By Elizabeth Weintraub. Home Buying/Selling Expert
Elizabeth Weintraub has an extensive background in real estate spanning more than 30 years, including experience in related industries such as title and escrow. She is a full-time broker-associate at Lyon Real Estate's midtown Sacramento office and is recognized as a top producer. She is also a Life Member of the Master's Club, an honor bestowed by the Sacramento Board of REALTORS®, and ranks in the top 1% of all the agents at Lyon Real Estate.
CA BRE License #00697006
Home owners who are hoping to stop foreclosure often dread dealing with the facts that got them to the place of being in foreclosure. If they think back to when they first bought that home, losing the home was probably the furthest thing from their mind. Few home owners actually plan to go into foreclosure .
Reasons For Pending Foreclosure
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Here are a few of those reasons:
- Job loss / unexpected unemployment
- Sudden illness or medical emergency
- Death in the family
- Divorce / loss of second income
- Excessive debt obligations
- Job demotion or promotion denials
- Inability to pay an adjustable interest rate that increases
- Unexpected major home maintenance expense
Ways to Avoid Foreclosure
The best way to avoid foreclosure is to prevent the filing of a Notice of Default. Lenders do not want to foreclose but will file a Notice of Default to protect their interests, if necessary.
If you know you are unlikely to meet your mortgage obligation, the first thing you should do is call your lender.
Don't put it off, be embarrassed or ignore letters from your lender because those responses will make the situation worse, not better. Depending on your particular situation and hardship circumstances, here are some options your lender might propose to you:
- Time to make up your payments.
Lenders might agree to wait before taking legal action against you and let you work out a repayment plan that is affordable for you. This is called forbearance.
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- Forgiving a payment.
freeze the interest rate before it increases or change the interest rate to a more manageable rate for you. A lender might also extend the amortization period. This is called a note modification.
Certain government loans contain provisions that let borrowers who meet specific criteria apply for another loan, which will pay back the missed payments. This is called a partial claim.
Ways to Stop Foreclosure
When the lender files a Notice of Default, your options are limited. That is why it is better for you to call your lender before falling behind on your payments, because lenders are often reluctant to work out repayment schedules after foreclosure proceedings have been commenced.
You will be given a certain time period to bring the payments current, pay the costs of filing the foreclosure and stop the foreclosure. This is called reinstatement of your loan. If you cannot make up the missed payments and the lender will not work with you, here are a few other options to stop foreclosure:
- Sell Your Home.
This is called deeding the home back to the lender. The homeowner give the lender a properly prepared and notarized deed, and the lender forgives the mortgage, effectively canceling the foreclosure action. Lenders tell me that deeds-in-lieu of foreclosure affect credit the same as a foreclosure.
The lender might also work an arrangement where a home owner can remain in the home until finding a place to move into. Owners in default should negotiate the right to retain occupancy, arguing that if the lender followed through on the foreclosure, an owner would still enjoy the right of possession during that procedure.
At the time of writing, Elizabeth Weintraub, BRE # 00697006, is a Broker-Associate at Lyon Real Estate in Sacramento, California.