Option : Refinancing Your Mortgage
Another avenue to consider is refinancing. There are a few ways to do this.
You can speak with your mortgage servicer and negotiate a new loan with the same mortgage company. There will be new closing costs and fees, but youll stop the foreclosure process.
Unfortunately, if you have several past due payments, your loan servicer may decide youre high risk and refuse to refinance your agreement. In this case, you can reach out to a new lender. However, the new loan provider will likely require a higher interest rate.
Refinancing your mortgage is easier if you do it sooner rather than later. If youre only delinquent on your mortgage payments, your loan provider will likely work with you on a refinancing agreement. Once they send you a notice of default and your house is in pre-foreclosure, theyre less likely to offer refinancing.
Also, if youre considering refinancing, watch out for scams. Many companies claim that they help stop foreclosures, offer loan modifications, or provide mortgage relief when, in fact, theyll take your money and vanish.
So, you have to do your homework when searching for a reputable refinancing company. And, if theyre making promises that seem too good to be true, theyre probably not the type of company you should give your money to.
What Is A Foreclosure
Few people can buy a house with cash, so a mortgage is necessary. As long as the borrower makes the monthly payments until the mortgage is paid off, theres no problem. However, if the borrower quits paying, the lender needs to be able to recoup its losses.
So, the house itself is the collateral for the loan. If the borrower can no longer make payments, the lender acquires the house through a legal process called foreclosure, so it can sell the house and recoup at least some of what is owed. Foreclosure evicts the homeowner from the property and damages the borrowers credit score for seven years.
Sell Your House For Sale By Owner
Selling your home by owner may be a better option if you don’t have the equity to sell with an agent. You will still be responsible for marketing your home and doing the paperwork but you will not have to pay a commission. This will probably be a longer more stressful process for homeowners who are looking for a way to save my home from foreclosure but can be a viable option in some cases. be careful when doing this though, if you go under contract with a buyer who is unable to perform you may waste months of valuable time as your equity is slowly diminishing. Remember, selling your house by owner can have hidden costs as well, wewrote an article about this to help guide you and budget accordingly.
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Request A Loan Modification
If you have had an unexpected change in financial circumstances, a loan modification may be your best option. In this situation, your attorney will contact the lender and explain your circumstances and how they impacted your ability to make timely mortgage payments. Standard hardships lenders may consider, which often affect homeownership and finances, include:
- A recently contested divorce proceeding
- An accident that caused significant injury or disability
- Income decline due to an unexpected job loss
- A salary reduction at a long-term current job or new job
- Being the victim of fraud or another financial crime
- A national crisis, such as a pandemic
- Child support and custody issues or
- Sudden death in the family.
Lawyers will gather facts and proof of the incident that relate to your financial change. They will then ask the lender for your loan to be modified .
They may also ask the lender to forgive the past due amount or add it on to the end of the mortgage. With either approach, you will need to show that you now have a source of income and can make the agreed-upon new payments.
A lenders automated email and phone banks do not analyze or recognize hardships. However, specific workers for the companies can do so, especially if you have had a strong payment history up until this time. Your attorney will know to whom and how to make the case for a hardship loan modification.
What Are The Tax Consequences Of A Workout If The Lender Gives Up Part Of My Debt
If the mortgage holder “writes off” any part of the debt you owe – even if they reduce your interest rate – the IRS may consider it as income to you and charge you taxes on that income. However, if you were insolvent at the time the debt was forgiven, you may be exempt from any taxes for the forgiven debt.
Tax rules are complicated. Consult with a tax professional who has experience with debt forgiveness. If you have questions, contact our Low Income Taxpayer Clinic for more information.
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What Do I Need To Know First
Call 1-888-664-2569
Here are four quick tips:
Educate yourself. Many, many people are in fear of losing their homes. Maine provides some free help resources, but not everyone will be able to get a free lawyer. Here, we want to help you get started by telling you about some options and where you may be able to get further help.
Be persistent. Saving your home can take a long time and be frustrating. But there may be an affordable solution.
Avoid Scams. Many companies are promising to stop foreclosures and get loan modifications for a fee. Many of these companies take money and then disappear. Be careful and don’t be scammed!
Get free help now. Contact the Maine Foreclosure Prevention Hotline: 1-888-664-2569.
Types Of Foreclosed Properties
There are a few different types of foreclosures, and multiple ways you can buy one. Here’s a quick rundown of some of the basic terms you should know:
- Pre-foreclosure: When a home is in pre-foreclosure, it means that the lender has started the foreclosure process, but the borrower still owns the home. The owner is likely selling because they can no longer afford their mortgage and are trying to avoid a foreclosure.
