How to Protect Yourself Against Foreclosure
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Remember this, lenders don’t like foreclosures. An average foreclosure costs the lender $80.000 and they end up with a piece of housing stock on their books which they are required to sell, so the accounts will balance and they can lend the money to someone else. It takes time and pressures their business. If you feel things are getting tight and the threat of foreclosure begins to loom into sight, there are some things you can do to help yourself.
Speak up: If you feel you are going to miss a mortgage payment, speak to the lender beforehand. They don’t like being kept in the dark and fear you are about to default. If you speak to them you allay this fear and can often negotiate to skip a payment. If the reasons are really serious like loss of a job, illness or divorce they might let you miss several payments. This gives you an opportunity to get back on your feet. You will have to make the payments but they will be tacked onto the end of the mortgage, which will be extended as a result.
You need to be quick: Most mortgage payments fall due at the start of the month. Payments are considered late if they have not appeared by between the 10th and the 15th. Late payments incur late penalty fees. By talking to the Mortgage Company you will be able to avert the late fee. Then a mortgage is deemed delinquent if there has been no payment in a 30-day period. Foreclosure proceedings begin between the 60th and 180th day depending on the policy of the individual company.
Negotiate: Many people panic when they foresee that they will have difficulty in meeting forthcoming mortgage payments. Some panic so much they abandon their homes. This is exactly not what to do! Instead of running scared, talk to the lender. Like you, they don’t like foreclosure. You may be able to change the terms of the mortgage. This applies particularly to variable rate packages. Then they can reduce the interest, thus lower the payments or spread them over a longer period of time. This makes paying easier and some people will find themselves able to weather the storm by using the tactic!
Sell: Foreclosure sours your credit record. You may be able to sell the house before they foreclose. Don’t expect to get top dollar; you are conducting a fire sale, but the strategy might be able to raise enough money to cover your owings. This takes a little time, so tell your mortgage provider your plans. They will give you the time. If nothing else you have bought some time.
Deed in Lieu of foreclosure: By issuing the lender a properly notarized deed, you are giving the home back to the lender. Different laws exist in different States and it is always best to take legal advice, because the tactic, if done correctly will keep the foreclosure off your credit record, and that is important. Because if foreclosure appears there you will find it extremely difficult to borrow money against property for the ensuing 7 to 10 years.
Additional Benefits: Oftentimes, particularly if you are working with a smart property attorney, the lender will allow you to remain in your old house until you find a “suitable” new one. Once more this can buy you time. You might also find they are prepared to rent it back to you. This outcome is fantastic as you continue living in your old home. As more distressed property floods onto the market, it will become increasingly difficult to sell it on. When that begins to happen they will be very happy to make deals that suit the homeowner.
Final Warning: If the foreclosure of your home does not raise sufficient money to cover outstanding debts, they may come after you for the rest!
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