How to Stop Foreclosure Is Government Help Available?

Foreclosures, A Fact of Life

Whether due to job loss, unexpected medical expenses or any other unforeseen circumstances, delayed payments on your mortgage are indeed an embarrassing and disturbing situation. Not only do you face the risk of foreclosure and possible loss of your home, but it also does inevitable damage to your credit score.

The good news is that there are certain steps you can take to avoid foreclosure and keep your home even if you have received a notice of default from the mortgage lender. The truth is, foreclosures are a sad fact of life.

The options open to homeowners in danger of foreclosure vary depending on where they are in the process of foreclosure and the state where they live. So, the best time to start is right now, because there are more options available at the beginning of the foreclosure process.

Right from the moment the homeowner defaults on a monthly mortgage payment, they have a 90-day window to make good on the missed payment before the mortgage lender can initiate foreclosure proceedings against them.

Loan Modification

At this stage, it would be a good idea to call the lending institution as soon as you miss a payment and renegotiate the terms of the loan to avoid foreclosure. Communication is very important in all aspects of our lives and that includes saving your home. This step can help you negotiate more favorable terms that let you resume your mortgage payments. You could ask for a grace period, which gives you more time to work out a payment plan. You can ask the lender to alter the terms of your loan by lowering the interest rates or possibly extend the repayment period. However, you need to make sure that the fresh terms you request from your mortgage lender are realistic goals you can accomplish.

If it so happens that your lending company is unwilling to accept your new terms, and all else fails, the next logical step might be to file for bankruptcy.

Bankruptcy

To halt any further foreclosure proceedings against you, you should consider filing for Chapter 13 bankruptcy to curb rising debts. Chapter 13 allows the debtor to file a plan at a Bankruptcy court detailing how they intend to pay up their outstanding debts. 

The percentage of the debt to be paid back by the debtor varies depending on the total amount due, as well as the client’s income and expenses. Once approved, this plan usually lasts for a period of three to five years. During this time, the person’s unpaid debts are lumped together into a single monthly payment. 

Filing a Chapter 13 bankruptcy petition guarantees that the creditors are required by law to stop any effort on their parts to recover items or otherwise require payments from the debtor. Moreover, opting for Chapter 13 bankruptcy may terminate or halt the process of foreclosure. It also gives the homeowner the opportunity to pay the overdue mortgage payments over a period of 3 or 5 months via a payment plan as ordered by the Court.

People who successfully file for Chapter 13 bankruptcy often end up paying less than they should. In some cases the court may be able to extend the term of your mortgage loan, reduce the mortgage balance or reduce the interest rates. However, only a Court can legally force a creditor to accept a reduction in the sum total of the amount owed. Thus, it is very worthwhile to consult a legal representative to help you with your case so that you can maximize your chances of a beneficial outcome.

Government Help

The current recession has affected not only homeowners, but businesses as well. The Government has assisted these businesses in the form of bailouts. Banks, real estate and businesses can access these government bailouts. However, with the new Home Affordable Foreclosure Alternatives (HAFA) plan, home owners also have access to these government bailouts.

Hence, as an alternative, many homeowners facing foreclosure seek the government’s help in their search for a means to stop foreclosures on their properties. The Obama administration has extended homeowners lifelines by introducing several incentives and subsidies designed to help homeowners overcome the complications of running mortgage loans.

Government programs such as the Home Affordable Foreclosure Alternatives (HAFA) program is for homeowners who, although eligible for the Home Affordable Modification Program (HAMP), cannot get a permanent loan modification or avoid foreclosure. The HAFA program offers protection to eligible homeowners who decide to do a short sale or voluntarily surrender the property.

Eligible homeowners for the HAFA program are offered an opportunity to avoid foreclosure by performing a Short Sale on the property or voluntarily surrender the property to the lender. Homeowners benefit by receiving up to $ 3,000 in relocation assistance funds and they also get total freedom from all future liability on their first mortgage debts, amongst other things.

As you can see there is government help for foreclosures, even if it’s not what you had in mind. So try to keep up with your payments and stay out of debt as best you can to avoid any of the above scenarios.


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