- Short sale: A short sale is a type of home sale where the sales price is less than what is owed on the mortgage. These homes may or may not be in pre-foreclosure. With a short sale, you’ll be buying the home from the owner, but the lender will need to agree to the amount.
- Foreclosure auction: Once a lender forecloses on a home, the home is put up for sale at an auction. This can be a risky way to purchase a foreclosed property, particularly for beginners, because you likely won’t have the opportunity to inspect the property before you buy it, and you’ll be stuck with any title issues that are attached to the house.
- REO: Foreclosed properties that aren’t sold at auction are known as real estate owned, or REO, because they’re owned by the lender or another entity, such as the US Department of Housing and Urban Development or one of the government-sponsored enterprises that backs conventional mortgages.
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Short Sales And Deeds In Lieu Of Foreclosure
Other common ways to prevent foreclosure include short sales and offering the deed in lieu of foreclosure.
A short sale means the homeowner sells the house for less than they owe. Typically, short sales allow for a quick sale, but you could still walk away owing money to the bank. Of course, as most homeowners facing foreclosure are not in a good financial situation, that isnt ideal.
Offering the deed in lieu of foreclosure means youll give your home to your lender to make up for the missed payments. That will save your credit score, but you come away without a home and any equity you had in it. Plus, you can only use this method if an attempt to sell your home fails.
How Can I Prevent Foreclosure
Talk with your lender about a payment plan, a temporary forbearance, or a loan modification. Pay what you can. If your payments are not accepted, save them until you can pay in full. For free foreclosure prevention counseling, contact the HOPE Hotline at 888-995-HOPE or visit 995Hope. The earlier you apply for assistance, the more rights and options you will have.
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Deed In Lieu Of Foreclosure
Another way is to willingly give your property to the lender in return for pardoning your debt. You will qualify for a deed in lieu of foreclosure only if you cannot sell your home before foreclosure. The only advantage of this option is that you are rescued from foreclosure and the lower credit record that inevitably results from it.
Trustee Challenges To Confirmation
Because the confirmed Chapter 13 plan has such power, both the Chapter 13 trustee and the mortgage lender have opportunity and incentive to object to your plan.
The trustees objection is often focused on feasibility. Does your projected budget show that you can pay enough into the plan to do whats required?
Remember that the amount necessary to fund the plan is not just the amount of the mortgage arrears.
The Chapter 13 trustee gets a commission on the money she handles in the case. So, to get $1000 to the mortgage lender, you have to pay the trustee $1100, where the trustees commission is the 10% maximum.
Also, if you owe priority taxes, the Bankruptcy Code requires that those taxes be paid in full over the life of the plan. Likewise, any delinquent family support claims must be paid in full.
So, the total payments to creditors through the plan may need to cover other creditors as well. It depends on the means test or the net value of your assets.
The trustee will look at the total amount your plan provides over the life of the plan and compare it to your projected income on schedules I and J. Does it look like you can pay your current living expenses and the amount required by the plan? If you propose to increase plan payments in future months, is there reason to think you will have the money to do that?
If not, your plan may not be feasible. If its not feasible, it doesnt get confirmed.
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How To Avoid Foreclosure
It is important to scrupulously research the best interest rates available and pick the mortgage term that is right for you. For example, 40-year mortgages will typically allow you to make lower monthly payments than traditional 30-year fixed mortgages. That said, the interest rates for these mortgages tend to be higher. Use an online mortgage calculator to best estimate your total mortgage costs and plan ahead.
If your home is at risk of foreclosure, dont start packingtake action. The following options for avoiding foreclosure should be easily available to anyone with a government-backed loan provider and built-in mortgage insurance, such as in an FHA loan.
Five Tips To Prevent Foreclosure
- They want you to pay them large fees upfront and only accept cashiers checks and wire transfer payments. You should never pay individuals and organizations claiming to help you keep your home.
- They start discouraging you from speaking to your lender and attorney.
- They advise you not to respond and appear at a court summons. Please note the process will continue without you and you will be one step closer to foreclosure.
- They start to pressure you into signing the deed to your home or other documents without consulting an attorney. You should never sign anything you havent read or clearly understand.
- They insist you lease your home and buy it back over a period of time.
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Loan Modification Or Forbearance
In some cases, such as a sudden unfavorable financial situation, you can negotiate a loan modification or forbearance with your lender.
