No one wants to be forced into foreclosure after finding a suitable home, but sometimes it’s the best option when times get especially tough. However, there are a number of ways homeowners can prevent foreclosure or at least manage the process more smoothly. Below are answers to the most frequently asked questions regarding the prevention and management of a foreclosure.
Will the bank negotiate with me to lower my interest rate and payment and prevent foreclosure?
Some lenders are more willing to adjust your mortgage than others, so you should always call your bank’s loan mitigation department to try. Typical solutions banks will put forward include accepting partial payments for a set period of time, accepting late payments or simply modifying the terms of your loan.
The federal government has also set up programs to help homeowners prevent foreclosure, such as FHASecure, Hope for Homeowners and the Homeowner Affordability and Stability Plan. The Homeowner Affordiability and Stability Plan is the latest program offered by the federal government and allows you to: (1) Modify your mortgage: people about to default should consider this option first, as it tries to reduce the size of the payments (by up to 31%) by reducing the interest rate on the mortgage for a set period of time (typically 5 years). To qualify, the unpaid principal of your mortgage must be less than $729,750. (2) Refinance your mortgage: people who are in trouble because their house has lost a significant amount of equity in the last few years (even those who are “underwater”) should consider this option. Note, however, that you cannot be underwater by more than 5 percent. Typically you need considerable equity to qualify for a refinance loan, but under this program owners may need little or no equity at all. To qualify, your loan must be owned by Freddie Mac or Fannie Mae, your mortgage must be less than $417,000 (unless you live in certain high priced areas such as New York, but if such is the case, you should consider modification over refinance) and you cannot be more than 30 days late on your monthly payments for the prior year.
Can I just sell my house for less than what I owe on it?
Selling your house for less than you owe is referred to as a “short sale”, and in many states, you must get the permission of your lender before you do this. If you don’t, the lender may sue you after the sale for the difference. If you live in a state that does allow this, then you can sell your house for less than the mortgage amount and the lender can’t do anything about it. Finally, short sales typically aren’t possible if you have more than one mortgage, unless the same lender owns the additional mortgages.
Can I file for bankruptcy to prevent foreclosure?
Usually Yes, you can. But not always. Sometimes, bankruptcy cannot prevent foreclosure, but it can certainly delay it. You really need to speak with a bankruptcy lawyer to know if it will work in your specific circumstances. Once you file, the court can enter a “stay” which would cease all collection actions, sales and foreclosures. The lender must then file for a motion to “lift the stay” and proceed with the foreclosure. This may be an attractive option if it also makes sense for other reasons since you can essentially live in your home for free for awhile and use the money you saved to secure a new place to live or help with your outstanding mortgage payments.
What will happen to my tenants if my property is foreclosed on?
Leases are generally wiped out upon foreclosure, unless the lease preceded the mortgage (which is rare). That does not mean, however, that your tenants will just up and leave immediately. You must give them proper notice of eviction (up to 90 days in some places), and there are a variety of other potential laws that may prevent your tenants from being evicted (such as Section 8 housing laws).
Can I give my lender the deed to my house instead of foreclosing?
Sometimes you can, but in most states the lender can still sue you for the difference between what it sells the house for versus what you owe. Thus, this is not an attractive option unless you can get your lender to agree, in writing, to not sue you for the difference. Similar to short sales, this option typically isn’t available if there is more than one mortgage on the property unless the additional mortgages are held by the same lender.
Foreclosure Lawyer Free Consultation
If you are in the foreclosure or pre-foreclosure process, please call Ascent Law for your free consultation (801) 676-5506. We want to help you.
8833 S. Redwood Road, Suite C
West Jordan, Utah
84088 United States
Telephone: (801) 676-5506