Facing foreclosure? There are resources available to help.
Falling behind on mortgage payments can be stressful, but there are many resources available to help you explore your options. No one plans to face foreclosure. But life can throw curveballs that lead to missed mortgage payments.
What is foreclosure?
Foreclosure is the legal process by which a lender (typically a mortgage company or a bank) takes ownership of collateralized property when the homeowner fails to make the mortgage payments required under their loan agreement. If a homeowner falls behind on the required mortgage payments, the lender can recover the outstanding debt by foreclosing on and then selling the property. Foreclosure procedures vary by state, so it is important to learn what steps are required to foreclose under your state’s law.
Foreclosure may begin after just 3 months of missed payments, but the timing is dependent on the type of loan and the property location. Generally, the foreclosure process begins when a lender informs the borrower that he or she is behind on payments. That failure to make payments will lead to the initiation of foreclosure proceedings. The lender then files a notice of default with the appropriate authority if the borrower’s account is not brought current.
What resources are available to homeowners facing foreclosure?
Foreclosure can feel intimidating and overwhelming, but there are several options available to explore.
See if you qualify for a government assistance program.
The U.S. Department of Housing and Urban Development (HUD) provides several programs for homeowners struggling with their monthly mortgage payments, including those at risk of foreclosure. You can call 888-995-HOPE to talk to a counselor about your specific situation. Every state also has a Department of Housing or an equivalent agency that may have information on state or local assistance programs. It’s important to seek legal and financial advice to explore your options—you don’t have to go through it alone.
Talk to your lender about forbearance.
Give your lender a call to see if you can come up with a loan modification or a repayment plan that works for both of you. They may even offer you some relief through forbearance. This option may allow you to pause your mortgage payments temporarily or lower them.
Talk to your lender about deed-in-lieu of foreclosure.
Another option you may discuss with your lender could be to give the deed back to them in return for having the remaining debt canceled, called a deed-in-lieu of foreclosure. A benefit of this is avoiding a foreclosure reported on your credit. However, you must find a new place to live when you return the home’s deed to the lender.
Talk to your lender about selling the house as a short sale.
A short sale is when a homeowner sells their house for less than what they currently owe on the property (some people refer to this as being “underwater” or “upside down” on their loan). Some lenders may agree to a short sale to help mitigate their financial loss.
If the lender signs off on the execution of a short sale, the process includes all the steps of a typical home sale, but you will need to negotiate with the lender so that they will accept the sale price as a complete settlement of the mortgage debt.
What about selling a house that’s about to be in foreclosure?
A traditional house sale can take weeks or months between listing, showings, waiting for offers, negotiations, and closing. An “as is” sale to a cash buyer tends to offer the benefit of speed in exchange for a purchase price that’s discounted from the market rate.
If you’re considering an all-cash buyer, you should do plenty of research.
Here are some questions to ask a cash home buyer.
