How to Avoid Foreclosure

How to Avoid Foreclosure

All families know when they’ve become overwhelmed, debt-strapped and at the brink of no return. A pending foreclosure is a sad reality for many but one phone call and a little pre-planning can help you avoid foreclosure.

For some reason the majority of homeowners facing a pending foreclosure will bury their heads and wish it away instead of becoming steadfast in saving their pride and joy. You can avoid a foreclosure, even for those who have missed several payments. The first thing any homeowner should do is communicate their hardships to their lender to try and work out a new payment plan. The government has begun offering incentives to modify current loans for any home purchased before January 2009. Speak to your lender about lowering your interest rate and restructuring your monthly payments. They may be able to add your missed payments to the end of your loan in place of you trying to catch up. Of course, I’m simplifying this process; the lender will require you to show proof of your hardship, proof of your income and a plan of action for repaying your mortgage loan.

Unfortunately, the media would have you believe avoiding foreclosure is as easy as one phone call and everything is back to normal. It’s just not that simple but a committed family who doesn’t want to lose their home can work to modify their current loan and avoid foreclosure.

For those worrying about the foreclosure process and need some time to formulate a plan, don’t worry because the foreclosure process is not an instant practice. It’s a series of several steps. And in each step, the homeowner can stop the pending foreclosure.

How Much Time do you have to work out a Foreclosure?

How exactly does foreclosure happen, and how much time do you have to save your home? Here’s a simplified timeline of the stages, and what you should do to avert the eventual foreclosure:

Stage 1: You missed a payment. Expect to get a call or a letter from your creditor reminding you to remit your payment. This early, you can ask help from a counselor.

Stage 2: You missed two payments. Your creditor will be more persistent and would ask to discuss with you the reasons for your failure to pay. Even if you don’t have a better reason than financial constraints, it is still important that you take their calls. Remember that even creditors would prefer a settlement to litigation, so there should be no reason to not talk to them. They will want to hear your explanation and the ways by which you are trying to address you difficulties. At this point, you should also attempt to make at least one payment so your arrears don’t go up to three months.

Stage 3: You missed three payments. Your creditor will likely send you a demand letter asking you to pay your arrears, as stated in the letter, within 30 days, otherwise they will initiate foreclosure proceedings. By this time, they will most probably refuse payment of anything less than the full amount of your delinquency. Call a counselor for tips on how to work something out with your creditor.

Stage 4: You missed four payments. Your period for paying is almost over. A housing counselor can advise you on how to keep your account from being transferred to the creditor’s legal counsel so you don’t incur attorney’s fees.

Stage 5: Sheriff or Public Trustee schedules a sale. If you have not been in contact with your creditor throughout all the stages, this is what happens: the actual day for the foreclosure will be set, and you will get a notice by mail, by a poster tacked onto your door, or by an advertisement in a newspaper of general circulation. You still have the time between your receipt of the notice and the actual date to contact your creditor and try to come out with arrangements.

Stage 6: A Post-foreclosure sale remedy. The inevitable has finally happened but all is not lost. You will still have a period to redeem your home. Take note of this period, as this is your last chance to keep from losing your home.

In addition to your lender, take time to speak with a Realtor about what other options you may have.