You Can Stop Foreclosure by Getting Approved for One of These Programs  

Each of the following 7 methods are proven ways to stop foreclosure and keep your home. You'll want to pay special attention to how each of these methods affects your monthly mortgage payment. Because these programs are long-term solutions, the solution you choose needs to fit your monthly budget.

Working With Your Lender to Bring Your Mortgage Current

Here is a brief description of the five plans you can arrange with your lender. They are often referred to as "workouts".

1. Reinstatement - There's not much to this technique. You pay back everything you owe in one large payment. You resume making your regular payments after that.

2. Repayment Plan - You catch the mortgage up over a period of a few months with payments that are larger than your usual mortgage. Many lenders will initially offer you repayment plans of 3-6 months. Some will go as long as 12 or 18 months if you can show them that you need more time.

3. Forbearance - This program is really helpful when your financial problems are short-term. A forbearance gives you a smaller mortgage payment for a specific number of months. Some lenders may even let you go without making any payment for a short time. When the forbearance is over, you are generally expected to bring the loan current with a reinstatement or repayment plan.

4. Modification - For many, this is the program of choice. A modification occurs when your lender changes one or more of your loan terms to bring your mortgage current again. It can get you a lower payment if you've had a permanent reduction in income. You can also use a modification to move all the money you presently owe to the end of the loan. With this kind of modification, you just make your regular mortgage payment again.

5. Partial Claim - If you are behind on a FHA loan, you may qualify for an interest-free loan from the government. This loan is used to bring your first mortgage current again. The best part of this program is that the loan from the government doesn't require a monthly payment. You pay it off whenever you sell or refinance.

It may surprise you, but most lenders have no desire to foreclose on your home. They are in the business of lending money, not managing properties. A lender usually loses money on a foreclosed home. Some industry experts estimate an average of $40,000 per foreclosure.

Many lenders utilize a special loss mitigation department to work with borrowers who are behind on their mortgage. Their job is to get you into the program that is most appropriate for your situation.

Refinancing and Bankruptcy

There are two other ways to stop foreclosure and retain possession of your home when the preceding options won't work for you and your situation.

6. Refinancing - A new loan can give you a fresh start, but there are many restrictions. As a borrower, you become a greater risk as you fall further and further behind on your mortgage. As a result, any new lender is only going to loan you a certain percentage of your home's value. You may end up with a higher monthly payment than the one you had before. One way around the issue of a higher payment is to pay off some other debts with the new loan.

7. Bankruptcy - Because of its long-term credit implications, a bankruptcy should only be considered as a last resort. A Chapter 7 will only stall the foreclosure process for 30-90 days. It's not an effective long-term solution. A Chapter 13 bankruptcy can force your lender to accept payments on the past-due amount. But, you would also have to make your regular mortgage payment as well. Be sure to seek qualified legal council if this is an alternative you are considering.

What You Can Do Next

Once you have selected a way to stop foreclosure, it's important to take action as soon as possible. The amount of time a lender has to wait to foreclose varies from state to state. So pay attention to any notices that you receive from your lender or from your county court.

No matter what anyone tells you, you won't be evicted from your home until after the home is auctioned off or awarded to your lender in court.

About the Author

Nicole Williams has held numerous positions in debt management, credit counseling, home lending, and property management. She is the author of a number of articles designed to help homeowners avoid foreclosure. To learn more about the programs discussed here and about the foreclosure process for your state, visit http://www.steps-to-stop-foreclosure.com

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