The financial situation of the past few years has certainly brought its share of financial hardships for many homeowners. In the most dire of circumstances, some homeowners are forced to foreclose on their mortgages. However, some homeowners are able to delay foreclosure, either through ethical means, or with methods that could be considered a little questionable. (For more, check out Avoid Foreclosure: How To Handle An Underwater Mortgage.)

TUTORIAL: Mortgage Basics

Reducing Costs
Many homeowners that realize they're at risk of going into default will cut costs and attempt to stay in their homes by ethical means. Many will do such things as finding roommates, taking on a second job, renting out rooms or having relatives move in. The reduced costs or increased income helps these homeowners to free up cash for keeping up with their mortgage payments.

Using the Bank as an Ally
Some financial institutions are good at working with their borrowers to find ways to keep them in their homes. In many situations, this could be the best option for all parties involved. If the bank helps homeowners find ways to reduce their payments, consolidate loans, refinance their mortgages or reduce their other expenses, this can result in a happy ending for everyone involved. The key to keeping the bank on your side is being proactive. Don't wait until you've missed more than a payment or two, and your lender will be much more likely to work with you to get things back on track.

Finding the Technicalities
Some homeowners have been able to stay in their homes for lengthy periods as a result of finding technicalities in the mortgage documentation. Though this is not truly an ethical method for staying in your home, it has certainly worked for some. Many of these homeowners are not making any payments, so they're essentially living in their homes for free. Some homeowners have done this by requesting to see original paperwork from the bank that, at times, has been lost in filing as a result of electronic transfers that are often used for mortgage documents. If this is the case, some judges have dismissed the case against some homeowners. In some situations, the bank may not even have the paperwork as a result of passing mortgages off to third-party lenders. (For related reading, see Saving Your Home From Foreclosure.)

Taking Your Time Filing Paperwork
If you're willing to play the waiting game, you can also slow down the process. Waiting until the last minute to file paperwork is one way to ensure that the process moves as slowly as possible. The national average time it takes for a foreclosure to process is currently sitting at 647 days – that's nearly two years. Some regions are sitting at much higher averages; WashingtonD.C. being among the highest, with an average of 1,053 days.

Putting up a fight is one way to stay in your home, though again, not necessarily the preferable method. Challenging the bank's actions can certainly delay the process. Refusing to sign all documentation, including refusing to accept registered letters can delay the process, since foreclosure documents must be formally acknowledged with a signature of someone who lives in the home. Sending letters that detail your financial hardships can also help to delay the process. Regardless of whether a homeowner opts for some of the less ethical tactics, everyone who is facing foreclosure should keep in mind that every foreclosure lawsuit can be challenged. Retain the services of an attorney and do so the legal way. Follow the court's rules and deadlines and plead your case to a judge. At the very minimum, you'll likely buy yourself some more time.

Declaring Bankruptcy
This is certainly an extreme action, though it has worked for some homeowners. This often results in the homeowner being able to stay in their home until the matter of bankruptcy is resolved. The rules for declaring bankruptcy vary by state, and you must obtain the assistance of a lawyer when you file. Keep in mind that there can be long-term ramifications of declaring bankruptcy, so be sure to fully research what all is entailed before taking this drastic step.

The Bottom Line
Many argue that those who delay foreclosure through unethical means are damaging the housing market and further harming the economy as a whole. Many homes that are in foreclosure are often not properly maintained, which lowers property values and reduces the amount that lenders are able to recoup from selling these properties. Also, the courts and financial institutions must bear the costs associated with delaying foreclosure. These costs are then passed onto others as lenders increase fees to cover their losses and protect against the higher risks that they often face.

No matter how you look at foreclosure, there is no doubt that losing a home can be a traumatic event for the families that are forced to move away and leave their homes behind. However, there are always more legal and ethical options available for delaying or avoiding foreclosure, and homeowners should always try to stick to these methods. Choosing to use some of the less-than-legal methods, though they may work for a period of time, can have destructive long-term consequences. (To learn more, see Can You Dispute A Foreclosure?)

Related Articles
  1. Home & Auto

    The Pros and Cons of Owner Financing

    Details on the upside and risks of this type of deal for both the owner and the buyer.
  2. Credit & Loans

    Can Corporate Credit Cards Affect Your Credit?

    Corporate cards have a hidden downside. If the company fails to pay its bills, you could be liable for the amount and end up with a damaged credit rating.
  3. Mutual Funds & ETFs

    ETF Analysis: iShares US Real Estate

    Learn about the iShares US Real Estate fund, which holds shares of equity and nonequity real estate investment trusts incorporated in the United States.
  4. Credit & Loans

    Your Credit Score: More Important Than You Know

    Credit scores affect key aspects of your personal and professional life. Knowing your score and managing your credit input can make a big difference.
  5. Credit & Loans

    Schedule Loan Repayments with Excel Formulas

    Calculate all the particulars of a loan using Excel, and set up a schedule of repayment for a mortgage or any other loan.
  6. Credit & Loans

    What Qualifies as a Nonperforming Asset?

    A nonperforming asset is a loan made by a financial institution to a borrower who has failed to make any scheduled payments for at least 90 days.
  7. Credit & Loans

    How Does a Lease Work?

    A lease is an agreement between two parties where the lessor owns property that it allows the lessee to use pursuant to terms of the agreement.
  8. Credit & Loans

    Fixing Your Credit Score: A Do It Yourself Guide

    Following these five steps can go a long way toward repairing a low score.
  9. Credit & Loans

    10 Ways to Manage Student Loan Debt

    How to manage those pesky payments as you embark on adult life.
  10. Credit & Loans

    Avoiding Red Flags with Online Mortgage Lenders

    Using an online mortgage lender can be convenient, but how do you know you can trust one? Follow these tips to make sure the lender is legit.
  1. Equity

    The value of an asset less the value of all liabilities on that ...
  2. Debt/Equity Ratio

    1. A debt ratio used to measure a company's financial leverage. ...
  3. Chattel Mortgage Non-Filing Insurance

    An insurance policy covering losses that result from a policyholder ...
  4. Zombie Foreclosure

    A situation (or a home in this situation) that occurs when a ...
  5. Personal Property Securities Register ...

    A written, public, online record of legal claims to personal ...
  6. Roll Rate

    The percentage of credit card users who become increasingly delinquent ...
  1. How can I take a loan from my 401(k)?

    The majority of employers offer eligible employees the opportunity to save for retirement in a qualified plan through paycheck ... Read Full Answer >>
  2. What is the difference between "closed end credit" and a "line of credit?"

    Depending on the need, an individual or business may take out a form of credit that is either open- or closed-ended. While ... Read Full Answer >>
  3. In what instances does a business use closed end credit?

    The most common types of closed-end credit used by both businesses and individuals are mortgages and auto loans. Businesses ... Read Full Answer >>
  4. What are the long-term effects of delinquent accounts?

    Delinquency occurs when borrowers fail to make payments on their loans. All loan borrowers should do their best to avoid ... Read Full Answer >>
  5. How was the American Dream impacted by the housing market collapse in 2008?

    The American Dream was seriously damaged by the housing market collapse in 2008. In many ways, the American Dream is a self-fulfilling ... Read Full Answer >>
  6. How much risk is associated with subprime mortgages?

    A large amount of risk is associated with subprime mortgages. Since the mortgages are specifically for people who do not ... Read Full Answer >>

You May Also Like

Trading Center

You are using adblocking software

Want access to all of Investopedia? Add us to your “whitelist”
so you'll never miss a feature!