Foreclosure: Keeping Foreclosure At Bay

Posted on January 11th, 2008 by saman

What would you have done if you suddenly find a letter in your mailbox telling you that your mortgaged property would soon be foreclosed? You would undoubtedly be shocked beyond words before exploding into a state of panic. The moment the court date is set, you might as well be prepared to lose your property for good.

To avoid getting into the above situation, you must be aware of your financial status and progress from the very beginning. Plan your spending very carefully to avoid going over your budget. In planning your budget, you have to know how to prioritize. Whatever happens, pay your bills first before you splurge to avoid jeopardizing your whole family. Write your budget in a list and categorize them according to priority. For example, put ‘mortgage payment’ and ‘home equity’ on the very top and let ‘new shirt’ stays at the bottom. Even if you find yourself thinking you won’t be having enough cash, do not skip the biggest bill. In this case, do not skip your mortgage bill. Foreclosure is very fast-tracked in some countries and in less than 60 days, you could be getting the dreaded foreclosure notice.

The moment you realise that you are unable to make your mortgage payment, do not take it easy and ignore the problem at hand. Ignoring your problem increases the possibility of you losing your property tenfold. Do not panic when this happens to you. Read through your loan documents and find out the actions that can be taken against you should you fail to make payments. Keep in mind that the longer you let the problem continue, the harder reinstating your loan would be. Before you know it, you could be standing outside your property, watching the ‘For Sale’ sign laughing and shouting volumes at you.

If you miss one payment, contact your lender immediately to inform them of your situation. If you are the one being contacted, answer the call or call them back. You can negotiate with your lender on how to go about making the payment. Most of the times, you will be given a few choices in which you and your lender must come into agreement: (a) get your loan reinstated to enable you to catch up with the payment you have missed; (b) get forbearance of payment until you’re more stable financially; (c) get your loan modified in terms of minimum payments so that it becomes more affordable; or (d) set up a different repayment plan until you’re ready to repay the amount initially agreed upon.

There is also a government-sponsored solution that deals with modifications of loans. Investors are persuaded to modify the terms by the federal government. This normally results in a lower interest rate or a longer loan term with smaller monthly payment.

Another way for borrowers to avoid foreclosure is to make a partial claim on certain eligible loans. Making a partial claim enables borrowers to acquire an additional loan to help cover the payments they missed. If you are a few months behind in loan repayment, this is your best shot as it will allow you to become current on the loan. Contact your current lender for more information.