Saving Your Home or Property From Foreclosure
Foreclosure is the legal process that your mortgage lender uses to take your home adshome or property when you fall behind on your mortgage payments. If you are faced with foreclosure, you can work to save your home – or at least limit the financial damage caused by foreclosure – if you understand your options and take the appropriate steps.
Keeping Your Home or Property
Many homeowners believe that all lenders are eager to foreclose and take possession of their property. The predatory or abusive lenders may intentionally lend money with the goal of pursuing foreclosure and repossessing the home or property. Legitimate mortgage lenders prefer to receive your loan payments, and will foreclose only as a last resort because it is a costly and time-consuming process. Lenders are required to explore options to keep borrowers in their homes.
This means your lender may offer special “loss mitigation” programs to help committed borrowers avoid foreclosure.
Saving Your Home or Property
Foreclosure – the repossession of your home or property by your lender – means you will lose the property agentproperty and any equity you had in it. Your credit record will be damaged and you may incur a tax liability if the lender fore goes (forgives) any part of your debt. Foreclosure becomes a possibility when you get significantly behind on your monthly mortgage payments.
You could easily find yourself in a position where you cannot make one or more full mortgage payments for a variety of reasons, including:
* Unplanned expenses or a loss of income: An emergency car or home repair or unexpected medical bills can leave you short of funds to pay your other bills.
* A long-term or permanent loss of income due to a layoff, a reduction in overtime hours, a divorce, or an injury or illness that keeps you away from work could affect your ability to make your full mortgage payment not just this month, but for many months.
* A home or property loan that requires a large increase in monthly payments: More than ever, borrowers are in loans that are structured so that at some point (often between one and five years after you make the first payment) the required monthly mortgage payment goes up significantly.
* Depending on the loan terms and prevailing interest rates at the time the rate adjusts or “resets,” your monthly payment can increase by many hundreds of dollars.
* Predatory loan terms: A predatory loan includes unfair or deceptive terms, high rates and costly fees, payment requirements that the lender knows will be difficult for you to meet, or features that get you deeper into debt and strip your equity. Since these loans are often unaffordable from the outset, the risk of foreclosure is very great.
* By some estimates, one in five home owners are at risk of losing their homes or properties due to these types of loans. Despite your best efforts to plan for emergencies, prepare for higher payments and avoid abusive lenders, you may still find yourself in default (missing one or more payments). If that happens, you may still save your home or property from foreclosure by understanding your options and taking the appropriate steps.
Lender solutions to foreclosure
Lenders have tools to get borrowers back on track.
Though lender solutions vary, possible foreclosure prevention tools include:
Repayment plan.
Under this arrangement, you add an additional amount of money to your regular monthly payment until you make up the past-due amount you owe.
Reinstatement.
Occurs when you pay the lender the entire past-due amount you owe, plus any late fees or penalties, by an agreed upon date.
Loan modification.
Involves permanently changing one or more of the terms of the mortgage to make payments more manageable for you. Modifications include lowering the interest rate, extending the term of the loan, or adding missed payments to the loan balance.
Forbearance.
A formal agreement with the lender under which your mortgage payments are reduced or suspended for an agreed upon period. At the end of that period, you resume regular payments, and bring the loan current through a lump sum payment or additional partial payments over a number of months (unless the loan has also been modified to make this unnecessary).
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