A property enters preforeclosure when the owner doesn't make his mortgage payments. This typically doesn't happen after one mortgage payment, and it might take several months for the preforeclosure process to begin. Once the process has started, there are ways you can work with the mortgage company to stop the foreclosure proceedings. It's best to communicate the reasons you've had difficulty with the mortgage payment from the first missed payment so you and the lender can arrive at the best way to remedy the situation.
Ask your mortgage company for a loan modification. The federal mortgage associations Fannie Mae and Freddie Mac have helped develop modification plans that change your existing mortgage with the same company to provide a more affordable payment. This usually extends the length of the loan, adding any missed payments onto the balance.
Cure the loan by paying the past due balance along with late fees and penalties. If you were out of work for a short time, during which you couldn't make your late payments, most lenders will stop the preforeclosure process if you can begin paying again and pay the outstanding balance. Some require the balance as a lump sum while others create a payment plan to get you caught up. The terms of the original mortgage, such as the payment amount and length, still stand.
Sell the home as a short sale or for the balance of the loan. During preforeclosure, many lenders agree to accept a sales price that's lower than the loan balance, called a short sale. This saves them the time and expense involved in handling and selling a foreclosed property. Selling for the loan balance doesn't reap you any benefit from the equity in your home, but it could possibly encourage a buyer before the foreclosure process finalizes.
Refinance the home to change the monthly payment and length of the loan. A longer term often means a lower payment, but after several missed payments, you might not score a lower interest rate. This option can allow you to stop the preforeclosure process by paying off the old loan in full, including the past-due balance, without money out of pocket.
File for bankruptcy to stop collection proceedings on the past due balance. Most bankruptcy trustees agree to let you stay in your home with the current mortgage and to work out an affordable payment plan for the past due balance. The bankruptcy stops the foreclosure process, and in a Chapter 13 bankruptcy, the lenders must accept the trustee's decision regarding a payment plan. With Chapter 7 bankruptcy, the lender has the option to agree to the payment plan or continue with the foreclosure process; the difference is that the bank no longer can try to collect money from you if it decides to foreclose.
- You typically have until the home home is sold at auction as part of the foreclosure process to cure the loan or find another solution to stop the process.
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