How to Reverse a Mortgage Foreclosure

The foreclosure process can often be halted through negotiations.

A foreclosure begins with a lender notifying the homeowner that the process of legally obtaining the property has begun. In the initial stages, a homeowner is given the opportunity to satisfy back payments and stop the foreclosure. Traditionally, it becomes difficult to reverse the bank's action as the process progresses. However, many lenders have found more cost-effective alternatives to foreclosure and are often willing to reverse legal action if homeowners agree to certain conditions to stop the process.

Instructions

1. Contact your lender. Regardless of which stage your foreclosure is in, ask to speak to the person in charge of your file. Because many lenders are sitting on mountains of foreclosed properties they can't sell, foreclosure isn't always the most suitable solution to resolving the problems associated with your distressed mortgage. Ask your bank to halt the proceedings for 60 days.

2. Offer a cash settlement to satisfy your back payments. Ask your lender for a total of your back payments, penalties, legal fees and interest. Make an offer if you have access to funds.

3. Request a loan modification. Lenders often find it more cost-effective to make distressed home loans more affordable than to foreclose. Review your monthly expenses and income. Come up with a mortgage payment you can safely afford. Pitch the new payment to your lender if the bank is open to negotiation.

4. Consider a short sale. Contact your lender and request permission to sell your home for less than you owe on your home loan. A short sale will remove the bad debt from the bank's books and stop the foreclosure process. Alternatively, if you want to stay in the home, ask a qualifying friend or relative to buy your house on a short sale and rent it back to you. You can always buy it back when your situation improves.

5. Consider bankruptcy as a last resort. If you are unable to reverse your foreclosure using traditional methods, filing a Chapter 7 or Chapter 13 bankruptcy will result in an automatic stay in your foreclosure proceedings. This means your lender must halt all attempts to seize your property until your bankruptcy is discharged or repayment to the court begins through a Chapter 13 proceeding.

Tips & Warnings

• Contact an attorney if you need help negotiating with your bank. If you can't afford a lawyer, contact a community legal clinic.

References

• 1st Step Mortgage Group

Resources

• HousingAndUrbanDevelopment: Foreclosure Information
• Filing For Bankruptcy Online