Avoid a Foreclosure, Minnesota Foreclosures, Real Estate

How to Stop the Foreclosure Process There are a myriad of ways that unforeseen hardships can change the joy of owning a home into an incredible burden. Maybe you've lost your job, or have unexpected medical bills beginning to pile up, or your monthly mortgage payments have increased beyond your current budget. No matter what the cause of your troubles, ignoring the problem won't help--it will only make it worse. You must act quickly to resolve the issue.

The following are a few examples of how to stop a foreclosure on your home:

1. Look For Other Sources - Most homeowners don't realize they have a variety of resources that can aid in making mortgage payments to avoid foreclosure. Consider the income created by unemployment or disability insurance and your savings as possible cash-flow resources. Other examples include slashing the household budget by trading in expensive items like cars, boats, and motorcycles for cash. Even retirement funds can be used, but beware that many people with access to their retirement funds can be penalized for early withdraw and face increased income taxes.

2. Contact Your Lender - If you have reviewed all possibilities of creating cash-flow to pay your mortgage, then it's time to reach out to your lender. Do this as soon as possible! Your ultimate goal in contacting your lender is to create an agreement that will alter your mortgage so that foreclosure proceedings can be stopped before they are finalized.

3. Review The Options - After contacting your lender, or in some cases the servicing company that handles the loan for an investor, you may have other options available. Typically lenders are not required to make adjustments to your loan, but many will consider it a viable option one that benefits the lender and you and can include refinancing.

Possible options to discuss with your lender include:

Deed in Lieu of Foreclosure - In this option, your lender may accept the return of the title to your home, but beware that the lender may still sue for loss and report any uncollected funds due to loss to the IRS as taxable income to you. This option may have negative effects on your credit report.
Claim Advance - If you have a private mortgage lender, they will often provide a cash advance to bring your loan payments up to date. Sometimes this money is interest free and may not have to be repaid for years.
Re-Amortization - In this option the payments you have missed are added to the balance of the loan, making your account current. Your debt will increase and your monthly payments will be higher unless the lender also agrees to extend the term of the loan.
Short Sale - Considered by many one of the best options available to avoid foreclosure, the short sale is an increasingly popular option. In this option, the lender accepts less than what you owe on the property, relieving the homeowner of debt. Lenders are often willing to accept a short sale because it greatly reduces the expense and time involved in foreclosure proceedings. In most cases, a short sale does less damage to your credit than a foreclosure. A qualified REALTOR® will be exceptionally helpful in completing the short sale process with you.

Typical Foreclosure Timelines

One note of warning: Beware of any company claiming that they guarantee they can stop any foreclosure no matter what you owe. The Federal Trade Commission recently compiled a list of warning signs that a "foreclosure fixer" company may be a scheme. Those warnings include any company that requires you to pay for services upfront, tells you to send mortgage payments to it directly, or asks you to turn over the property deed, or tells you to avoid contacting your lender directly.

When you miss your first mortgage payment by one day, you may be involved in the foreclosure process. You need to act quickly, as the process seems to develop a life of its own without your input. Yes, it may seem easier to just let things go if you feel there are no other options available to you, but things will not be easier for you in the long run. Recent statistics indicate that 50% of all home loans are placed into a foreclosure process without any personal contact being made by a borrower. You should know the process in order to prevent it.

The foreclosure timeline may vary depending on where you live, but the following are some basic guidelines of what you can expect with estimated timelines.

1) You have missed your first mortgage payment, you may not face any penalties for up to 16 to 30 days. After 16 to 30 days, late charges?including a possible mortgage late fee?will begin to accumulate and your lender will contact you to determine why you haven't made your most recent payment.

2) After 30 days, you will be considered to be in default on your home loan. Failure to pay your mortgage after 30 days means your lender may exercise the right to take your home. Most lenders would prefer to not foreclose on your home, and will allow you pay only part of the late payment; others however may demand the entire payment and any fees.

3) 60 days after you have missed your payment, a lender will typically file a "Notice of Default." Between the 45th to the 60th day you are late on your mortgage payment your lender may send you a letter stating the mortgage terms and inform you that you have 30 days to resolve the unpaid amount. You should expect frequent phone calls from your lender, often offering options to resolve the defaulted payment and/or a loan modification.

4) On the 60th and 90th days, things begin to seriously add up. At this point, a notice of default is sent to you and collection costs are added on top of the other late fees. In addition, your lender will probably turn over the loan to its legal department which will send the documents to an attorney to begin formal foreclosure proceedings against you.

5) Between 150 and 415 days a "Notice of Trustee Sale" will be filed and your home will be scheduled for sale at an auction or foreclosure sale. In this period of time certain requirements must be met as part of this legal proceeding, including the advertisement of the impending foreclosure in local newspapers. You may be given the chance to purchase the property depending on where you live, but most likely you will be forced out of your home by the local sheriff's department.

Effects of Foreclosure

These days more homeowners are facing a tough decision about whether foreclosing is the only option they have left. Deciding to foreclose on your home will have implications on your family and your credit for the rest of your life.

When a homeowner can no longer make payments to a lender for a home, the lender may repossess a home in the process of foreclosure, usually with the purpose of reselling it, to recover the amount owed on the defaulted home. Homeowners facing foreclosure proceedings will face lasting implications.

A few of the effects of foreclosure are:

1) Your credit scores will be significantly lowered, sometimes by more than 300 points. This is the single most devastating mark on your credit report and will affect all of your future credit possibilities.

2) A foreclosure listed on a credit report is nearly impossible to have repaired and will most likely remain a permanent mark on this valuable personal report.

3) Any future application for a mortgage you apply for will require you to reveal a previous foreclosure, greatly affecting your mortgage rates.

4) Most employers will also conduct a credit check. With a huge drop in your credit score due to a foreclosure, this may also hinder your future employment opportunities. This is especially true of many government positions, including military and law enforcement agencies.

5) If your current employer runs a credit check, then a foreclosure may even put your current position in jeopardy.

6) In order to recuperate money they did not receive during a bank sale of the property, a lender may seek a deficiency judgment against you to obtain the balance.

7) Depending on your state law, you may be responsible for deficiencies after the foreclosure for an undetermined time period, placing you in a prolonged cycle of continued collections.

8) Your family will have to relocate. This is always a disturbance for children, marriages, careers, and other important aspects of your life.