If you’re a homeowner who can’t make your mortgage payment foreclosure on your house may seem inevitable. Still, several foreclosure programs are available that may help you to stop the bank from foreclosing on your home. Your options will vary by your situation and the loan servicer with whom you are working.
Foreclosure Programs for Individuals Who Can Afford Their Property
Some foreclosure programs can help if you are bringing in a regular income and are still able to afford your property. These programs help individuals who are having difficulty making their current payments but are not too far behind or are only having temporary challenges. Below are several options for foreclosure avoidance and when they may be appropriate.
- Reinstatement- This is an available option if you know that you are only temporarily going to have difficulty making your mortgage payments.
- Repayment Plan- If you have only missed a few payments, this is a good way to help you catch up.
- Forbearance- This is another option if your struggle to make your mortgage payments is only short-term.
- Loan Modification-This can be helpful if you are facing a long-term income reduction but still will be able to manage to make regular payments.
Reinstatement
This foreclosure program involves setting a date with your loan servicer when the past-due amount needs to be paid-in-full. However, keep in mind, you will be paying late fees and other penalties in addition to the total past-due amount.
Repayment Plan
Repayment plans work by adding a portion of what is past due to your regular payments for a specified amount of time until you catch up. The portion added and the amount of time given will depend on your loan servicer.
Forbearance
You may be eligible for this type of foreclosure avoidance if you are temporarily unemployed, on temporary disability, or are facing other short-term financial hardship. Forbearance works by reducing or stopping your mortgage payments for an agreed-upon period. When the agreed-upon period is over, you will return to making your regular mortgage payments.
Besides making your regular payments, you will also need to pay either a lump sum or make partial monthly payments until you bring the loan current.
Loan Modification
When you make a loan modification, it will permanently change one or more terms of your current mortgage contract so that your mortgage payments are more manageable.
You and your loan servicer will have to agree on the new terms. The changes that are allowed will vary by your servicer, but generally, available modifications will include the following:
- Lowered interest rate
- Prolonging the term of the loan
- Adding payments to the loan balance
- Debt reduction
- Debt forgiveness
Foreclosure Programs for Individuals Who Can’t Afford Their Property
A foreclosure can be very damaging to your credit and can cause you additional problems in the future. If you are no longer able to afford your property or have left it, you can still lessen the damage and avoid foreclosure with one of these two foreclosure programs.
- Short Sale
- Deed-In-Lieu of Foreclosure
Short Sale
If your loan servicer allows it, you may be able to sell your property yourself before it goes into foreclosure. In a short sale, you sell your house, and the loan servicer takes all the profits from the sale and puts it towards what you owe on the mortgage. Your loan servicer will forgive any balance remaining on the mortgage after receiving the money from the sale.
Deed-In-Lieu of Foreclosure
When you opt for a Deed-In-Lieu of Foreclosure program, you voluntarily give your property title back to the loan servicer, and they agree to cancel the rest of your mortgage. While this is not the ideal solution because you will lose the property and whatever equity you have in your property, it can still be less damaging than a foreclosure to your credit.
A Deed-In-Lieu of Foreclosure is only an option if you don’t have any other loans or obligations secured by the property you don’t want foreclosing.
Who to Contact for More Information and What to Have with You
Besides your bank or other loan service provider, you can also contact the U.S. Department of Housing and Urban Development or the Homeownership Preservation Foundation. They can put you in contact with a foreclosure avoidance group near you and provide you with additional information regarding what foreclosure programs that are available to you as well as other resources.
When preparing to speak to your loan service provider or another foreclosure professional, you should gather the following documentation:
- Tax Returns for the past two years
- Paystubs for the past 60 days
- Three months’ worth of bank statements
- Documentation showing hardship
- Third-party authorization form (if the property has a listing with a real estate agent)
- Other relevant documentation