How To Avoid And Stop Foreclosure
If you fall behind in your mortgage payments, the possibility that you may lose your home can make you feel devastated and helpless. The worst approach in that situation is ignoring notices from your lender and doing nothing. Most people dont realize that if you are the victim of a foreclosure, you have options. In fact, depending on your circumstances, you may be able avoid and stop foreclosure but only if you take action.
You can and should take steps to protect your rights as a homeowner. But sometimes, despite your most honest efforts to work something out with your lenders, the process ends without a resolution. When that happens, a mortgage defense attorney can help stop foreclosure.
When Will A Lender Foreclose In Chapter 13
A home lender will foreclose if your house payment is past due and your Chapter 13 plan doesn’t provide for the arrearages. You can also expect foreclosure if you stop paying your house payment during bankruptcy, fail to carry homeowner’s insurance, or breach another mortgage provision.
But the lender must first get permission from the court. We explain the process below in the “How a Lender Lifts the Automatic Stay to Foreclose in Chapter 13” section.
What Is An Underwater Mortgage
When the current value of a property is less than the amount owed on the mortgage, the loan is said to be underwater. In other words, an underwater mortgage has a higher outstanding principal balance than the market price of the home. This circumstance is also referred to as being upside down or having negative equity in the home.
Homeowners with little or negative home equity can find themselves in this situation when property values fall, even when theyve made all of their mortgage payments on time.
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Determine Whether You Qualify For A Government Program
The Making Home Affordable Program was created to help homeowners make their monthly loan payments more affordable in the long term. The options include adjusting your interest rate, extending your loan term and forbearing your principal. Mortgage lenders across the country participate in the program.
If your mortgage is considered underwater, meaning you owe significantly more than the home is worth, the mortgage will automatically be evaluated to see if the principal can be reduced. Visit MakingHomeAffordable.gov to see if you are eligible for this arrangement.
Damage To Your Credit Score
A foreclosure, regardless of whether its due to strategic default or other circumstances, has a negative impact on credit. Foreclosures remain on a credit report for seven years, with the impact gradually lessening over time. With the hit to your credit, youll have a harder time getting credit cards or car loans, and pay higher interest and more fees. You can rebuild your credit by working to establish a history of on-time bill payments, but doing so can take years.
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Missing Mortgage Payments: Default And Foreclosure
Usually, if you miss one or more payments on your mortgage loan, your loan is considered to be in default, but you might have special rights during the during the COVID-19 pandemic. To learn more, read these resources from the Consumer Financial Protection Bureau: Mortgage forbearance during COVID-19: What to know and what to do and CARES Act Mortgage Forbearance: What You Need to Know.
In other circumstances, the servicer might order default-related services to protect the value of the property like inspections, lawn moving, landscaping, and repairs. The servicer will charge your loan account for these services, which can add up to hundreds or thousands of dollars.
If the lender decides to move ahead with foreclosure, that process can also add hundreds or thousands of dollars in additional costs to your loan. That can make it even more difficult for you to keep up with payments, make your back payments, and keep your home.
If youre facing foreclosure, stay in touch with your servicer and try to work out a plan to pay the back payments you owe, modify your loan, enter into a repayment plan, or get a temporary reduction or suspension of payments. If your loan was in default when your new servicer took over, they might be considered a debt collector and you may have additional rights.
Option : Stay In Your Home And Keep Making Mortgage Payments
Real estate trends ultimately determine whether keeping the home is your best financial move. Consider your attachment to the home, your income and where you think property values are going in your neighborhood. Depending on how far underwater you are, is there a chance youll be able to build equity in your home over time? Could you increase your income or trim expenses to pay down the mortgage faster? Are you comfortable with the idea of staying put and waiting to see if home values rebound?
Ive seen cases where there would be little chance that the homeowner could ever recover. Ive seen scenarios where the market picked up and they would no longer be underwater, says Allan Katz, a certified financial planner and president of Comprehensive Wealth Management Group in Staten Island, New York.
A relatively small uptick in home values can make a difference: If home prices were to increase by 5 percent, 216,000 homes would no longer be considered underwater, according to a recent CoreLogic equity report. On the flip side, there would be big trouble for homeowners: A 5 percent decrease in values would translate to 292,000 additional underwater mortgages.
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Turn Over Ownership To Your Lender
Another option is to voluntarily turn over ownership to the lender in order to avoid foreclosure. This arrangement, called a deed in lieu of foreclosure, requires homeowners to convince their lender to take back the deed to the property in exchange for releasing them from the mortgage. Youâll likely need to prove to your lender that you canât afford to make your payments.
