In an ideal world, everyone would be financially stable with job security and perfect health, but in reality, we all face problems with our health and jobs, which can cause you to potentially lose your house.
Effects on your job and health can ultimately leave a homeowner unable to pay mortgages, property taxes, as well as day-to-day bills.
Being unable to pay these bills, is when a foreclosure can become active and if the house is not sold at an auction, it can become the property of your mortgage company.
All homeowners need to understand How to Stop A Foreclosure at the Last minute, and this article aims to provide a guide on how to do so.
What is a Foreclosure?
Many individuals take out monthly payment loans from a lending company, when purchasing a house, as a lot of new homeowners do not have the entire amount to complete upfront payment.
But when choosing these payment methods, it is important to know what implications can arise if payments are missed.
This is when foreclosures become active. Simply put, a foreclosure is when a homeowner can not afford to pay their monthly mortgage fees, which can lead to their house being sold at auctions or becoming the legal property of the mortgage company.
Key Insight: Banks, financial institutions, and credit unions are some lending companies you can use to buy your home. When you attend your closing day for your home, you will sign an agreement stating you will pay the loan back over a set period.
How to Stop a Foreclosure at the Last Minute: When is it too late?
Knowing when it is too late to stop a foreclosure is vital, but the rules and regulations may differ depending on which state or city you are based in.
However, there is one definitive rule that applies no matter which state you are in. Everyone will have up until the day of the auction to prevent the foreclosure process.
Once the home up for foreclosure has been auctioned, it's usually too late to prevent, but there are several avenues to explore if you are wondering How to Stop a Foreclosure at the Last Minute.
The Foreclosure Process
Depending on who your mortgage lender is the rules can differ between how many months you can miss payments without facing repercussions, but it can be around two to three months late
Key Fact: The Consumer Financial Protection Bureau states that 120 days late is the most common time frame for the foreclosure process to become effective.
Once a homeowner exceeds the threshold for late payments, a public notice called Notice of Default will be issued. A notice of default will state that you have failed to pay your mortgage and will seek for a payment to be made.
If the NOD is not effective a does not spark a payment, a direct warning will be given to the homeowner alerting them that the lenders are considering adopting the foreclosure procedure.
In some cases, a grace period is available for discussion. This is where a homeowner can arrange a repayment plan to cover their missed payments, and this stage is called pre-foreclosure. If your missed payments are cleared the foreclosure process will be terminated.
However, if the lender and borrower cannot negotiate a repayment plan the house will be put up for auction, or the house will become real-estate owned or bank-owned.
But as mentioned throughout this article stopping foreclosure at the last minute is possible.
Options to Stop Foreclosure:
There are numerous ways a homeowner can prevent or stop the foreclosure of their home, and it is important to remember the sooner you tackle the situation the better as you will be working to a tight schedule.
Hot Tip: If you leave it a week before the auction, you will be giving yourself less time to deal with the problem. Dealing with the issue as soon as you can is the fine line between losing your property and keeping your property.
Contact Your Lender:
As soon as you discover that you are at risk of facing foreclosure you should contact your mortgage lender to try and resolve the issue.
Although many people think their lenders will not want to speak with them this is not true at all.
Bear in Mind: It costs a lot of money for lenders to process a foreclosure on a home, so they would prefer to work one-to-one with you to come to an agreement.
A common option is to create a payment plan allowing you to pay your debts in installments; this helps to eliminate any formal processes.
Speak To Your Housing Agency:
If you are wondering how to stop a foreclosure at the last minute and want to know what options, you have you can always contact your state's housing agency.
A counselor will be able to guide you through the options available and may be able to protect you from foreclosure.
Alter Your Loan:
There are different ways that you can modify your loan to come up with a plan that works for both the lender and borrower.
One way you can modify your loan if your lender approves is to lower the monthly payments to make it more manageable. If the modifications to your new monthly payments are within your budget, you can remain on your property while continuing to meet your agreements.
