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Preventing Foreclosure-Valuable Options From Your Mortgage Company


Foreclosure is the legal process in which the lender is allowed to take action in order to obtain the money that is theirs which is not being paid back by the borrower. The lenders have the right to protect their best interest and they will begin the foreclosure process normally after three or more payments in a row are not paid.

Once that first letter comes in the mail, some people will simply throw in the towel because they know that they do not have the money to bring their account completely current. There are options though so if you are facing foreclosure, know that you do not have to give up just yet.

When it comes to a mortgage account entering the foreclosure period, many lenders instruct their collection agents to ask for the total amount that is due to bring the account current and only that. The thing is the foreclosure most likely started because of a financial hardship or set back that was experienced.

This probably means that you do not have a few thousand dollars just sitting around but yet you can afford monthly payments and you want to keep your home. If your mortgage company has yet to advise you of the assistance programs that they have, then you need to bring the subject up with them.

The Repayment Plan

If the financial problem that you were having is now over, you may be able to qualify for a repayment plan. The amount of your monthly repayment plan will depend on several factors. How far past due you are, the amount of attorney fees owed, your living expenses, and the household income is taken into consideration.

Generally, a lender with a good collection or loss mitigation department will not set you on repayment plans that are too expensive for you with the reason being that you will most likely fall off the plan. This is not something that is beneficial to anyone.

Once all of your expenses are documented, the lender will take those and compare them with your bring home income. This income can include all kinds of income. The income of a spouse, for renting a room, and child support can be used in this equation.

If there is a little bit of money left over after all of your expenses are taken care of, those funds will be used to determine the amount of the repayment plan. You could very well find yourself paying a payment and a half, a payment and a third, or even a payment and a quarter of a payment. The lender will break down for you the length of time you will be on the plan and once it is all over your account will be back on track.

Loan Modification

The loan modification is a great option for many people. For those who had valid reasons for falling behind on their payments and who can prove that they are truly able to afford the home, the modification may be the perfect way to go. If you have not made any payments at all in the last several months, do not be surprised if you are told to go on a repayment plan first.

Then after making two or three payments on the plan, the loan modification could be completed bringing the account much quicker than simply waiting to complete the entire repayment plan. The modification is where the lender takes a better look at the loan and makes adjustments.

The loan is reworked so that the interest rate is sometimes lowered. When the interest rate is lowered, the monthly payments are lowered which many people find extremely beneficial. The process from application to completion could take a couple of weeks or a couple of months depending on if a repayment plan is going to need to be set into place first.

Forbearance

The forbearance is quickly becoming something that is a thing of the past for many lenders. Because of this, you may very well find that your lender simply does not offer it at all. The forbearance is where the lender basically gives the borrower permission to not make their mortgage payments for a set number of months.

During this time period, the payments do continue to become due and then past due. The agreement is that the payments are allowed to become past due without being bothered all of the time by the collection department and foreclosure action will not be started in the middle of that time period.

Once the forbearance period is other, borrowers find that collection actions resume. This is a great option for someone who does not have any income to pay the monthly mortgages payments but knows for a fact that they will be receiving a large chunk of money by a certain date. To make this work the best for everyone involved, that money should be enough to completely bring the loan up to date.

Short Sale


The short sale is for the borrowers that realize that they are unable to keep the home but want to avoid foreclosure. When the borrowers list the home for sale, they quickly learn the value of the home. If the value has lowered, for whatever reason, they may not be able to sale the home for the amount that is owed to the lender.

Upon proving the value of the home compared to what the lender is owed, the lender may review the account for a short sale. A short sale is where the lender allows the borrower to sale the home for less than owed, with arrangements for the difference or the understanding that the difference will simply be wrote off.

This is a great way to make sure that something is done with the home before a foreclosure auction and it ensures that the bank will at least receive a good chunk of the money that they are owed.

Deed In Lieu

The deed in lieu of foreclosure is where the bank agrees to take the deed back from the borrowers name so that they can list it for sale. This allows the mortgage company from not having to spend thousands of dollars on an attorney and still end up with a property that they really do not want. The deed in lieu can save both parties money and it allows the borrower to simply walk away from the entire situation.

Usually though, it will be required that the home is listed for sale for at least three months before a deed in lieu will even be seriously looked at. This is just to make sure that selling the home was at least given a shot.

See Part 2 - The Pros and Cons of Foreclosure Avoidance Programs Offered