RealtyTrac reported an increase of 4% in the number of foreclosure filings (default notices, auctions and bank repossessions) in the third quarter of 2010, rising to 930,437 or one in every 139 housing units. The magnitude of those numbers scares a lot of people, but for the more than 900,000 households in the midst of a foreclosure crisis, the fact that they are not alone may not matter. (Are you in danger of losing your home? Protect your credit score with a real estate short sale. Refer to Short Sell Your Home To Avoid Foreclosure.)
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Your individual options for delaying a foreclosure depend in part on where you stand in the process. According to the Department of Housing and Urban Development (HUD), the glut of foreclosures has automatically delayed the process, and the timeline varies from one state to another and from one mortgage company to another, In general, after three missed mortgage payments, homeowners will be given a demand letter or a "Notice to Accelerate" that gives you 30 days to catch up on your payments. After four missed payments, the lender will turn over the case to their lawyers and begin foreclosure proceedings.
The steps you should take to keep your home depend in part on where you are on the foreclosure timeline. If you have not yet received a foreclosure notice and are behind by one or two payments, start by calling your loan servicer to discuss their options for avoiding foreclosure. In addition, call a housing counselor. There are nonprofit organizations that can put you in touch with HUD-certified counselors who can give you advice suited for your situation.
Some of the options to discuss with your lender are:
- Reinstatement - If your problem is temporary, you can agree on a specific date to repay your past due balance.
- Repayment Plan - You may be able to arrange to repay your past due balance in small increments over several months to bring your loan up-to-date.
- Forbearance - Your payments could be reduced or suspended for a certain time and then you can repay the missing payments with incremental sums or a lump sum.
- Loan Modification - This is a permanent change to your loan by reducing the interest or increasing the repayment term.
- Short Sale - If you would rather sell than try to keep your home, discuss a short sale option with your lender. A short sale means the lender accepts less than the full amount for your loan pay-off.
- Deed in Lieu of Foreclosure - This is a voluntary transfer of title to your lender that can be quicker and less damaging to your credit than a foreclosure.
- Government Programs - A loan modification or a refinance may be an option, even if you owe more than your home's current value. Check what federal and state-level programs are applicable to your situation.
If you have already received a foreclosure notice, your options are fewer, but there are some possibilities. (Learn the tactics you can use to prevent your home from being repossessed. Read Saving Your Home From Foreclosure.)
Filing for bankruptcy may help you keep your home for at least a little while, since the foreclosure process is legally stopped with an "automatic stay" once you file. The foreclosure can be reopened after the bankruptcy is complete or if your lender obtains legal permission to proceed with the foreclosure.
- "Produce the Note" Strategy
Some homeowners have successfully delayed a foreclosure by demanding that their lender provide proof of ownership of their loan. Since home loans are often sold from one lender to another, it can take weeks or months to track down this paperwork.
- Legal Action
Depending on your state, you may be able to hire an attorney to request title to your property if the lender cannot produce the appropriate paperwork.
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Avoid Foreclosure Scams
Whether you choose to work with your lender or opt to fight back with a bankruptcy or a legal battle, all foreclosure victims should be aware of the prevalence of foreclosure scams. If you are approached by someone who demands a fee for foreclosure counseling, this is likely to be a scam. Other warning signs include a request for you to sign your title over to someone else, a suggestion that you stop making mortgage payments or that you send your mortgage payments to anyone other than your lender. (If you want to save your home, avoid bogus offers and take matters into your own hands. Check out Avoiding Foreclosure Scams.)
The Bottom Line
The most important thing to remember when handling a financial crisis is to continually respond to information requests from your lender or a housing counselor and to work closely with them to resolve your situation. In addition, every individual should take a hard look at their finances to determine if keeping their home is even the best option. Some families, while disappointed to lose their home, have found that selling or turning over the home to their lender and moving on to a new place can ease their financial woes faster than fighting a difficult foreclosure battle.
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