A deed in lieu can be fast and doesnât require the borrower to prepare and list the property. While it will damage your credit, itâs not as bad as an actual foreclosure.
The catch here is that the lender is under no obligation to accept the deed in lieu offer. A lender may decide it can recoup more of its money through a traditional foreclosure. Another potential catch is that, if the lender sells the home for less than the balance on the loan, you may have to make up the difference.
Refinancing Your Home To Get Out Your Mortgage
If the main reason you want to get out of your mortgage is the high monthly payments you have, but you still wish to stay in your current home, you could consider refinancing. In order to qualify for refinancing, you need to have a good credit score, your house needs to have a certain amount of equity accumulated, and youll need to meet certain employment and financial requirements depending on your lender
The process itself is basically the same as when you obtained your original mortgage. Youll also be technically starting from zero on a loan, and youll be paying a lot more in interest in the long run, but your monthly payments will be lower, and your credit score will remain untouched.
Remember though that because youre starting a new loan, you might be liable for loan origination, closing, appraisal and application fees.
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Speak With Your Lender About A Forbearance Program Or Loan Modification
If you know that in the near future you wont be able to make your mortgage payments, you can ask your lender for an application for a loan modification. Just like in a short-sale, you will need to draft a letter of hardship in which you explain in detail why you cannot continue to make your monthly payments. In this letter, you need to explain how you got into your hardship, how you have tried to improve your situation, and why theres no way to escape your current hardship.
If the bank accepts your application, they may suspend your payments temporarily, reduce your payments, or modify your interest rates.
While its almost guaranteed that in the long run, youll end up paying more in interest, a forbearance program will give you the opportunity to avoid foreclosure.
Why You Shouldn’t Walk Away From Timeshare Maintenance Fees
Many timeshare owners believe they don’t have to pay maintenance fees and special assessments after paying their mortgage. That’s not the case. This annual maintenance fee is how these resorts turn a profit every year. If you attempt to stop paying this timeshare obligation, the resort will do everything possible to collect these payments from you.
What starts with a barrage of phone calls soon escalates to collection companies if you still refuse to pay. The financial burden worsens as you now risk foreclosure and possible legal action. To truly free yourself from a timeshare, you need to find a way to cancel the purchase agreement.
LOAN PAYMENTS VS ANNUAL MAINTENANCE FEES
There are often two culprits behind financially distressed timeshare owners. The excruciatingly high costs of timeshare mortgage payments and the annual maintenance fees. You may be wondering what these expenses are, so here’s a breakdown of each:
- Timeshare Mortgage Loan Payments: For those with a deeded timeshare, you are likely to take out a loan to cover the purchase cost. Like any other mortgage loan, this loan has a term length and interest rates.
- Annual Timeshare Maintenance Fees: These fees are for regular upkeep at the resort, including cleaning, landscaping, building repairs, upgrades, and other expenses. Collected on an annual basis, the cost of these maintenance fees tends to rise each year.
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Can You Get A Mortgage With A Dismissed Chapter 13
It’s likely, yes. But most lenders have a waiting period that must pass first, although some shorten it significantly if you can show that the bankruptcy filing was due to circumstances beyond your control.
You’ll also need to satisfy income and credit score requirements. Learn more about buying a house after Chapter 13 bankruptcy.
How To Avoid And Fix Problems With Your Servicer
Typically, the servicer must credit a payment to your account the day they get it. That way, you dont owe extra fees and the payment doesnt look late to the lender. Late payments show up on your credit report and may affect your ability to get credit in the future. Too many late payments can lead to default and foreclosure.
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What Are The Consequences Of Not Paying A Timeshare
When you walk away from a timeshare agreement, you forfeit your vacation ownership rights and leave yourself open to legal issues. Abandoning your ownership breaks a deal and puts you at risk of foreclosure. It also may drag your credit score down for up to seven years.
Before you stop paying the annual fees, you need to consider the results of that decision. To fully understand what happens when you abandon your timeshare, here are a few of the most frequently asked questions we receive regarding the subject:
Does The Mortgage Company Have To Give Me A Chance To Pay Up Before Accelerating On The Debt And Filing A Foreclosure Case
Yes. The company must provide a written notice of default and right to cure your mortgage loan default . The notice must state that you are “in default” and that you have 35 days to cure the default. Being “in default” means that you are behind in your payments or that you have not paid your taxes or your insurance. The home mortgage company cannot begin a lawsuit to foreclose the mortgage deed until after that 35 day notice expires.
