Advice on Stopping a Foreclosure

A record number of people from across the United States are facing foreclosure on their residences as well as on commercial real estate. If you at ofre facing the prospect of foreclosure or if you are already in the mids foreclosure action, you need to know how to stop a foreclosure.

Modification

A modification involves renegotiating the terms and conditions of the mortgage loan. Generally speaking, the modifications include a reduction in the monthly payment on the loan. The lender agrees to bring the loan into a current state. The lender agrees to forgive any charges, penalty fees and other costs that have accumulated. The overall life of the loan is extended.

The federal government in the United States developed a set of incentives to encourage mortgage lenders to enter into modification agreements with borrowers in lieu of pursuing foreclosures. These incentives include providing these lenders with funds to cover the costs of any losses sustained through a loan modification.

Short Sale

Through a short sale, the mortgage lender agrees to discount the balance due and owing on the loan itself. In other words, the lender lowers the loan balance.
A mortgage lender can prefer to discount a loan as opposed to pursuing a foreclosure because it is cheaper. A lender will spend more money on a foreclosure than a lender loses through a discounted loan.
After a loan is discounted, the borrower can put the property on the market for sale at a significantly reduced sales price. The property owner is in a position to sell the property in a shorter time and to pay off the balance due on the loan.

Mortgage Foreclosure Loan

A mortgage foreclosure loan is a specialty financing through which the property owner obtains a new loan to pay off the loan in or heading to foreclosure.

The interest rate on a mortgage foreclosure loan will be higher than that of a more traditional loan. However, the monthly payments due on the loan likely will be lower than what was experienced with the original mortgage. The life of a mortgage foreclosure loan will also be extended than normally is the case with a more traditional type of mortgage financing.

Mortgage foreclosure loans are not particularly easy to obtain. Generally speaking, this type of non-traditional mortgage lending has been curtailed, a status that is not expected to change significantly any time in the foreseeable future.

References

• American Bar Association, Section of Real Property
• Stop Foreclosure Now: The Complete Guide to Saving Your Home and Your Credit, Lloyd Segal, 2008

Resources

• U.S. Department of Housing and Urban Development, Guide to Avoiding Foreclosure