Stop The Foreclosure Process

Homeowners who are facing foreclosure frequently have difficulty dealing with the facts that landed them there in the first place. Few homeowners ever think that they will go into foreclosure...it is the furthest thing from their mind.

Apart from those individuals who commit mortgage fraud...take out a loan without ever intending to pay...I have listed a few reasons that can cause a homeowner to stop making payments:

1.] Loss of employment
2.] Medical emergency or sudden illness
3.] Death in the family
4.] Divorce
5.] Excessive debt obligations
6.] Job status/financial changes
7.] ARM changes
8.] Unforeseen major home expenses

The best way to avoid foreclosure is to prevent the filing of a "Notice of Default". Lenders do not want a foreclosure on their hands, but will file a "Notice of Default" to protect their interests. If you are finding yourself in this type of situation, communicating with your lender to see what your options are is a prudent way of handling the problem, rather than waiting until the "Notice of Default" is in play.

The lender may agree to working out a payment plan to make up the back payments. This is called "Forbearance".

A rare but second option is "Payment Forgiveness". This is where the lender, based on your past history and present circumstances, may forgive one or two payments.

The lender may also allow you to add a small amount to your regular payment over the course of time to make up the difference, all the while keeping current.

In our current economic situation, Loan Modification is very viable option where the lender negotiates with the borrower, usually with the help of a "Loan Modification Professional" to change the terms of the loan. This varies from lender to lender and on a case by case basis. The borrower must demonstrate a hardship as well as be behind on their mortgage payments. Changes can range from a decrease in the interest rate, extend the length of the loan, or change an ARM to a fixed 30 year loan. At times the lender may forgive the interest accrued in a negative amortization loan and on a more rare situation principal reduction may come into play. With the new Obama plan, we should see more principal reduction to the current home market value when modifying loans.

If your house is in foreclosure, selling your home, selling your home in a short sale, or signing a "Deed-in-Lieu of Foreclosure" are all other options. When you sign the "Deed -in-Lieu of Foreclosure", you have deeded the home back to the lender and the lender forgives the debt. Lenders tell us that credit is affected in the same way as if the house was foreclosed upon.

Successfully completely the loan modification process is the best option. It is a "Win-Win" for the lender and the borrower. The borrower remains in their home. Psychologically, this is positive along with the financial issues being resolved. It is good for the lender as well because when a property is foreclosed upon, the note immediately loses at least 50% in value, and legal fees that can easily exceed $20k.

Stopping foreclosures is a challenge for the homeowner. With good communication, a good loan modification plan, proper counsel and professional guidance, the process can be mitigated. The homeowner remains in the home under better circumstances, the lender avoids the financial losses associated with the foreclosure process and usually is able to re-coop the losses over a period of time.

Our current economic situation demands that we are proactive in various ways to avoid foreclosure. By taking a proactive stance, we will effect change that over time that will improve the current economic crisis.