Late Payments:
During this time, you should make your late payments or call your mortgage company and try to work out a payment plan. If your payments are sent back, save them in a separate savings account and continue to make payments into that savings account each month. Especially if you are trying to keep your home, it is important to prioritize this payment above other payments you have, like credit card debt and old hospital bills.
Save Money! If you can afford a mortgage payment but not the amount you owe, save the amount you believe is affordable and set it aside. This can make all the difference when you are negotiating an affordable workout plan.
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How Can I Apply For The Hemap Program
If you fall behind 60 days or more on your mortgage payments, the bank or mortgage company is allowed to send you a letter telling you that you are in default and letting you know about the HEMAP program. As soon as you get this letter, you should call one of the housing counseling agencies listed in the notice and schedule a meeting to make an application.
You cannot apply for HEMAP unless that letter has been sent to you.
You must attend a meeting within 33 days after the date on the notice if you want to apply for HEMAP and put a hold on the foreclosure process while your application is pending. You can attend the meeting after the 33 days and still apply for HEMAP but that will not stop the foreclosure process.
At the meeting, be prepared to explain the circumstances beyond your control that caused you to fall behind. The housing counselor will help you complete your application and will send it to the HEMAP program. If you apply for HEMAP on time, the bank or mortgage company cannot start a foreclosure case against you for up to 60 days while HEMAP reviews your application.
If your HEMAP application is denied, don’t give up. You have the right to appeal, simply by sending a letter to the address listed on the denial letter. Send your letter right away, because there is a 15-day deadline to file an appeal. The foreclosure process can resume while your appeal is being considered.
Meet With A Foreclosure Counselor
Remember that assistance in the effort to avoid foreclosure is confidential and free of charge from a HUD-approved counseling agency. Its a phone call you can and should make at any point in the process in conjunction with your conversations with your mortgage lender about relief options.
A HUD-approved housing counseling agency representative will discuss with you what options are available and what might work best in your specific situation. Its well worth the effort to learn more about housing counseling.
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How Does Mip Work
If you have an FHA loan, you pay a portion of the premium up front at the close of the loan and then continue to pay mortgage insurance premiums on a monthly basis. The upfront premium is always 1.75% of the loan amount. If you cant afford to pay this at closing, it can be financed into your loan amount.
In addition to the upfront premium, theres an annual premium thats based on your loan type as well as your down payment or equity amount. If you have a standard FHA loan with a 3.5% down payment on a loan of no more than $625,500, the annual MIP is 0.85% broken into monthly payments.
If you have an FHA Streamline where you go from one FHA loan to another for the purpose of lowering your rate and/or changing your term, the MIP rates are a little better. In this case, theres an upfront rate of 0.01% of your loan amount and an annual MIP rate of 0.55%.
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Does Canceling A Timeshare Affect My Credit
A timeshare foreclosure can have a significant impact on your credit. Not only will your credit score likely decrease, but foreclosures can stay on your credit report for up to seven years. This credit status makes it difficult to qualify for a future mortgage or any other form of credit without high-interest rates.
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Cfpb Finalizes A Rule Restricting Mortgage Foreclosures Until 2022
While federal law already prohibits a servicer from beginning a foreclosure until the borrower is more than 120 days delinquent, aConsumer Financial Protection Bureau ruleprovides even more protection to those affected by the COVID-19 pandemic. From August 31, 2021 through December 31, 2021, unless an exception applies, a loan servicer may start a foreclosure only if you’re over 120 days behind on your mortgage payments and:
- you’ve abandoned the property
- you haven’t responded to the servicer’s outreach attempts for 90 days, or
- you’ve submitted a complete loss mitigation application, remained delinquent at all times since applying, and have been evaluated for all loss mitigation options, but noalternatives to foreclosureare available.
But the rule doesn’t apply to non-primary residences or to small mortgage servicers. The protections also don’t apply if the borrower was more than 120 days delinquent before March 1, 2020, or the applicablestatute of limitationswill expire before January 1, 2022.
What Kind Of Lender Or Loan Servicer Do You Have
As a homeowner, its vital to understand what type of lender or loan servicer you have.
Specifically, Do You Have A Federally Backed Mortgage Or Private Loan?
Recently, Congress has passed into law the CARES ACT, which allows for 2 Trillion in stimulus funding for individuals and business owners.
The good news is that for homeowners who have a Federally backed mortgage , the CARES ACT provides certain protections for homeowners during COVID-19.
So What Is A Federally Backed Loan?
A Federally backed loan is a mortgage that is supported by government servicing agencies such as Fannie Mae Freddie Mac.
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