Local Mortgage Information for Your Area
How to Avoid or Stop Foreclosure
When faced with a potential
foreclosure, the first thing to do is to take action.
Ignoring the problem-particularly with letters and phone calls from the
lender, or abandoning the house-not only makes foreclosure inevitable, but it also reduces the potential to save the
mortgage.
Borrowers have many options when it comes to avoiding foreclosure, including:
- communicating with the lender
- repayment plan
- forbearance
- mortgage modification
- deed in lieu of foreclosure
As a first step in avoiding a foreclosure, experts recommend opening the lines of communication with the mortgage lender. If they know you are willing to resolve the problem, they will be more inclined to help you.
Definitely don't abandon the house, as it may disqualify borrowers for any help the lender or others may be able to provide.
Many mortgage-lending companies have a loss-mitigation department dedicated to helping resolve payment problems before the loan defaults and goes into foreclosure.
For example, a lender may be able to create a repayment plan that divides past-due payments and adds them to current payments, allowing the borrower to continue with their mortgage while also getting caught up.
Another potential is forbearance, which is when the lender allows homeowners to temporarily delay their upcoming mortgage payments until the past-due payments are paid.
Or, for homeowners with long-term financial difficulties, mortgage modification or a deed in lieu of foreclosure may be good options.
Mortgage modification is similar to
refinancing, since the past-due payments are added to the mortgage loan and a new payment plan is created.
As a last resort, homeowners that still cannot afford mortgage payments-even with the help of a repayment plan or mortgage modification-may want to consider selling their home to avoid a foreclosure.
If they cannot sell their house, then a deed in lieu of foreclosure may allow homeowners to voluntarily give their home back to the mortgage lender without a foreclosure.