Ways To Stop Foreclosure
What Are Ways To Stop Foreclosure?
Numerous ways to stop foreclosure may be available for distressed homeowners facing foreclosure. Oftentimes, homeowners are surprised to learn about the many different ways to stop foreclosure. Some strategies may allow homeowners to stay in the home while other strategies may require homeowners to leave the home.
Important factors that may affect a homeowner’s outcome with respect to foreclosure can be their current financial situation, how many mortgage payments they have missed, the state they live in and/or the amount of time left until the foreclosure sale date. Homeowners should consider learning as much as possible about potential ways to stop foreclosure in order to have the best opportunity at finding a favorable alternative to foreclosure.
Ways To Stop Foreclosure & Keep The Home
The ways to stop foreclosure and keep the home may be difficult to qualify for based upon a homeowner’s current situation. The factors mentioned earlier may all play an instrumental part for mortgage lenders in deciding whether or not to approve a loss mitigation request. It is important to note however, not all foreclosure defense options may require a mortgage lender’s approval.
Popular ways to stop foreclosure and keep the home often include:
- Loan Modifications
- Repayment Plan
- Filing Bankruptcy
Getting a loan modification is often one of the most popular ways to stop foreclosure. Loan modifications typically work by modifying the original terms of the mortgage agreement in order to reduce monthly mortgage payments, lower principal, lower interest rates and/or extend the life of the loan.
A repayment plan may also be one of the smart ways to stop foreclosure for homeowners who experienced a short term economic hardship. Repayment plans often work by adding missed mortgage payments across the life of the loan to bring the loan current.
Filing a chapter 13 bankruptcy can be one of the ways to stop foreclosure for homeowners who cannot qualify for the other options listed above. Chapter 13 bankruptcy often stops foreclosure once the automatic stay goes into effect and homeowners are commonly able to keep their homes.
Other Ways to Avoid Foreclosure – Mortgage Forbearance
Mortgage forbearance can be a foreclosure defense option whereby mortgage lenders agree to suspend foreclosure proceedings while a homeowner attempts to bring a defaulted mortgage loan current. Mortgage lenders may even choose to reduce or suspend mortgage payments for an agreed upon length of time. The word “forbearance” is derived from the word “forbear” meaning to withhold. Mortgage forbearances may be a smart foreclosure defense strategy for individuals who know they are experiencing just a temporary financial hardship.
Mortgage Forbearance Can Be a Good Choice When –
A mortgage forbearance may not be a wise move for individuals who know their financial duress can last an extended period of time. It is important for homeowners to understand when to choose this foreclosure defense option.
It can be a good idea to choose a mortgage forbearance when:
- You have been unable to refinance your mortgage loan.
- You are only a few months behind or less on your mortgage payments.
- You are experiencing just a short-term financial hardship and expect to bounce back soon.
Mortgage Forbearance Advantages
A mortgage forbearance may offer a number of advantages when compared with other foreclosure defense strategies. Four advantages associated with a mortgage forbearance can be:
- Homeowners have the opportunity to recover from a financial difficult situation with a suspension or reduction in monthly mortgage payments.
- It may be used in combination with a mortgage modification.
- Homeowners can remain in their houses while foreclosure proceedings are halted with a forbearance.
- There are typically less damaging effects from a forbearance than with a bankruptcy or home foreclosure.
Mortgage Forbearance Requirements
Various mortgage lenders may have different mortgage forbearance requirements. Typically, common forbearance requirements may include:
- A homeowner must have less than 12 months of missed mortgage payments, but at least 3 months of missed mortgage payments.
- A homeowner must have an economic hardship that can be demonstrated to mortgage lenders.
- Homeowners must affirm to mortgage lenders their intent to remain in the home as their primary residence.
Mortgage Forbearance Considerations
A mortgage forbearance is not always the smartest option for all homeowners even though they may qualify. If mortgage payments have recently become un-affordable because of an increase in interest rates on an adjustable rate mortgage, forbearance is not likely to cure this issue. Forbearance’s are typically reserved for specifically short-term financial difficulties. It can be a good idea to speak with a foreclosure defense attorney prior to pursuing this option.
A foreclosure defense attorney may help homeowners in a number of ways if they are considering mortgage forbearance as a foreclosure defense option. These attorneys can help by reviewing an individual’s financial and foreclosure situation in order to determine if forbearance is the best option. Additionally, these attorneys can negotiate with mortgage lenders and fill out any required paperwork.
