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
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;
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.
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?)