How to Stop Foreclosure

Foreclosure is scary, invasive, and VERY final. Once a property is sold in foreclosure, it’s unlikely the borrower can retrieve ownership. It’s not unheard of, but it would happen only in certain very specific circumstances. The best way for a borrower to achieve the most favorable outcome is to TAKE ACTION BEFORE foreclosure happens.

As with all situations of this nature, it is recommended that the borrower seek professional assistance during this critical time.

Useful Information

1. COMMUNICATION WITH YOUR LENDER is crucial to making a satisfactory deal. Anyone who tells you to cease contact with your lender is not acting in YOUR best interest.

2. LENDERS MUST ADHERE TO A SPECIFIC PROCEDURE IN FORECLOSURE MATTERS. Failing to properly follow all lawful procedures could constitute an illegal foreclosure. Borrowers can get relief from lenders who do not follow the process.

3. LOAN MODIFICATION, AS ONE WAY OF ENDING THE FORECLOSURE PROCESS, IS BETTER FOR THE HOMEOWNER THAN FORBEARANCE. Modification renegotiates the loan, the amount, interest rate and term. Forbearance modifies some of the terms, but requires that the delinquent balance be paid in addition to the regular note. The end result is a higher payment, which might severely restrict the borrower’s realistic chances of getting back to current status. If it was hard to make the payment, how can it be a benefit to make a higher payment?

4. BANKRUPTCY CAN STOP FORECLOSURE, BUT ONLY TEMPORARILY. Lenders will watch the bankruptcy procedure carefully, and petition the court at the proper time to remove the property from the bankruptcy. This is a valuable tool for a borrower to buy time to find a solution to the issue. The downside is that the court will become involved, and will dictate terms of payment if the bankruptcy actually continues. This applies not only to the property, but to other financial obligations the borrower has.

5. SELLING IS ALWAYS AN OPTION AND OFTEN THE BEST SOLUTION. Borrowers can sell their property anytime before foreclosure, up to and including the day prior to the sale. Lenders must fulfill payoffs in reasonable times, and must accept full payoffs if they are offered in time. Cash buyers (like us, for instance) are nimble, and can move fast to beat the foreclosure sale. For retail sales, time can be an issue. Lenders have allowed property owners a reasonable time to sell prior to foreclosing. This transaction takes cooperation between borrower and lender, more likely if communication with the lender has been maintained throughout the process. Condition of the property is a key component of whether a house will sell for retail value to an owner-occupant, along with the willingness of the lender to work with the owner for the extra time required.

6. SELLING FOR LESS THAN THE AMOUNT OWED ON THE LOAN IS POSSIBLE. This is called a “short sale” and requires complete cooperation with the lender. Lender usually selects the sale price they will accept on the property. Meanwhile, payments, fees and penalties continue to accrue during the sale period. The property must be listed and marketed for sale by a Realtor.

7. VACATING THE PROPERTY IS ALMOST ALWAYS A BAD IDEA. Lenders that find properties vacant may, by loan contract, secure the property with their own devices. That means the borrower loses access to the property, and virtually ensures that the property will be sent to the foreclosure sale at the earliest possible date.

8. IN SOME CASES, OWNERS CAN SIGN THEIR PROPERTY OVER TO THE LENDER. This is called “deed in lieu of foreclosure.” This can only occur when the only encumbrance on the property is the lender’s lien. Generally, borrowers may receive a token amount from the lender (sometimes called “cash for keys”) to assist with moving costs. These are negotiated benefits for the borrower. While this transaction benefits the lender, it is viewed by the credit community the same as a foreclosure, meaning the damage to the borrower’s credit is more lasting.

9. ALLOWING A BUYER TO TAKE OVER PAYMENTS ON A DELINQUENT LOAN CAN BE BOTH GOOD AND BAD. On one hand, selling the property before foreclosure can shave years off the damage to a borrower’s credit. But, because the loan will not be taken out of the borrower’s name until the new owner sells, borrower is still responsible for repayment. This in itself can be a benefit and a curse. We have performed these transactions in the past, and have found that while we are making the payments on the property, the borrower’s credit continued to improve. When the loan is paid off at our sale, borrowers have found significant improvements in a short period of time. CAUTION: Borrowers should be VERY careful to have complete trust in the party with whom they perform this type of transaction. ONLY experienced professionals with good track records should be considered.

10. IF THE PROPERTY GOES TO THE FORECLOSURE SALE, ALL ISN’T NECESSARILY BAD NEWS. True, the borrower will lose title to a purchaser or the lender at the sale. They will get a visit or note from someone to arrange for them to vacate. But if the property sells for more than the lender is owed, the borrower receives the difference between the sale price and the amount owed on all obligations. The borrower could conceivably walk away with some money. However, if the property does not sell to a third party purchaser at the sale and the lender gains title, borrower will not receive any excess funds.

11. SUMMARY – TAKING ACTION IS ALMOST ALWAYS A BORROWER’S BEST APPROACH TO FORECLOSURE. Proactive borrowers maintain more control of the process than those who just hide from their lender and wait for the inevitable knock on the door. And with so many options available, there is almost certainly a much better solution available for those who seek. Those who act have a much shorter wait until normalcy returns in their lives. Credit heals faster; life has a way of moving on and, as it has been said, “this too shall pass.” Help it pass faster by doing something for yourself!

12. WE CAN HELP. We have helped thousands of property owners with their unique situations over the years. We know the processes and the best techniques. We are trustworthy and deliver on our promises. And we would be delighted to speak with you about your situation. You would be under no obligation, and our consultation is ALWAYS free. Give us a call today!