Every property owner with a mortgage should learn how to stop foreclosures. It is likely that over the term of an average loan, they will have a financial crisis. Once the monthly payments are ninety days delinquent, most mortgage lenders initiate legal action.
Reality Check
Borrowers have five ways to stop their lender from taking title to their property. When considering how to stop a foreclosure, they should first examine the following three aspects:
Financial Confidence
- Has the source of financial difficulties been resolved?
- Are estimated future earnings realistic?
- Is the property in good condition or will it require expensive repairs and improvements?
Proper debt management will help prevent future budget crises. It is also important to make sure that it is worth saving. If the house needs a new roof or the unimproved land is near a future shopping mall, its value will be significantly affected.
Potential Value
- Is there equity in the property now?
- Is it over-improved for the area?
- Is it a buyer's market?
Assess local economic conditions when considering how to stop a foreclosure. If employers are leaving the area and unemployment is skyrocketing, it will take a long time for the property to appreciate.
Credit Concerns
- Is it possible to obtain credit once a foreclosure action has begun?
- Can timely loan repayments before and after the foreclosure proceedings make a difference?
- Will there be higher costs and fees when applying for credit after a foreclosure?
All three of the above questions can be answered yes. While learning how to stop foreclosures, many property owners fixate on the potential damage to their credit file. A good credit rating is important. However, it is only a portion of what the borrower should consider.
How To Stop Foreclosure
Once the property owner decides how to stop a foreclosure, the next step is to develop a plan based on their situation. Each will require some research and hard decisions. It is important to be realistic and focus on resolving the issue rather than on the circumstances of the situation. There are five angles to explore when examining how to stop a foreclosure.
Find the Hidden Money
Each of the following allows the property owner to keep their home or land as well as maintain a credit standing:
- Borrow the funds from family or friends. Sign a realistic repayment agreement.
- Make use of cash value in a whole life insurance policy by obtaining a loan against the equity.
- Through your church or synagogue. Many congregations have an emergency fund to help members in catastrophic situations.
- Sell or liquidate other assets such as:
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- Boat
- Bonds
- Coin collection
- Jewelry
- Retirement account
- Second car
- Stocks
- Vacation timeshare
Sometimes another loan is the most viable option when a borrower is considering how to stop a foreclosure. Ideas to examine include:
- Obtain a new home mortgage.
- Rewrite the current loan.
- Consider a second mortgage.
- Seek out lenders who specialize in high-risk loans.
Sell and Move On
The option of selling and moving on works best when the property has excellent equity value and the neighborhood is in high demand.
- Price the property priced for a quick sale.
- Convince the lender to wait a few months before proceeding with legal action.
Sell the house, pay off the loan, and make a fresh start.
Bankruptcy
Bankruptcy is meant to assist people in times of economic hardships. When a property is in foreclosure, Chapter 13 Bankruptcy may be the best choice. Once a payment plan is ordered by the court, civil legal actions, such as foreclosures, are suspended. Creditors are ordered not to harass the debtor. They are expected to accept the court's repayment plan. In some cases, the lender can refuse. Consult with an attorney to learn more about lender's rights in your state. However, the borrower cannot miss a payment on the court's schedule. If that occurs, all creditors can resume pursuit of their loan balance.
Military Exemption
Active members of the United States Armed Forces, including the National Guard, can discover how to stop foreclosures by contacting their superior officer. The Soldiers and Sailors Relief Act offers protection from some civil court actions. It applies to:
- Loans obtained prior to enlistment.
- Loans obtained prior to going on active duty.
Petitioning for this relief can stop or delay the foreclosure in most cases. At the very least, it will motivate most lenders to decrease their payment demands.
Summary
When a mortgage defaults, it is important to plan on how to stop a foreclosure. Communicate with the lender. Remember that their goal is to obtain payment on the loan. There is a good chance the person you are dealing with there is simply following policy. That is their job. In all cases truth, realism and mutual respect can make the process less complicated for both sides.
