What is Foreclosure Defense?
Foreclosure defense typically refers to a broad set of strategies and legal techniques distressed homeowners may use in order to delay, prevent or stop home foreclosure.
The term “foreclosure defense” became popularized shortly after the burst of the housing bubble devastated the U.S. housing market. The subprime mortgage lending boom and subsequent housing bubble burst of the early 2000s set many homeowners up with what would soon become unaffordable mortgage loans.
Soon after the boom, adjustable rate mortgage loans began to mature and homeowners began to default on their monthly mortgage payments. The banks took action by sending out foreclosure notices by the thousands.
Foreclosure defense became an increasingly popular topic of discussion as many families scrambled to learn as much as possible about how to stop the foreclosure process and save their homes from foreclosure.
How to Stop Foreclosure Using Foreclosure Defense
Using foreclosure defense to stop the foreclosure process may be accomplished in a variety of ways depending upon a homeowner’s specific situation. It is important to note, some options for stopping the foreclosure process may be unavailable to certain homeowners depending upon how many mortgage payments they missed, how much equity is built up in the home and/or the state of the homeowner’s current economic situation. Other factors may affect a homeowner’s eligibility as well.
Using Foreclosure Defense to Stop Foreclosure & Stay in the Home
Using foreclosure defense to stop foreclosure and stay in the home is often the resolution many homeowners hope to achieve.
Four potential strategies for stopping foreclosure and remaining in the home may include:
- Loan Modification – A loan modification typically works by negotiating with mortgage lenders to modify the original terms of the mortgage note. This may include reducing monthly mortgage payments, lowering principal and/or extending the life of the loan. Once a lender approves a loan modification application, the foreclosure process may be stopped. Loan modifications can be very difficult to qualify for however.
- Mortgage Forbearance – A mortgage forbearance typically works by negotiating with mortgage lenders to temporarily suspend the foreclosure process while a homeowner attempts to bring a defaulted mortgage loan current. A forbearance agreement may temporarily suspend mortgage payments, lower monthly mortgage payments, or even add the unpaid balance on to the back of the mortgage loan. This option is typically reserved for homeowners with a short-term financial hardship.
- Mortgage Reinstatement – A mortgage reinstatement typically works by making a lump sum payment to pay off all defaulted monthly payments as well as any late fees, costs and penalties incurred. After the lump sum payment, the mortgage loan can be considered current and the foreclosure process may be stopped. This option can be difficult to achieve since distressed homeowners do not typically have the funds available to make a lump sum payment.
- Filing Bankruptcy – Filing bankruptcy typically works by filing a bankruptcy petition with the Federal bankruptcy courts. Once a bankruptcy petition has been filed, an automatic stay may go into effect halting collection efforts from creditors, including mortgage lenders. The foreclosure process may be stopped while the automatic stay remains in effect. After the bankruptcy case is finished, the foreclosure process may be stopped or continue depending upon a number of factors. Some homeowners may be able to keep their homes after filing bankruptcy while others may not.
Using Foreclosure Defense to Stop Foreclosure & Leave the Home
In some cases, homeowners prefer to use foreclosure defense in order to stop the foreclosure process and leave the home. This may be a smart option for homeowners who know they cannot afford their current mortgage or for homeowners who know they will be experiencing a long-term financial hardship.
Three potential options for stopping foreclosure and leaving the home may include:
- Deed in Lieu – A deed in lieu of foreclosure, sometimes referred to as a mortgage release, typically works by negotiating with mortgage lenders to accept the deed of the home in exchange for release of mortgage obligation. This can be a great way to minimize the negative effects associated with going through the foreclosure process. Additionally, some homeowners may qualify for up to $3,000 in relocation assistance.
- Short Sale – A short sale, sometimes referred to as a pre-foreclosure sale, typically works by negotiating with mortgage lenders to approve a sale of the home for less than the remaining balance on the mortgage. The proceeds from the sale are used to pay any unpaid balance on the mortgage loan. This can be an effective way to avoid filing bankruptcy or losing the home at a foreclosure sale. Relocation assistance may also be available. Homeowners should remember however if any amount debt is forgiven by mortgage lender, the IRS may consider the forgiven debt as taxable income.
- Filing Bankruptcy – Depending upon local state laws and a homeowner’s specific situation, some homeowners may be required to turn over the home after filing bankruptcy. While this may not seem like a great option, it may be less damaging to a homeowner’s credit ratings than losing the home at a foreclosure sale.
Foreclosure Defense Help
Foreclosure defense help can be very valuable when dealing with mortgage lenders, big banks and the foreclosure process. Foreclosure laws vary from state to state and typically every homeowner’s situation is unique to some degree. For this reason, dealing with a home foreclosure can be very time consuming, stressful, and confusing.
Many homeowners have benefited from enlisting the help of an experienced foreclosure defense attorney. These attorneys typically have extensive real estate law experience and regularly negotiate with mortgage lenders for alternatives to foreclosure.
Potential benefits of hiring a foreclosure defense attorney may include:
- These attorneys can explain the foreclosure process clearly and help distressed homeowners explore potential alternatives to foreclosure
- These attorneys often have a great deal of experience in negotiating with mortgage lenders and cutting through any red-tape which may be dragging the case out unnecessarily
- These attorneys can help prepare a loss mitigation application
- These attorneys can represent homeowners in court should the need arise