HOW CAN I AVOID FORECLOSURE?
The most effective method for avoiding foreclosure is to avert a
Notice of Default from being filed by your lender. Your lender is
going to prefer to work things out with you than to force a
foreclosure. Therefore, the most important thing you can do is
communicate with your lender the instant you anticipate having
issues with paying your mortgage.
Don't delay, be ashamed or disregard bills and/or letters from your
lender. Not responding will only make your situation worse. Once you
communicate with your lender, they are likely going to offer you
several different proposals which are outlined below.
- Offer additional time for making up payments. They will hold off
taking legal steps and offer you a repayment plan that will fit your
budget. This practice is known as forbearance.
- Debt forgiveness is when your lender allows you to skip a payment
or two. This hardly ever happens.
- Offer you a repayment plan. Meaning, they will allow you to spread
out your missed payments over an extended term. Suppose your payment
is $1,500/month, your lender may allow you to include an extra $150
to each future payment until you are all caught up.
- Change the terms of your loan. If you have an adjustable rate
loan, your lender may either change your interest rate to one that
is more reasonable/affordable for you or they may freeze your
interest rate. It is also possible that your lender will offer you a
note modification otherwise known as extending the amortization
- Allow you to refinance the back payments of your loan to your
balance and re-amortize your loan. This can only be achieved if you
have enough equity in your home.
- Create a new, separate loan for paying back the payments that you
missed. This type of loan is a government issued loan called a
partial claim and is only available to borrowers that satisfy
Impact of Foreclosure On Your Credit
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