With a loan modification, youll renegotiate your existing mortgage so that you have payments you can afford. Then, when things get better financially, your repayment plan may include paying a prorated amount of arrears along with your monthly payments to make up the debt.
Loan modifications arent the same as refinancing your loan. Since you arent initiating a new loan agreement, there are no new closing costs or initiation fees.
With a loan forbearance, the lender can temporarily lower or suspend mortgage payments entirely because of a short-term financial issue. If you had a sudden drop in income or are facing a medical emergency but otherwise have a good credit history, your lender might be open to these options.
Ways To Save Your House From Foreclosure
By michelreibar
Making monthly mortgage payments can be difficult. When financial situations change for the worse, and things arent getting better, what was one or two missed payments can quickly lead to pre-foreclosure. If youre facing foreclosure on your house, its important to understand that you have options and dont have to lose your home. And, if selling your home becomes the best route, you may be able to walk away with some of the proceeds.
If youve been searching online for what can I do to save my house from foreclosure? keep reading as we outline the many routes you can take when facing foreclosure. We give you the pros and cons of each and discuss who theyre best suited for. By the time youre done reading, youll have a good idea of how to save your house from foreclosure.
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Get A Home Inspection
When you buy a foreclosed home, you’re getting it “as-is,” meaning you won’t be able to go to the seller and negotiate repairs for any defects you find. This means that getting a home inspection is vital, because it will give you an idea of the amount of work the house needs, and how much money you can expect to spend fixing it up.
Not all foreclosures have significant issues, but if the property has been abandoned or wasn’t properly maintained, some of its major components could need fixing up. If it has more significant issues, like damage to the foundation, you’ll need to consider whether the money you’ll spend repairing the home is worth what you’ll save by buying a discounted property.
“The main challenge is the condition in which you may find the property, including hidden problems like foundation issues, deferred maintenance, inoperable systems, among others,” says Kofi Nartey, founder and CEO of real estate firm GLOBL RED. “My recent buyer of a foreclosure had thousands of dollars of deferred maintenance to deal with, as well as general updating and repairs”
The problem with buying a foreclosure is you might not get the chance to order a home inspection. If you’re buying the home at auction, you won’t be able to get the home inspected. This is extremely risky, since you’ll have no idea what condition the property might be in.
Hard Money Loan Refinancing
Hard money refinance is often seen as the last resort option. So, at first, most people ask their initial lender to refinance the mortgage.
But if the lender deems there is too much risk, they will deny that request. In this case, you can go to a private lender and get a hard money loan to refinance that mortgage.
While this will prevent foreclosure, you may incur very high interest from private lenders.
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Don’t Lose Your House To Foreclosure Recovery Scams
If any firm claims they can stop your foreclosure immediately if you sign a document appointing them to act on your behalf, you may well be signing over the title to your property and becoming a renter in your own home! Never sign a legal document without reading and understanding all the terms and getting professional advice from an attorney, a trusted real estate professional, or a HUD-approved housing counselor.
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Pennsylvania Housing Finance Agency
Known as PHFA for short can sometimes provide assistance to homeowners who have become delinquent on their mortgages. Your best bet is to contact PHFA as soon as possible Contact them if you have missed mortgage payments or if you are experiencing a hardship causing you to miss payments. The Homeowners Emergency Mortgage Assistance Program is a loan program designed to provide financial assistance to residents who, through no fault of their own, are financially unable to make their mortgage payments and are in danger of losing their homes to foreclosure.
Pennsylvania residents who face losing their primary residence through foreclosure, you may be eligible to receive this type of loan to bring the mortgage up to date. . Depending on your individual circumstances, you may also be eligible to receive financial assistance with your monthly mortgage payment for up to 24 months from the date of your default.
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Repayment Plans Load Modifications And Short Sales
Your options for avoiding foreclosure will depend on many factors, including the value of your home, how much you owe on your mortgage, and your financial situation. In some cases, you may be able to get caught up through a payment plan with your lender. With our help, you might also be able reach an agreement with your lender to modify the terms of your mortgage loan. A loan modification could result in lower monthly payments through reduced interest rates, a longer repayment term, or principal moved to the end of the loan.
A short sale may also be an option for avoiding foreclosure. In a short sale, your home can be sold for less than what is owed on it. The proceeds of the sale would go to the lender to satisfy a portion of your remaining debt. It would be up to the lender to decide whether to accept the proceeds of the sale to settle your debt or if you would still be liable for any deficiency. Our lawyers can negotiate the terms of a proposed short sale with your lender so that you can make an informed decision.
