Being in a situation that sees you struggling to make mortgage payments is never a good feeling.
Another thing that you need to understand is that the lender who holds your mortgage does not want to take the home away from you. In fact, they prefer to offer you options to take advantage of that will allow you to stay. But to take advantage of these options you need to have a complete understanding of how foreclosure and foreclosure law works. Once you have a complete understanding of it all, your chances of avoiding foreclosure will increase.
Being Aware of the Laws Governing Foreclosure
Laws that govern foreclosure furnish lenders with the ability to repossess a home and resell it once a mortgage has become defaulted. Any money obtained from the home sale then pays the remaining loan balance which allows the home to be owned free and clear. However, if the home’s sale does not generate enough to cover the entire loan amount, the lender may go after the borrower for any remaining amount, on top of being foreclosed. The process of foreclosure is not a rapid process, but it can be expensive. This is why the lender prefers to work with a borrower in order to come up with solutions that work for both parties financially.
In order to grasp the entire concept of foreclosure, the type of mortgage also needs to be considered. When a borrower obtains a mortgage, they are receiving money to purchase a home or they obtain one to utilize the equity that has been accumulated over time. Regardless of the reasons for a mortgage, the process is the same where a borrower receives a loan from a bank and the bank has the borrower sign required mortgage forms stating the bank having interest from a security point of view. So if a borrower ultimately defaults, the home turns into the collateral which the bank can take through a foreclosure process.
We recommend contacting an attorney that specializes in foreclosure law.
Preventing the Process of Foreclosure
Foreclosure is not going to be the same everywhere, but the end result will always be the same, homeless. If you have a strong desire to keep your home and can prevent foreclosure from occurring, then you need to recognize the available courses of action to take. First, the current homeowner is given an opportunity to make a full payment of the balance before the home goes for sale. The full payment will eliminate the mortgage and the deed will be handed over immediately to the owner. Or, the late payments may be allowed to be made in order to bring the balance to a current status.
However, being in a situation such as foreclosure does not always mean that a person is financially capable of getting themselves out of it. This is especially true since having no finances is what got them into foreclosure in the first place. But that still doesn’t mean they have run out of options because they can still use a method known as forbearance. When forbearance is sought, the lender allows payments to be put on hold for an agreed upon time. Although forbearance can help the borrower in certain situations where they may experience job loss, it is unable to decrease or eliminate the fees and penalties that come with late payments.
If forbearance is not a viable option for you, then you can attempt to ask your lender for a modification in order to avoid foreclosure. When modifications are made, the lender allows the terms of the mortgage to be changed so that the borrower will be able to afford to make the payments. Having forbearance is a permanent change that is designed to create lower payments while lengthening the amount of time for repayment. Depending on your situation, you may be able to take advantage of your loan’s principle being lowered. This is made possible through many programs offered from the government. An example of this includes the Home Affordable Modification Program (HAMP) which assists homeowners by creating a subsidized modification based on certain guidelines.
Solutions for Owners Who Wish to Relinquish the Home
There are a few circumstances that may make a homeowner relinquish the home altogether. This normally occurs when the value of the home is a lot less than what the balance being paid is, causing an unwillingness to keep paying. When a borrower is faced with this issue, the only feasible option that they see is to turn the house keys over to the lender and cutting their losses. In order to help lessen any negative impact that this may have, the owner may opt for a deed in lieu of foreclosure. This option is another agreement where the home is signed over to the lender in order for foreclosure to be eliminated.
Why You Should Steer Clear of a Default
It may seem like a good idea to go with a deed in lieu of foreclosure in order to avoid financial responsibility due to unforeseen circumstances, but it does not cut you off completely. In fact, doing a deed in lieu of foreclosure can create the occurrence of deficiency judgments. These judgments could be viewed as a trap and may be imposed upon a borrower if the lender really wants to. When it comes to deficiency judgments, they involve holding the borrower personally liable for any and all balance that remains unpaid regardless of the foreclosure and payment received through a sale. However, a judgement can be easily avoided if you are familiar with the law that surrounds it.
You also need to keep in mind that the lender not only has security interest in homes that they lend to, but most lenders have a requirement for borrowers to make a guarantee in writing that mast be signed. This guarantee allows the lender to have added vestment in the property in case of a foreclosure. It can also be used to go after a borrower on a personal level. When this occurs, a borrower almost always gets the short end of the stick in the court proceedings. However, having a knowledgeable attorney will be able to arrange for an acceptance of a deed in lieu of foreclosure agreement.
Obtain Advice from a Foreclosure Attorney
Feeling like you are drowning in your mortgage payments can be a devastating feeling and one that can have you see your dream home slip away. To receive some comfort, it is best that you get in touch with an attorney who specializes in foreclosures. Having an attorney may allow discrepancies to be found within the mortgage documents or other details which may void the foreclosure from moving forward.
But only you can make that first step by contacting an attorney.