Other Ways to Stop Foreclosure – Foreclosure Offense
Foreclosure offense is often characterized as a set of techniques used to take legal action against lenders in order to avoid foreclosure. It can also be used as a response to foreclosure after mortgage lenders have initiated the foreclosure process. Common terms associated with foreclosure offense include counterclaims or loss mitigation.
With foreclosure offense homeowners may try to take the legal offensive by pursuing proactive legal action to slow or stop the foreclosure process. In addition, in the case that homeowners were wrongly foreclosed upon, they may pursue a case against their mortgage lenders.
Foreclosure Offense Advantages
Foreclosure offense may provide homeowners with the opportunity to effectively fight foreclosure if the mortgage lender’s foreclosure case can be proven as unjustified. In light of numerous foreclosure scandals, a number of homeowners are beginning to pursue foreclosure offense since not every case of foreclosure initiated by the mortgage lenders are justifiable.
Homeowners may be motivated to pursue foreclosure offense after discovering instances of:
– Illegal transfer of deeds
If an illegal transfer of deeds occurs, homeowners may choose to pursue a quiet title lawsuit against their mortgage lenders. This type of lawsuit focuses on uncovering the true owner of a property in order to clear or “quiet” all other claims from any other person or entity. If it is discovered the mortgage lender who initiated the foreclosure process does not have an adequate claim on the property in question, the mortgage lender’s foreclosure case may be thrown out in court.
– Violations of the Fair Debt Collection Practices Act (FDCPA)
The Fair Debt Collection Practices Act (FDCPA) defines acceptable procedures for debt collectors to follow when pursuing the collection of a debt. The acceptable procedures outlined by the FDCPA include clauses on times during the day when debt collectors can call, how and where the debt collector can contact a debtor, ethical behaviors when collecting a debt and more. In the case that a mortgage lender has violated some or all of these provisions, homeowners may be able to pursue a case against their mortgage lenders.
– Violations of the Truth in Lending Act (TILA)
The Truth in Lending Act (TILA) defines the required disclosures of specific information that must be provided to a borrower prior to offering a mortgage loan or other type of loan. TILA was setup to help borrowers make well-informed decisions prior to entering a contractual debt obligation. In the case that mortgage lenders did not disclose certain required information, homeowners may be able to pursue a case against them.
Robosigning became a rampant problem in the foreclosure industry after a large number documents were discovered to have fraudulent signatures. Robosigning can occur when an employee of a mortgage lending company or bank signs off on documents without verifying its contents. This can help mortgage lenders initiate the foreclosure process on false grounds. In the case that robosigning is discovered, it may be possible to pursue a foreclosure offense case based upon wrongful foreclosure.
Other Ways to Avoid Foreclosure – Eminent Domain
Using eminent domain to fight foreclosure seems to be an idea gaining momentum in areas with high densities of foreclosed and underwater homes. The idea arose in Richmond, California, where Mayor Gayle McLaughlin positioned eminent domain to help distressed homeowners instead of helping corporations “move people out of their homes for big stores.” Irvington, N.J., Brockton, Mass., Yonkers, NY and Chicago are all taking a serious look at the idea.
What is Eminent Domain?
Eminent domain is essentially the right to take private property for public use by a state, municipality or other authorized government entity. Just compensation is paid to the owner of the private property to be taken according to the Fifth Amendment to the U.S. Constitution. Additionally, the private property owner must have the right to due process.
Eminent domain may be commonly used to enhance public transportation, improve access to utilities, build pipelines and more. The idea to use eminent domain to help distressed homeowners avoid foreclosure is a fairly recent development that has not been utilized on a widespread scale before.
How does Eminent Domain Help with Foreclosures?
Eminent domain may help distressed homeowners facing foreclosure and/or homeowners with underwater mortgages by helping to keep residents in their homes. Government municipalities and cities may be able to help homeowners by using eminent domain to acquire loans from bond-holders at a fair price. After that, the loans may be restructured to allow for more affordable mortgage payments to homeowners.
This may help individuals avoid the severely negative effects associated with foreclosure. Additionally, by keeping more residents in their homes, home values may avoid a sudden drop due to widespread foreclosures.
The banks unsurprisingly do not seem to be in favor of the plan. Some have argued the banks will receive less money on the mortgage loans if the government entities take the properties through eminent domain.
It is unclear how successful the plan will be, but could be a step in the right direction for areas with high densities of foreclosures and underwater mortgages.