Published On: Thu, Dec 7th, 2023

6 Ways to Stop Foreclosure on Your Home

In Q3 2023, total U.S. foreclosure filings reached 100,546. That includes 36,684 foreclosure filings in September, up 8% from August and 15% from September last year. 

If you are concerned about foreclosure or at risk of missing your monthly payments, consult a foreclosure attorney for professional help. They can help you mitigate losses.

If you want to learn how you can stop a pending foreclosure, read on. In this article, we’ll go over what a foreclosure is, how to avoid it, and ways to stop it once in motion.

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What is foreclosure?

A foreclosure is a legal process by which a lender repossesss a home to recoup their losses after a homeowner stops making mortgage payments.

Federal law prohibits lenders from beginning the foreclosure process until a borrower has been past due on payments for over 120 days. 

At that point, the foreclosure process starts, and the homeowner may be evicted from the home—which is recorded on their credit report—and the property ownership transfers to the lender, who typically sells the property at auction. 

How to avoid a foreclosure

To avoid foreclosure, it’s crucial to keep up with your monthly payments. If you never get behind, you won’t ever be at risk of foreclosure. 

Some common ways to prevent falling behind on payments include building an emergency fund in case you fall on hard times, refinancing your mortgage to lower your monthly payments, and proactively reaching out to your lender for help.

Many homeowners don’t realize that lenders want to avoid foreclosure just as much as you do because it usually costs them. So, as soon as you anticipate missing a payment, contact the lender to see what options are available to you. 

How to stop a pending foreclosure

Some of the options to stop a pending foreclosure that a lender might propose or that you might pursue on your own include the following:

  1. Modify the loan

If you’re struggling to make your monthly mortgage payments, your lender may be willing to modify the loan to make it more affordable. A loan modification works similarly to a refinance in that it can extend the length of the loan term or take into account an improved credit score to lower your monthly payments so they are easier to pay.

  1. Establish a mortgage repayment plan

Say you fell behind on your mortgage payments and then get back on your feet and continue making them. What if you can’t afford to pay back the missed payments in a lump sum?

In that case, lenders may be willing to work out a repayment plan to get you caught up. Instead of requiring the missed payments all at once, they may let you spread them out over a longer period of time so you can pay back what you owe incrementally.

  1. Request a forbearance

Another way to stop a foreclosure is to request a forbearance. This puts your monthly mortgage payments on hold temporarily so you can get back on your feet. You’ll still owe the amount that was suspended at the end of the forbearance period, but you’ll have more time to gather the necessary funds. Usually, the suspended loan payments are paid via lump sum or a repayment plan. 

  1. Conduct a short sale

If foreclosure looks inevitable, you might consider a short sale. This involves selling your home for less than what you owe and having the proceeds go to the lender, who usually then forgives part or all of the remaining loan balance. Of course, you’ll need to get a short sale approved by the lender first. 

  1. Sign a deed in lieu of foreclosure

If all else fails, you might sign a deed in lieu of foreclosure. This means voluntarily transferring property ownership to the lender to avoid an official foreclosure proceeding, which would damage your credit score. This way, you at least protect your credit so you can qualify for more favorable loan terms in the future. 

  1. Consult an HUD-approved counseling agency

Lastly, it’s worth getting professional advice before resorting to foreclosure. The U.S. Department of Housing and Urban Development (HUD) sponsors counseling agencies that can provide loss mitigation counseling at little to no cost. Contact one today to see what options you have. But beware of mortgage assistance scams that ask you to sign over your property deed and then steal from you.

The bottom line

Ultimately, there are many ways to avoid foreclosure and the financial loss and credit damage that come with it. To avoid foreclosure, start by contacting your lender to see what they advise. You may have more options than you think.

Author: Anna Johansson

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