as well. Homeowners should bear in mind, however, that even if they pay off their outstanding debt, the terms of their loan remain in place. If the homeowner was struggling with the loan because it was unaffordable, the homeowner should give serious thought to applying for the next option for stopping a foreclosure: a loan modification.
A loan modification application, under new federal regulations, requires a loan servicer to stop foreclosure while the application is pending. Limits exist on this; repeated applications will not continuously stop a foreclosure. A loan modification should always be a homeowner’s first attempt at stopping foreclosure as this can be a sustainable option going forward as with a loan modification, you reach an agreement between you and your mortgage company to change the original terms of your mortgage—such as payment amount, length of loan, interest rate, etc. In most cases, when your mortgage is modified, you can reduce your monthly payment to a more affordable amount.
The next possible option for you would be to declare bankruptcy. Bankruptcy provides a debtor with an automatic stay, which will automatically stop a foreclosure. Under bankruptcy law, the bank is prohibited from foreclosure, which can provide the homeowner with some time to work out their next course of action. Bankruptcy is a good option for a homeowner with an impeding deadline for a foreclosure sale and no other viable options. Long term, however, bankruptcy is not always the best choice for avoiding foreclosure in the long run (speak to a bankruptcy attorney to determine if this is a good option for you).
If you tried or have already done a loan modification and filed for bankruptcy or those options don’t make sense for you, it may be a good idea to sell your home.
If you are “underwater” meaning that you owe more on your mortgage than what the home is worth, you may want to look into doing a short sale. We will have another video on that topic specifically but essentially this is formally asking the bank if they will take less for the home than is owed.
