Avoiding Foreclosure

If you are facing financial difficulties, whether they are short-term problems with cash flow or long-term issues such as a job loss or serious illness, you need to start exploring your options as soon as possible to avoid foreclosure.  Even if you have not missed a mortgage payment, but are worried that you may fall behind soon, now is the time to take action and study your options.

Depending on your individual circumstances, you may be eligible to refinance or modify your mortgage loan, lowering your overall monthly payment and making it more affordable.  Even if you have already missed a few payments, you may qualify for several programs that can help you get back on track.

Summary of Options for Homeowners Facing Foreclosure

If you are a homeowner facing foreclosure, below is an overview of options that are available to you in saving your home and avoiding foreclosure:

Refinancing Your Mortgage Loan:  Under this option, a homeowner obtains a new mortgage loan on the property that completely replaces your current mortgage loan and substitutes a new interest rate and monthly payment.  Even if the value of your home has decreased and you now owe more on your home that it is worth, you still may be able to refinance your mortgage loan as part of the government’s Home Affordable Refinance Program (HARP).  The benefits of this option include that it makes your monthly payment more affordable, creates no negative activity on your credit history report and allows you stay in your home and avoid foreclosure.

Negotiating a Repayment Plan with Your Mortgage Lender:  Under this option, a homeowner contacts their mortgage lender and attempts to negotiate a repayment plan on the mortgage loan that allows them to pay the past due amount over a longer period of time to eventually make you current on the mortgage loan payments.  When faced with the prospect of filing a foreclosure action against the property, many mortgage lenders are willing to discuss repayment plans with the homeowner.  The benefits of this option include that it resolves the delinquency over time through gradual payments, is less damaging to your credit history report than a foreclosure and allows you stay in your home and avoid foreclosure.

Negotiating a Temporary Forbearance with Your Mortgage Lender:  Under this option, a homeowner contacts their mortgage lender and attempts to negotiate a plan with the mortgage lender that allows them to temporarily suspend or reduce their monthly mortgage payments for a specified period of time.  Again, this option may be preferable for some mortgage lenders compared to filing a foreclosure action against the homeowner.  The benefits of this option include that it gives you time to improve your financial situation, is less damaging to your credit history report than a foreclosure and allows you to stay in your home and avoid foreclosure.

Negotiating a Modification with Your Mortgage Lender:  Under this option, a homeowner contacts their mortgage lender and attempts to negotiate an agreement with the mortgage lender that changes the original terms of the mortgage loan, including the amount of the monthly payment, length of the loan, interest rate, etc.  Depending on your individual circumstances, you may also be eligible for the government’s Home Affordable Modification Program (HAMP).  The benefits of this option include that it makes your monthly payment more affordable, is less damaging to your credit history report than a foreclosure and allows you stay in your home and avoid foreclosure.

Working with a REALTOR® to Sell Your Home through a Short Sale:  Under this option, a homeowner works with a REALTOR® to sell the property and negotiate with the mortgage lender to accept an amount to pay off the mortgage loan that is less than what is owned on the balance of the mortgage loan.  Since short sales result in a negative action on your credit history report, it is preferable to attempt to refinance the mortgage loan, obtain a forbearance from the mortgage lender, negotiate a repayment plan on the mortgage loan or negotiate a modification plan with your mortgage lender before you attempt a short sale on the property.

If you would like to consider a short sale on your property, it is imperative that you begin to work with a REALTOR® before you are three months delinquent on your mortgage loan payments and before the mortgage lender initiates a foreclosure action on the property.  Unfortunately, a short sale involves a considerable amount of paperwork and research, which means that it will not be a quick solution to the program and may require weeks (or months) of negotiation with the mortgage lender.

However, if you are facing foreclosure and are unable to take advantage of any other options to save your home and avoid foreclosure, a short sale may be the only way to avoid the extremely damaging aspects of foreclosure.  Even though a short sale will result in a negative action on your credit history report, it is normally much less damaging than the negative action that would result from a bankruptcy or foreclosure.

More Resources are Available for Homeowners Facing Foreclosure:

If you would like more information on how to avoid foreclosure and potentially save your home, there are many valuable resources available for you to utilize.  Please take the time to review the information available on the following resources:

 

                       List of Housing Counselors in Kansas – U.S. Department of Housing and Urban Development

 

                       Know Your Options Video Series – Fannie Mae


                       HOPE NOW Homeowners’ Hotline Website – HOPE NOW Alliance


                       Foreclosure Alternative: The Short Sale – HouseLogic.com

 

                       How to Talk to Your Lender about Foreclosure – HouseLogic.com


                       Brief Summary of Kansas Foreclosure Law