How Can I Stop the Foreclosure on My Home?

You aren't locked into a foreclosure --- you can stop the process.

When your mortgage lender informs you that it intends to foreclose on your house, that does not mean that you have no options and losing your home is inevitable. The foreclosure process can take six months or longer, depending upon what type of foreclosure your lender files and what state you live in. Whether the foreclosure process is already under way or will soon begin, you don't have to stand by quietly while the bank seizes your property. Proactive homeowners can take steps to stop foreclosure and maintain ownership of their homes.

Bankruptcy

Turning bankruptcy paperwork in to the court immediately stops your creditors from taking action against you through a process known as the "automatic stay." Your mortgage lender can neither continue foreclosure proceedings --- no matter how far along the process already is --- nor can it call you, send delinquent payment notices or take any other collection action while your bankruptcy case is under way. An automatic stay protecting your home is available when you file either Chapter 7 or Chapter 13 bankruptcy.

Payment Plan

Missing a single mortgage payment can make it difficult for some individuals to catch up. Banks do not typically accept partial mortgage payments. If you are unable to pay two or more mortgage payments at once --- in addition to your lender's late fees --- catching up on your delinquent mortgage can prove impossible and foreclosure is the eventual result.

Call your mortgage lender and negotiate a payment plan to avoid this scenario. Through a payment plan, your lender allows you to continue paying your current mortgage payment and adds a portion of your past unpaid balance each month until you pay off the missed payments and fees.

Mortgage Modification

The terms of your current loan are what determines your mortgage payment each month. If changes in your financial situation result in your mortgage payment becoming a monthly struggle, contact your lender and ask about mortgage modification.

Through a mortgage modification, sometimes simply referred to as a "loan modification," the bank lowers your payments by extending your repayment term or lowering your interest rate, making it easier for you to catch up on missed payments and manage future payments.

Selling the Home

You may not want to leave your home, but selling the property prevents your lender from foreclosing. The proceeds from the sale cover your total loan balance and safeguard you from a foreclosure on your credit record.

If the fair market value for your home is less than the remainder of the mortgage, you can still sell your home and prevent foreclosure through a short sale. Should your lender approve, you sell the property for its current value and the lender agrees to take a loss on the loan.

References

• National Public Radio; How Long Does Foreclosure Take?; David Kestenbaum; October 2010
• Santa Clara University School of Law; Automatic Stay; Gary Neustadler; 2009
• United States Department of Veterans Affairs; Avoiding Foreclosure -- Forbearance and Repayment; November 2009
• U.S. Department of Housing and Urban Development: Loan Modification Frequently Asked Questions
• Idaho Department of Finance; Short Sale Guidance; March 2010

Resources

• The Federal Reserve Board; Protecting Your Home From Foreclosure; June 2010
• HGTV Frontdoor; Sell Your House Fast When Foreclosure Looms: Tara-Nicholle Nelson; February 2008
• Federal Citizen Information Center: Housing -- Avoiding Foreclosure
• National Association of Realtors: The Basics -- Short Sales