Preventing Foreclosures

March 13th, 2008 | Tags: Foreclosure

One need not panic – there are many ways to avoid foreclosure. The first is time – time is of vital importance. Items like late fees go up and credit scores go down. Generally the lender waits for 90 or 150 days before filing foreclosure. If the borrower does not become current then for the foreclosure process to run its full course it might take anything from two to three months to a year.

The borrower should try to get the loan modified even before missing out on a single payment. The move should be taken when the borrower can feel the pinch just starting. Modification means a change in the terms of the loan by which the monthly payments will be lowered or few payments will be overlooked. The borrower should speak to the loan modification section of the bank – that is the lender. All the receipts should be kept ready at hand together with bank statements, tax bills of the property and also insurance bills. It will be advantageous to be ready with an appraisal report beforehand. Since the foreclosure process is frustratingly delaying it is up to the borrower to be active and persistent. Experts opine that the loss mitigation departments are perennially overworked and understaffed with inexperienced hands. Under the circumstances the lenders will be willing to talk.

Another option is to think about selling the house. If the house is worth less than the loan amount the lender has to be persuaded to agree to this short sale. The lender has to agree to accept whatever is got from the sale. Many lenders forgive the deficit but others will keep the balance as another loan against the borrower – an unsecured loan. It is not easy to go about the actualities of a short sale. Lenders are far from willing to forego the amount that is due to them. Hence they have to be convinced about the hardships the borrower is facing. The banks usually do not have much say in the matter. This process is also slow.

The deed in lieu of foreclosure is a viable alternative. The deed of the house is handed over to the lender and the mortgage gets released. This will not entail any further loan burden even if the value of the house is less than the loan. Moreover there is no hassle about getting it sold. The lender gets spared the worry of foreclosing.