Remember: Although your loan modification is being reviewed, it does not mean that your lenders
It is worth noting that lenders do not need to pause the foreclosure process while they are reviewing your loan modification request.
Another way to modify your loan is to add your missed loan payments to the total balance for you to pay at the end of your mortgage payments.
Typically, there are some criteria that you will have to fulfill before your loan can be remodified:
You will have to apply for a loan modification to prove that you can make your payments
For the first three months of your modification, you will be on probation. You will be expected to make on-time, consistent payments.
Once your probation period is over, your loan will be rewritten implement changes to your monthly payment figures, remaining balance, and interest rates.
Loan modifications are common amongst lending companies, and it is one of the easiest ways to get you out of the foreclosure process.
Note: There may be some additional fees that come with the loan modification, and these will be added to your balance.
Sell Your House
Whilst it may seem crazy to advise selling your home to avoid foreclosure, it's one of the quickest ways to earn some cash to cover your debts and should be considered when wondering how to stop a foreclosure at the last minute.
Essentially, your mortgage lender wants to be paid back the money you owe them, so if you can sell your house in its current condition, even if it needs some home improvements, and raise the money to cover your late payments then this may be a suitable option for you.
Do Not Forget: If you are subject to foreclosure and are unable to avoid it, it can have negative impacts on your credit rating- making it harder for you to receive a loan in the future.
If possible, you will want to find a buyer who can pay the cash upfront without having to seek guidance from a mortgage financing lender. You should also opt to sell your home as-is, so you do not need to worry about any repairs.
Deed in Lieu
Similarly, to bankruptcy, filing for a deed in lieu will still negatively impact your credit rating.
A deed in lieu differs from the bankruptcy process and transfers ownership to your lender through a short sale process.
Typically, lenders will not opt for this option and are reluctant to make any agreements. Lenders are aware that some buyers try to sue and file a lawsuit after the deed in lieu has been processed and finalized. A buyer will claim they were not aware of the terms and conditions.
Just like bankruptcy, this option is not the best and is good as a last-minute attempt to stop foreclosure, after you have exhausted all other options.
The option of filing for bankruptcy should be your final resort. You must remember that the process of bankruptcy will not completely stop foreclosure, though it will slow it down it is considered to just buy you a little bit of time.
The foreclosure process will only be paused while your case is being reviewed. After the review is completed and summarized, foreclosure may continue, and you will be expected to cover any missed payments to continue your mortgage.
There are two different strands of bankruptcy, Chapter 7, and Chapter 13.
If you are filing for bankruptcy to buy some time, and do not plan to keep the house this is the best option. Chapter 7 bankruptcy will allow you to stay in your house without making any payments. During this time, ideally, you will have saved some money to either pay your dues or for a fresh start in a new home.
On the other hand, a chapter 13 bankruptcy is ideal if you plan to keep your home. You will discuss with your lender and come up with a structured repayment plan where you will clear your outstanding fees.
Key Takeaways: Filing for bankruptcy does not stop foreclosure, instead it pauses the process to give you time to figure out how you will pay your overdue fees. Remember unlike selling your home, filing for bankruptcy will negatively impact your credit rating.
Being subjected to a foreclosure is a tough and draining process, and while it's unfortunate many people go through this.
However, remember when you are considering how to stop a foreclosure at the last minute, there are many options to help you out.
If you are unsure of your options, or which is most suitable for you, you can always contact your local state housing agency and speak to a counselor for some extra support and guidance.
If foreclosure is hanging over you, you can try to modify your loan, or even sell your house as well as some other options to ease the pressure.
Most importantly, you should take the time to understand how the foreclosure process works and determine how long you have to prevent foreclosure and what date your auction falls on.
It costs a lot of money for lenders to process a foreclosure on a home, so they would prefer to work one-to-one with you to come to an agreement, so do not leave it until the last minute, reach out and speak to your lender as soon as you notice you are struggling to make a payment.
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