Knowing that your house is on foreclosure sucks. Nothing is good about it and you begin to panic even when there is something you can do about it. Of course, no one wants to lose their home but there are just cases when you cannot avoid this. But don’t fret, there are ways in which you can avoid foreclosure and knowing your rights as a homeowner can definitely help you. In this article, we will talk about that, read on for more helpful tips and guidelines!
What it Means to Be In Foreclosure
Foreclosure happens when the creditor (also known as your lender or mortgage holder) can repossess or take back your home to sell the property with the purpose of repaying any debt you have owed in your house. They can foreclose a home or property any time if the borrower (you) miss payments on the mortgage. Depending on the state you are living in, laws on foreclosure may vary. The length of processing time can also vary but most cases can start within three to six months after the borrower misses their first payment.
Reasons Why Foreclosure is Pending
Homeowners cannot avoid foreclosure because all extenuating circumstances that compels them to miss a mortgage payment. Apart from those who are known to participate in mortgage frauds, here are some of the few reasons why a homeowner is at risk for foreclosure:
- Loss of a job or unexpected unemployment (laid off)
- Death in the family
- Medical emergencies or sudden sickness
- Loss of second income or in the process of divorcing
- Demotion or refusal of a promotion
- Unexpected home maintenance expenses
- Inability to pay an interest rate that has increased
- Payments that are not met on a timely manner
Can you avoid a Foreclosure?
In various cases, a foreclosure can be stopped. Of course, depending on the situation, this may not be the case for everyone. However, it is best to know about the two ways in which you can challenge or defend your rights against a foreclosure. There are two LEGAL ways to challenge or defend against it:
Technical defenses mean the foreclosure to proceeding itself. This can be done when the property owner was not given the right notice of the default and proceedings however, this may not be as helpful. A technical defense may not be helpful when correcting the procedural defect. This means that the lender can issue a new default notice which can restart the proceedings again.
Another form of defense is what we call the substantive defense. This is the best and legal way to stop a foreclosure. How can you use this? Here are some of the best examples:
- If the debt interest were paid on time and not in default.
- The lender committed fraud to get the mortgage.
- The owner of the property filed for bankruptcy. If the bankruptcy was filed before the foreclosure, this will temporarily stop the proceedings and give you enough time to recover.
- If he or she has paid off the loan as well as the foreclosure costs and expenses of the lender.
In case you have any legal reason to stop the proceedings of the foreclosure, you must file an objection to the sale. Of course, you have to also check within the state you are living in regards to this. Some states may allow you to file an objection before or after a sale takes place.
What to do after a Notice of Default
Once the lender files a notice of default against you, your options become very limited. That is why you must contact your lender before you fall behind your payments or if you feel like you are going to miss a payment due to unforeseen circumstances. This way your lender can also adjust and work a repayment schedule so you don’t fall into foreclosure. However, in case your lender filed a notice of default, there are also a few things that you can still do:
- You can sell your home and the best way to do this is through a real estate agent. Get an opinion of your house value in the market and compare with others. This way you know which one can meet your needs within a specific time frame.
- Consider a short sale if your home is worth less than the amount you actually owed. Although this could affect your credit score, it’s not as bad as you might think as compared to a foreclosure. You can even negotiate with your lender and if he or she agrees to this term, this can be called as pre-closure redeemed.
- Sign a deed of foreclosure which means you are “deeding the home” back to your lender. This means that you will have to sign back your house to the lender so the mortgage is forgiven and effectively canceling the proceedings.
- Consider a short rental meaning you have to arrange an agreement with your lender to remain in the home until you are able to find a place to move in. This means they must allow you to retain occupancy and still has the right to possession during the proceeding of foreclosure.
- Consider filing for bankruptcy. This could stop all the foreclosure action and the best way to do this is to find the best lawyer who specializes in bankruptcy to get the work done. Ask for the options and costs it could take within the given time frame you have. While this may not entirely cancel the foreclosure, it can postpone the proceedings while giving you time to do what is needed.
Foreclosure cannot be always be avoided given the situation that you have. However, you are given enough time to settle your mortgage payments each month so there’s no reason to miss a payment. If you don’t want to get foreclosure then the best thing that you can do is always set a budget for your mortgage and pay your lender on time. Make sure also that you have all the receipts, notices and other important documents that you can use in case you are facing foreclosure. Be prepared also; don’t just rely on Plan A, always have a backup solution for this. Nobody wants foreclosure and so make sure that you have the budget set aside for your monthly dues.
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