Common Approaches to Ending the Foreclosure Process

Depending upon your situation, there are multiple approaches you may consider to put an end to the foreclosure process.

Lender Workout
If you had a temporary financial setback that has since been resolved, you may be a candidate for a lender workout. With a lender workout, you will workout a payment plan with your lender to get current with your loan and avoid foreclosure. Ask yourself, and possibly your lender, the following questions:

• Can you make up the defaulted amount over a period of months?
• Can you re-write the note and include the defaulted amount?
• Can you give the lender a deed-in-lieu of foreclosure and preserve your credit?

Your lender will want to know why the loan is in default and why you think you will be able to make the payments in the future. Your lender will probably not be inclined to stop foreclosure proceedings if they have reason to believe they will have to start proceedings again in 6 months.

Refinancing
Basic lending guidelines require most home loans to total no more than 80% of the current market value. If you have more equity than that, you should have no difficulty in obtaining a new mortgage. However, you can probably expect higher interest rates and loan fees.

Loans to Get You Current
If you experienced a temporary financial setback that has since been cured and are going to be able to keep the property, first consider family and friends for a loan to get current. It's much cheaper than hard money loans, but MAKE SURE you will be able to pay them back. You do not want to put them in the position of having to foreclose to get their money back. Hard money loans are typically provided by private investors who will lend money based on equity in the property. Credit and income are not issues of importance and loan approval usually takes a matter of days with funding following shortly. Loan amounts will usually be enough to bring existing loans current, pay the financing costs and put some money in your pocket. Loans will be amortized over 30 years to keep the payments lower and the balance will be due in 2 to 5 years.

Bankruptcy
Bankruptcy should be used only as a last resort, as it is a major step that will have lasting impact on credit reports. Bankruptcy is a federal court process that helps individuals and businesses repay their debts under the protection of the bankruptcy court or wipe those debts out completely. When you file for bankruptcy, an automatic stay goes into effect, prohibiting your creditors from taking action to collect the debt without the approval of the court. If the Notice of Default has just been filed on your home, you have sufficient time to explore the options for new loans or selling the property. If the foreclosure sale is going to be held very shortly, bankruptcy is a very common way to delay the sale. When you file bankruptcy, your financial matters fall under the jurisdiction of the courts which could limit your options. Prior to seeking bankruptcy, you should obtain appropriate legal advice.

The information contained on this site is not intended as legal advice. Consult appropriate professionals for legal advice and tax implications.