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Help! The bank has said that they are going to foreclose on my house! What can I do to stop foreclosure proceedings from my bank? I really want to avoid foreclosure if at all possible. What can I do to prevent foreclosure on my house?
The number of bank foreclosures has been rising with the downturn in the housing market. But believe it or not, the best source for foreclosure assistance and foreclosure help may be the bank itself!
That’s right – in order to stop mortgage foreclosure proceedings – to avoid a home foreclosure – you should talk directly with the bank! It sounds simple, doesn’t it?
You see, the bank doesn’t really want to foreclose – in fact most banks want to stop foreclosure sale increases as well! The bank would much rather you pay your mortgage, and stay in your home! The problem is that if you are unable to pay your mortgage – and most especially if you stop paying your mortgage, without notifying or making arrangments with the bank – then the bank is left with little choice other than to try to get some of their investment back however they can. And they do this by foreclosing on your house, and selling the house to try to make back some of the money (that’s a foreclosure sale).
The good news is that because the banks don’t really want to foreclose – they usually get far less money from selling your house at a foreclosure sale than they would if you paid off the mortgage – most banks will work with you if you have a reasonable expectation that you can catch up your mortgage, and then continue paying it off.
Banks have a number of tools at their disposal to work with a homeowner who is behind on their mortgage, including:
Forebearance: With forebearance, the bank will officially allow you to stop paying your mortgage for a short period of time, with an agreement that you will start paying it again, and an understanding of how and when you will do that.
Reinstatement: Reinstatement is when the bank allows you to start paying the mortgage again, picking up where you left off, and with you paying the bank a lump sum amount to make up the amount that you have missed.
You can also ask the lender for a payment plan, so that you can reinstate your mortgage, and pay the past due amount off over a short period of time, paying something above your normal mortgage amount each month until the past due amount is paid off.
Selling your home: If there is a real possibility that your home would sell if you listed it, the bank may be willing to put foreclosure proceedings on hold to allow you time to try to sell your house.
Chapter 13 Bankruptcy: Unlike the more well-known “Chapter 7” bankruptcy, a Chapter 13 bankruptcy puts a hold on collection proceedings – including foreclosure – and allows you to catch up on payment of your debt. If you are employed or have another regular source of income, and you are able to continue making your mortgage payments, you may be a candidate for a Chapter 13 bankruptcy, which can take your home out of foreclosure and allow you to start paying your mortgage again. Consult with a bankruptcy attorney to see if you qualify for this option (see below for a free bankruptcy consultation).
Deed in lieu of foreclosure: As a last resort, the bank may allow you to give the house back to them (sign the deed over to the bank) instead of them holding foreclosure proceedings. You still end up without your house, but it looks better on your credit (and is a bit kinder and gentler than being on the short end of foreclosure proceedings).
Bankruptcy: As a really last ditch resort – if the bank will not deal with you at all, and if you do not qualify for the Chapter 13 bankruptcy discussed above, you may wish to consult a bankruptcy and credit attorney about filing a Chapter 7 bankruptcy.
But first, and foremost, talk to your bank!