How To Stop Foreclosure Yourself
Let's get right to it. Why it's possible to stop foreclosure in California,Dallas Texas or anywhere else in the United States.
First of all lenders don't want to foreclose on homes because mortgage companies aren't in the business of owning real estate.
In addition, did you know that:
- It will cost your lender $30,000-$40,000 just to foreclose on your home?
- Chances are, your lender doesn't even own your mortgage anymore
- Most mortgage companies sell your mortgage soon after you refinance or buy your home.
That's just a few of reasons why banks are willing to accept a workout arrangement instead of foreclosing on you home.
Lenders are willing to grant one a one-time forbearance / loan reinstatement under certain circumstances. However, you must have experienced a hardship. Which would include loss of income, job loss etc. (see list of hardships on page 5) they also need to know that the hardship is over and that you can resume making your monthly payments.
So, it is very important that your lender understand that you have a legitimate reason for why you didn't make your monthly payments. That's why they require w2's and checks stubs to verify that you had a loss in income.
If you predict that you will not be able to afford your mortgage payments in the future, there are other options that your lender may be willing to grant you such as deed in lieu and a short sale. Both of these options will prevent foreclosure, but neither will allow you to keep your home.
Having a foreclosure on your credit report subtracts about 150 points from your fico score and you probably won't be able to get another mortgage for at least 2 years. So, if you can avoid foreclosure, then by all means you should do so.
Lastly, your chances of obtaining a workout plan will be greatly increased if you can come up with about 25-30% of the past due amount to offer the lender. This will help you bring your mortgage current faster, and lenders like that. This will also lower the monthly payment of your repayment plan.
What does foreclosure mean?
The legal process by which an owner's right to a property is terminated, usually due to default. Typically involves a forced sale of the property at sheriff sale or auction, with the proceeds being applied to the mortgage debt.
How does it start?
First, you will receive a notice of default. Usually, this will be taped to the front door of your home or delivered by mail. This notice is sent by your mortgage company, and it indicates that (usually if you are 90 days or more behind on your payments) the foreclosure process has begun. Once you have received this notice, you have a short time until the sheriff sale or auction. However, you can save your home within this period by paying all of the late payments, penalties and fees. But, this must be done before the sheriff sale or auction. Otherwise, you'll have to pay the full amount of the mortgage balance to redeem your home.
What is a sheriff sale or auction?
An auction sale of property held by the sheriff pursuant to a writ (court order) of execution (to seize and sell the property) to satisfy (pay) a judgment, after a notice of default. (YOUR HOME WILL BE SOLD TO THE HIGHEST BIDDER.) In Most cases the mortgage company will be that bidder for your home, since they have interest in it already. Your mortgage company will most likely repossess the home. But, you can redeem it by exercising your redemption rights.
What are redemption rights?
The period during which a borrower may reclaim the title and possession of property by paying the debt it secured.
This means that if you can afford to pay the full balance of the mortgage (cash) all at one time, then the foreclosure is over and you can have your home back.
However, if the property is abandoned as determined pursuant to the statute, the redemption period can be accelerated and shortened to 30 days. (Don't abandon your home)
The day after the sheriff sale your home will start to accrue interest charges every day. Example; $15 to hundreds of dollars per day. As you know, this can add up to a lot. So, it is very important to react quickly if you are in foreclosure.
DO NOT WAIT. THIS WILL NOT GO AWAY BY ITSELF!!
What can I do?
If you can't afford to catch up on all of your late payments before the sheriff sale, you have three choices.
1. You have to sell your property and try to cash out some of your existing equity.
2. Seek a foreclosure specialist to negotiate an alternative plan with your lender to get you the extra time necessary to get your finances back on track or a short sale.
3. Do nothing, stay in the property until the lender has you evicted. But, even then your lender can come after you for a deficiency judgment. (The balance of what you sill owe)
4. You do the workout plan and save your home yourself
What is a short sale?
A short sale is used when you are over financed. When you owe more than what your home is worth. If you have tried to sell your home but, your mortgage is more than what other homes in your neighborhood are selling for, you will require a short sale.
What is a deficiency judgment?
When a foreclosure sale does not produce sufficient funds to pay the mortgage debt in full, then you will be personally exposed to wage garnishment, asset attachment, and any other collection remedy specified by state law that enables the lender to make whole the debt.
What about all of the mail that I'm receiving?
Most of the mail that you receive is from investors, who want to make money from your ignorance. DO NOT signs any contracts from investors without having them reviewed by an attorney. Be cautious!
Terms and explanations that you should know:
A Repayment plan: - this is good if you were laid off but are back at work
Your lender allows you to continue paying your mortgage while attaching the past due amount to the end of the loan or in monthly payments in addition to the normal mortgage payments until the loan is current again.
Loan Modification: - this good if you've had a pay cut recently
A Loan Modification will change your existing mortgage note and give you a fresh new start in managing your home. Your account will be brought up to date immediately.
Short Sale: - This works if you owe more than what your home is worth
A short sale occurs when a property is sold and the lender agrees to accept a discounted payoff, meaning the lender will release the lien that is secured to the property upon receipt of less money than is actually owed.
If you have been unable to make your monthly mortgage payments and have also been unsuccessful trying to sell your home at the market value, this form of foreclosure may be what is necessary to get you back on track. This procedure allows you to transfer your property voluntarily to your lender or Mortgage Company and your debt or deficiency is often forgiven. This will not save your home, but it will help you with your chances of getting another mortgage loan in the future and it will help you avoid the lengthy legal process of foreclosure. Although it is a negative strike on your credit rating, it is less harmful than a mortgage foreclosure. (Take this approach if there is no way that you can recover from your hardship.)
Paying off an existing loan with the proceeds from a new loan, usually of the same size, and using the same property as collateral
Pre-foreclosure sale: - If you can sell your home...do so before foreclosure
Simply to sell before the foreclosure.
If all else fails
If for any reason you are not able to keep your home, it's not the end of the world. A lease option home or rent to own home is the best alternative post foreclosure.
As mentioned earlier, it takes about 2 years before another lender will grant you a mortgage again. However, if you can find a home that you like enough to want to purchase within 24 months, see if the seller is willing to do a lease purchase or lease with an option to purchase with you.
A lease option is a wonderful tool to use in order to get your credit back on track while you're buying your new home. Lease options allow you to lease to own a home for a set length of time and for a preset price. In other words, you live in the home that you are buying until you can purchase it.
Also, when it is time to get a mortgage again, as long as you have made all of your monthly payments on time, the new lender will treat your rent to own home as a refinance instead of a new purchase. Refinances are much easier to get than a new purchase mortgage. Lenders do this because you've already lived in the home for 24 months, which means that you now have seasoning. Along with your cancelled rent checks, you should have very little trouble acquiring a mortgage again.
For more specific, step-by-step detailed instructions on how to stop foreclosure along with all of the necessary lender forms, a state-by-state foreclosure redemption time table chart, a hardship letter and a free credit repair ebook as a bonus, visit: http://SaveYourHomeYourself.com/