Preventing Foreclosure: Stopping A Bad Situation Before It Gets Worse
Discovering that your home is about to be foreclosed on can be extremely unsettling. A person might understandably begin to think that there is nothing that they can do towards preventing foreclosure.
Preventing foreclosure is, however, manageable by following just a few foreclosure stopping methods. There are a few very important steps that someone in a difficult financial predicament needs to undertake in order to save their home from an unwanted foreclosure.
The first foreclosure stopping method to consider is to seek out an investor who is able to buy your home for more than you currently owe on it. This would relieve you of the burden of the loan without further damaging your credit. Depending on how much you owe, this could be unrealistic to do because the large number of distressed properties means that investors are enjoying a buyer's market.
That is where the 'Short Sale' comes in as a feasible foreclosure stopping strategy. A short sale is where the bank reduces the amount of the loan payoff down to the price the investor is willing to pay and you walk away from the home. When the homeowner is not accepted for loss mitigation and is sure to lose their home, a short sale is a good method of preventing foreclosure. You'll still have to move, but at least your debt will be cleared. Their credit score is reduced by about 100 points, as opposed to an average drop of 250 points in the case of a foreclosure and subsequent sheriff's sale. There is also the threat of a deficiency judgement whereby the homeowner would have to pay the difference between amount owed the lender and the auction sale price.
If you are unable to effect a sale to an investor, something similar can be done between just you and the bank. In this case, a Deed in Lieu of Foreclosure is executed and the bank will take over your home in exchange for you moving out of the home and leaving it in good condition.
Short sales and Deeds in Lieu of Foreclosure will both have a negative impact on your credit. Generally, this will last for approximately two years instead of five or more years for a foreclosure.
Another foreclosure stopping method is to negotiate either a forebearance agreement or a loan modification agreement with your banker. You might be able to work something out with the lender to remain in your home though. The banks currently have a lot at stake in preventing foreclosure. Hundreds of thousands of bank owned homes are sitting vacant. They represent liabilities, not assets, to the lenders.
Also, both federal and state government agencies are providing the banks incentives, and pressuring them to modify loans. If you are struggling to make your house payment each month, give your lender a call and learn what can be worked out. You may be surprised to find that lenders are more receptive now than they once were.
As a homeowner interested in preventing foreclosure, be assured that you are not alone. 1 out of every 100 homeowners are experiencing trouble with their mortgage payments. Millions of people have already lost their homes. And, while some of them have been fortunate enough to have found suitable rental homes or shared accomodations with friends, many have become homeless. So clearly, preventing foreclosure is not something to be taken lightly.
The high rate of foreclosures is also an important issue for our entire country. Americans with a sense of social justice are interested in seeing that their fellow citizens are adequately housed. Beyond that, the economics of the situation demand the these problems are addressed before they become even more widespread. To the relief of many troubled homeowners, Government is becoming more proactive with their efforts in preventing foreclosure.
If your home is at risk, it is important for you to educate yourself on these foreclosure stopping strategies.
