Foreclosure is the process by which a lender attempts to recover the money owed on a defaulted loan by taking ownership of and selling the mortgaged property.
While the process varies from state to state, the good news is foreclosure doesn’t usually happen overnight and often the lender works closely with the borrower to prevent it. Here’s what to do if faced with foreclosure.
Read the Lender’s Communications
The first clue you’ll get that your home is facing foreclosure will probably be a notice from your mortgage company. Whether a letter or an email, read this communication over thoroughly. It might contain information on how to prevent the foreclosure. It is often easier to prevent the foreclosure earlier in the process rather than later.
Educate Yourself on State Law
The foreclosure process varies from state to state and is governed by the law where the mortgaged asset exists. Found out whether your state allows for judicial or non-judicial foreclosures, it will inform how your foreclosure process is handled.
Communicate with the Lender
If faced with foreclosure, speak with your lender immediately. Foreclosures can be lengthy and expensive process, so lenders generally work hard to keep the borrower in their home instead.
Honest and courteous communication with your lender will get you the best results. Ask your lender if any of the following relief options are available to you:
- Repayment Plan: Working with the lender, you might be able to create a repayment plan that works with your budget. You’ll have to keep making payments, which is the best way to prevent foreclosure.
- Loan Modification: The lender will change the terms of your existing loan to make your payments more manageable.
- Refinancing: The lender will offer you a new loan with new interest rates and terms. This can help lower your monthly payment and ensure you make up for the missed/late payments that created the foreclosure process.
- Forbearance: The lender will suspend your mortgage payments for a certain period of time in an effort to let you catch up. Eventually, these payments will be tacked onto the end of your loan and will need to be paid.
Most foreclosures can be stopped if the borrower resumes making payments on the loan and brings it up to date. But if the borrower can’t pay off the balance, bankruptcy might become a viable option.
When you file for bankruptcy, the court automatically puts a “stay” on your creditors. This means that the creditor must cease their collection activities immediately. This automatic stay will postpone any foreclosure activity on your home. This DOES NOT mean the foreclosure will be permanently stopped.
Contact a Lawyer
If your home is in danger of foreclosure, give Kamper & Estrada, PLLC a call and learn what your options are. Our experienced bankruptcy lawyer Phoenix, AZ trust is available for a free one-hour consultation.