For many, nothing is more frightening than the threat of foreclosure, and possibly losing their home. When you aren’t able to make your mortgage payments, your lender may inform you that they are looking to seek legal action or pursue a foreclosure if the outstanding balance is not paid.
It's important to keep searching for options to save your home if faced with foreclosure. Foreclosure is not the end of things; instead, it’s often the start of a negotiation. Today, let’s break down 10 dos and don’ts that you should keep in mind when navigating the foreclosure process.
No matter what your circumstances are, the first thing you need to do is contact your lender. Mortgage loan lenders like to try and avoid foreclosing on a person's home, when possible. If they are not able to work with the borrower on the terms, they may end up losing money on the loan depending on the loan balance and the market value of the home.
It’s typically in the lender’s best interest to ensure that you remain housed, even if they have to defer mortgage payments or agree to lower monthly payments. In these negotiations, they will eventually get their money and make a profit on their investment.
Because of this fact, homeowners in danger of foreclosure need to speak to their lenders immediately. Be upfront and frank about your financial situation and explain that you need a foreclosure alternative.
Each homeowner has certain mortgage and forbearance rights. Go over your mortgage loan and make sure that your lender isn’t doing anything illegal, such as threatening to evict you or foreclosing without following the proper processes.
Furthermore, if your financial hardship is due to the COVID-19 pandemic, you may have the right to foreclosure if your loan is backed by a federal institution like the FDA or HUD. Your lender is not able to refuse a foreclosure request under these circumstances.
If your home is facing foreclosure, you should consider all the available foreclosure avoidance pathways open to you. Most of these must be offered by your lender, but you can suggest one of them to get the negotiation ball rolling.
Your lender may offer several different options, including:
Your exact situation may vary, but your lender will always be interested in working with you as opposed to forcing foreclosure.
Before and during foreclosure, don’t ignore any mail or messages that come from your lending institution. These messages might have valuable information such as a response to a forbearance request, an extension on your loan, loan modification details, and more.
Even if you’re worried about what your lender might say, it’s still in your best interest to open the mail as soon as you get it so you have the full facts of your situation and can adapt accordingly.
If your lender isn't willing or able to work with you and you're having trouble qualifying for other options you can apply for a co-investment with Balance Homes.
In a nutshell, Balance Homes pays you cash from your home's equity to pay off your mortgage, helping you to stay in your house, avoid foreclosure, and get the resources you need to improve your finances. Balance co-owners can repurchase the home's equity at any time within the 7 year term.
By maintaining your home equity and taking these proactive steps, Balance believes we can help you rebuild your credit and financial health — and create your path back to traditional homeownership. In this way, Balance Homes offers a unique and innovative means for average families to retain their homes even in the face of financial crises.
Because of this, Balance Homes is a better alternative to foreclosure. If you're having trouble qualifying for a refinance, a home equity loan, or HELOC a Balance co-investment could help you get back on track.
You can contact us today for more information or check out our website to see how co-investment may work for your situation.
Foreclosure is a scary thought to many American homeowners, but it doesn't always lead to bankruptcy. If your lender speaks of foreclosure, don't throw up your hands and give up and get ready to pack. You should also not make any drastic financial decisions and assume that you'll sink into bankruptcy and nothing will matter in the long run.
If you can make any mortgage payments whatsoever before or during foreclosure, make them. Even if they don’t bring you current with your mortgage debts, they show your lender that you are trying to stay in their good graces and are giving everything your best effort.
This is an invaluable appearance when your mortgage lender is considering whether to offer you a forbearance agreement, refinance your loan, and more. Lenders will be less likely to work hard to keep homeowners housed if they think those homeowners aren’t doing everything they can to stay current with their mortgages.
No matter how desperate you might feel in your attempt to avoid foreclosure, remember that no legitimate path forward will involve you paying fees to another company. In fact, you should never pay fees for foreclosure prevention under any circumstances.
For example, if you are contacted by a foreclosure prevention company that got your information under suspicious circumstances, they may promise to help you with your foreclosure if you pay them $500. They may also promise to negotiate or bargain with your lender (although this doesn't make sense since your lender only wants to negotiate with you).
Such businesses might be legitimate in the corporate sense. But they often charge hefty fees, sometimes as much as two or three months’ worth of mortgage payments. You should never do business with these individuals or companies.
They’re not exactly scams, but they don’t offer anything you can’t get by yourself or for free. For example, you don’t need someone to negotiate with your lender because you can simply contact them and work out a forbearance agreement or some other foreclosure prevention method.
Similarly, do your best to avoid the lies peddled by foreclosure recovery scams. You might be contacted by firms that claim they can stop your foreclosure ASAP if only you sign a document that gives them the exclusive right to act on your behalf.
Such contracts are often riddled with loopholes or legal catches that you may not notice that they can get you into big trouble with your lender or the government. On top of that, such scams are often used to steal money from homeowners who are in danger of foreclosure.
Bottom line: do not listen to anyone who contacts you offering you a miracle way out of foreclosure for a fee or by signing over your rights. Forbearance, co-investment, short selling, and plenty of other methods are available if you contact your lender right away.
Lastly, take care to mind your budget during these financially fraught months. You should not spend any money unnecessarily, especially since you need to be making mortgage payments ASAP. Take a hard look at all your subscriptions or unnecessary things you spend money on and cut them out if at all possible.
This is doubly important if your foreclosure avoidance plan will involve making extra mortgage payments to your lender. For example, if you enter a forbearance agreement with your lender, you won’t have to pay your mortgage for a little while. But any mortgage payments you defer to eventually come due.
If you have money that you come into suddenly, save it. Don’t spend it on something you don’t need. The most important asset under your name is likely your house, and you should try to keep it at all costs.
At the end of the day, foreclosure can be frightening and even difficult to overcome, but it’s not impossible to defeat. Given the nature of the housing market, your best bet is to contact organizations like Balance Homes, which may be able to help you find an alternative solution to full foreclosure and eviction from your property.
Want to know more about how co-investment works with Balance Homes and how we may be able to help with your housing situation? Contact us today for more information.
Sources:
Foreclosure Tips | HUD.gov / US Department of Housing and Urban Development (HUD)
Learn about forbearance | Consumer Financial Protection Bureau
