Options to avoid foreclosure

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There are several strategies available to you that can help you avoid a foreclosure. They all start with ACTION. If you have received a notice of default or are behind in your mortgage payments, this article will tell you how to avoid foreclosure on your home. To avoid foreclosure, you should first try to negotiate one of these options with your mortgage company:

Loan restructuring

There are real estate companies that can negotiate with your lender’s loss mitigation department to get your loan in good standing again. There techniques available to get a modification approved, such as a separate payment plan for your delinquencies, or adding your delinquent amount to the end of your loan. You may qualify for a modification, especially if you have recently experienced a reduction in income or an increase in living expenses. Sometimes it is possible to get your monthly payments lowered or your loan balance reduced.

Short sale

Real estate agents specializing in short sales can help you sell your home before a foreclosure sale takes place. In this case, the real estate agent listing your home as a short sale negotiates with your mortgage company to sell the home for less than your loan balance. The mortgage company would accept less than the amount you owe on the loan, avoiding costly foreclosure proceedings. If a short sale doesn’t work out, you may be able to give the property back to the lender (before foreclosure) and walk away without owing anything. This doesn’t do as much damage to your credit as a foreclosure.

There are things you can do on your own to avoid foreclosure without the help of a short sale real estate agent:

Reinstatement - Reinstatement of your loan by paying your lender all the past due amounts to bring the mortgage current. This option may not be feasible if your financial stress that caused the deliquency hasn’t improved.
Mortgage Refinance - Refinance your total debt load, or extend the term of the loan to reduce your payments. However, this is a difficult option if you owe more then your property is worth. If you have received a Notice of Default already, then you probably are not able to do a loan restructuring plan or refinance. Allowing the bank to foreclose or considering bankruptcy should only be considered a last resort.
Bankruptcy - You may qualify for Chapter 7 Debt Elimination or Chapter 13 Reorganization. Bankruptcy stays on your credit for 10 years.
Foreclosure - This is the most damaging to your credit other than bankruptcy. The lender will take your home and all of your equity. This will stay on your credit report for a total of seven years.

In these difficult financial times, many homeowners are able to benefit from the services of experienced real estate agents who specialize in foreclosure avoidance. They regularly negotiate the options above, helping their clients avoid the ramifications of a foreclosure.

Tips to avoid foreclosure

Don’t ignore the problem

The further behind you become, the harder it will be to reinstate your loan and the more likely you will lose your home. Contact your mortgage company as soon as you see that you are going to have problems making your payments. Lenders want to be in the money business, not the real estate business – so they don’t want your house. They all have options available to help you through tough financial periods.

Open and respond to mail from your lender.

The first few notes you get from your mortgage company usually offer excellent information about how to avoid foreclosure and get through your financial problems. Later, mail may include important notices of pending legal action. Failure to open your mail is not a viable excuse during foreclosure proceedings.

Know your rights

Find your original mortgage documents and actually read them so you know exactly what your lender might do if you don't make your payments. Learn about the foreclosure laws and time frames in the state you live in.

Keep track of your monthly expenses

Besides health care, holding on to your home should be your first financial priority. Review your bills and expenses to look for areas you can cut spending so you can make your mortgage payment. Look for optional expenses – cable TV, memberships and entertainment that you can eliminate.

Contact a real estate company that specializes in loss mitigation

If you are unable to make you mortgage payment and are in jeopardy of losing your home, contact a reputable loss mitigation company to help you by negotiating with your lender to resolve your situation.

Documents you will need

This is a list of documents that are generally required for a loan resolution package, although this list can vary depending on each unique situation:

Hardship Letter - A letter from you to your lender explaining why you are having trouble making your payments.
Financial Statement - This shows where your money goes and how much is left over after paying your bills. A short sale real estate agent will provide the appropriate forms, which will itemize your finances and show your hardship.
Bank Statements - Last two months of bank statements – checking, savings, etc.
Mortgage Statements - For all loans associated with the property, you need to collect the most recent mortgage statement & account number.
Pay stubs - Last two months of pay stubs, or proof of unemployment.
Tax Returns - Last two years of tax returns including W2’s.