Avoid Foreclosure

When you apply for a loan or mortgage, the last thing on anybody’s mind is a foreclosure notice sometime in the future. Most people have no idea how fast things can move once they receive a notice of foreclosure. Avoiding foreclosure will require some fundamental knowledge of foreclosure procedures and what is the best direction for you to take to keep your family home.

Home Foreclosure Explained

So, what is foreclosure? Foreclosure is simply a legal procedure instigated by a bank or lending institution to take possession of a property they, (the bank or lender), owns and the occupier has not complied withe the repayments as stated in the property loan document. As a result of payment default, the bank or lender will take back the property and they have the authority to dispose of the home by auction and apply the money received to the amount of home loan outstanding. Generally, the funds from the foreclosure auction will not be sufficient to discharge the loan completely. A negative balance after the foreclosure auction will result in the bank or lender issuing a deficiency order so the borrower still has to make good on the amount of debt outstanding on the property.

Statistically it has been shown that a vast number of property owners will receive a foreclosure notice and very shortly thereafter, pack their possessions and leave. Doing this serves no real purpose other than to give the bank or lender clear access to the property and the home owner withe no options left open. The immediate concern would be that the options regarding beneficial home loan refinancing or the possibility of filing for bankruptcy have not been investigated and the long term issues would revolve around future credit worthiness.

The foreclosure procedure can often take many weeks or even months to process and this is an ideal opportunity for the homeowner to investigate every option to keep their home from foreclosure.

Organize Your Money

It would be a good idea to start withe organizing income and outgoings and shedding any unnecessary expenses. Avoiding foreclosure is going to mean scraping every last cent together. Expenses during this time of hardship must be cut to essential bills, kids necessities and food.

Talk Withe The Bank Or Lender

Presently we are undergoing a huge global financial crisis resulting in vast job losses which naturally results in normally reliable and hard working folk being unable to meet the home loan payments to their lenders. It has been a long time since this degree of financial adversity has been inflicted on us. A “Letter of Hardship” must be produced to the bank or lender which details the circumstances surrounding the inability to make good on the home loan payments. The lender is more likely to view a case favorably if the two parties have been in regular contact. It is possible for the lender to be flexible in making different arrangements to assist the borrower without having to foreclose.

Who Can Help?

Perhaps it is possible that family and friends may be able to help out in the short term as they can see the hardship being endured. It is almost certain they would not wish to see a home go into foreclosure. State schemes are sometimes available to provide a debt clearing home loan at a very low rate of interest which could help to avoid foreclosure on a home.

Selling Your Home

Initially this seems like a drastic measure but if there is time this can be an excellent choice. If severe difficulties are unavoidable then selling the home as soon as possible gives a fresh start without the financial stigma of a foreclosure attached to ones credit record. Furthermore, because there is no enforced foreclosure from an auction where the home goes to the highest bidder, the true value of the property will be fetched which in turn will at least cover the outstanding home loan. After settling the outstanding home loan there is more than likely enough cash left over to move into another property which is more affordable.

Which Option, Loan Modification Or Refinancing?

Is there any equity remaining in the home? If so it may be possible to refinance the mortgage. The refinance option allows for settlement of any outstanding debt on the mortgage. If possible to refinance at a lower interest rate it follows that the monthly payments should decrease.

If refinancing is not an option the property may have to be sold in order to avoid foreclosure but please bear in mind the points above as a property sale could be an excellent choice. Selling the property at a profit means the lender will paid off completely thus negating any foreclosure proceedings.

If the owners do not wish, or are not able, to sell their property and refinancing is not possible, an alternative to look at would be loan modification.

The loan modification process really hinges on the attitude of the lender and the parameters they are willing to work to. Obviously the idea of the loan modification is to ensure that future payments are affordable so the home owner can meet the repayment schedule. The lender can come up with any solution they like for a loan modification but the more usual options are adjusting the interest rate and the term of the home loan.

It may be worth trying to steer your lender in the direction of what is known as a Short Sale. Simply put, this happens if a lender is prepared to accept a sum of money which is less than the amount owed on the property and is willing to “forgive” the rest of the money owed. As you can imagine, this is not going to happen very often.

Is It Worth Considering Bankruptcy Instead Of Foreclosure?

It is possible that filing for bankruptcy will give you a new start in life. It is possible to keep the home and also have all unsecured debts waived but you will need to look into the specifics of either a Ch7 or Ch13 bankruptcy as there are obviously conditions to be met to be eligible. Unsecured loans, such as personal, payday, unpaid medical bills and of course credit card debts can all be written off withe a Chapter 7 bankruptcy. It is essential to consult a bankruptcy professional for proper advice. Click the following link to take a closer look at the two forms of bankruptcy. Can Bankruptcy Avoid Foreclosure

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