(Financial services coach) Ways Of Stopping Foreclosure On Your Home
No commentsBy Nicholas Hunt
When you foresee that you will not be able to make mortgage payments, the best thing to do is to contact the lender immediately. If you wait until you get the default notice, your options to stop foreclosure will be quite limited. Do not ignore these letters; it only makes matters worse.
Methods the lender may use to stop foreclosure of your home are:
Partial Claim - If you are eligible, your lender may decide to offer you a government loan for the outstanding payments.
Refinancing - Your principal is increased as the outstanding balance is added to it. Must have equity.
Note Modification - The interest rate is frozen, or changed to something more manageable. This is primarily used for adjustable rate loans.
Repayment Plan - This method typically increases the term length of your loan. Your monthly mortgage payment increases to spread out the overdue balance.
Forgiveness - Although rarely granted or proposed, lenders do have the option of negating a missed payment or two upon agreement that you will make future payments on time.
Forbearance - The lender can decide to allow you a bit of time to make repayment arrangements. Legal action is not taken during this period.
A notice of default letter issued by your lender, states that you are now defaulting on the home loan. It also states that they must receive payment, or they will foreclose.
If you have already received a notice of default, you generally have 3 options:
1. Redeemed Pre-Foreclosure - This involves short selling your home and is useful if the amount of outstanding payments are more than what your home is actually worth. However, this option does adversely affect your credit. The IRS may also count it as taxable income.
2. Sell - Meet with a few real estate agents to get an idea of how much your home is actually worth. Go with a full-service broker for the best outcome.
3. Deeds In Lieu of Foreclosure - With this option, you will sign the home over to the lender, and they will absolve you of the outstanding loan debt by canceling the loan entirely. The lender then agrees not to foreclose. Depending upon your situation, you can negotiate occupancy until you are able to move. This should be your last resort as it can greatly affect your credit rating, just about as bad as the foreclosure itself. Also, the IRS may count the absolved debt as income. Lenders agree to do this because it saves them time, and money. But more essentially it quickly gives them possession of the property.
Of course, laws may vary by state so it is best to discuss your particular situation with an attorney who has expertise in the area of real estate.
Nicholas writes for Debt Nation, who have advice for people suffering debt problems and those who are fighting repossession.
Fighting Your Way Out Of Bad Credit
By Martin Sumner
Through their own mismanagement or through misfortune, many persons find that they have become trapped in bad credit. This may occur because they have recently gone through a divorce, or because their property has been destroyed in an accident, or because they have permitted their property to be repossessed or foreclosed upon. In any event, as credit is essential for everything from day-to-day purchases to buying houses and cars, it is important for a person with bad credit to quickly rebuild their credit rating so that they may begin borrowing responsibly.
The first step in rebuilding credit is to pay off outstanding debts. There are two ways to do this. One is to make minimum payments on all debts except for one, which is generally the one with the highest rate of interest. A debtor then makes the maximum amount of payment on that debt whenever possible until it is paid off, and then repeats the process on the next lowest rate of interest. Another way is to aggressively pay down all outstanding debts as much as one’s budget allows, or even taking out a consolidation loan to pay off all other outstanding debts and then paying down the consolidation loan. In any event, paying off outstanding loans is the most important way to improve one’s credit, because it not only improves one’s credit by reducing outstanding debt but it prevents sudden drops in credit should one or more of the debts default.
Once all outstanding debts have been paid off, the next step in improving credit is to borrow money and then pay it off promptly, so as to prove to lenders that one is a responsible borrower. An easy way to do this is by making small purchases with a credit card and then paying them off immediately or at the end of the month. It is also often possible to take out small loans from some banks or other lending institutions and then pay them back over time. In any event, it is essential to prove that one is responsible with credit and can be trusted to pay back what is owed.
It may also be a good idea to discuss debts with a credit counselor or other person who is specialized in dealing with debt. It may also be a good idea to check one’s credit rating to ensure that there are no debts which have expired or been paid off yet are still listed on the credit rating. In any event, fighting one’s way out of bad credit is a long and intensive process, but an essential one.
Martin writes for ADM Online who offer bad credit loans to homeowners or tenants, for any purpose including debt consolidation.
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What To Do If You Get Behind On Mortgage Payments
By Nicholas Hunt
In these difficult economic times, even the most persevering of homeowners may find it difficult to keep up with their mortgage payments. With a faltering job market, increasing unemployment, and tightening restrictions on credit, mortgages are frequently falling into arrears.
The growing number of home foreclosures has been in the forefront of recent news, and many people are facing the frightening possibility of losing their homes.
For those who find that they cannot meet their monthly expenses and are falling behind on their mortgage payments, it is vitally necessary to take action before the lender exercises the right to foreclose on the property.
What to do in this case depends on the specific situation, but the most important step, one which applies to all circumstances, is to communicate with the lender. A simple phone call will let the mortgage holder know that you are willing to work together to resolve the past due balance; ignoring letters and phone calls gives the impression that you have no intention of rectifying the situation. While it can be intimidating to initiate a conversation with the bank or other lender who holds your mortgage, most lenders are happy to try to find an alternative to foreclosure.
Particularly in cases where there is little equity in a property, it is important to remember that the lender prefers not to take possession of the home. Foreclosure is a costly process, and the lender is unlikely to cover the expense with the sale of the property. Therefore, banks and mortgage companies are very likely to try and work with you to cure the delinquency on the mortgage.
Many lenders offer some type of forbearance agreement. One type of forbearance allows borrowers to make slightly higher monthly payments until the past due amount is recovered. Another alternative is to work out an agreement where payments are reduced or eliminated for a certain period of time, to be recouped at a later date (with interest).
If your situation does not allow for this possibility, it may become necessary to sell the property. While this is not ideal in the current real estate market, it is preferable to losing your home to foreclosure.
Again, it is not possible to over-emphasize the importance of contacting the lender who holds your mortgage. If you remain silent and do nothing to help yourself in this situation, the bank or mortgage company will eventually have no choice but to initiate foreclosure.
Nicholas writes on personal debt problems and you can read more on missed mortgage payments at his site.
Thursday, October 23rd, 2008 at 11:00 pm and is filed under finance. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.
