If you miss mortgage payments, your lender can file a Notice of Default to start the foreclosure process. Fortunately, there are many tools you can utilize to buy yourself additional time and stop the foreclosure entirely. However, these tools can be time-consuming, unreliable, and extremely damaging to your credit – especially without the assistance of a good lawyer. A better solution is preventing the foreclosure process before it begins.
How Can I Prevent a Foreclosure Before It Begins?
If you have missed payments and/or an Appointment of Substitute Trustees has been filed on your property, there are useful tools that you and your attorney can utilize to prevent the foreclosure process.
The real estate lawyers at The Law Offices of Ruben and Ruben have ranked these tools from most recommended to the least recommended:
- Short Sale
Option 1: Modification
Like most any loan, a mortgage can be modified if both borrower and lender agree to new terms. A loan modification program can provide relief by reducing your interest rate, delaying payments, forgiving missed payments, and/or extending your total payments. Because lenders would rather work out a new agreement than file for foreclosure, this option is usually our first suggestion and a borrower’s best option. While this is a great tool, you need to be aware that the bank is not looking out for your best interest. They might suggest new terms that look good at first glance, but you might end up paying too much or be agreeing to bad terms that hurt you in the long run. Because of this, we highly suggest using an attorney during the modification process.
Option #2: Lease/Rent
If you’re able to rent out the property and downsize or live with a relative, you can continue owning the property and make enough money to pay the current and past due payments. In a favorable scenario, you may rent to someone who ends up being a potential buyer; this person can purchase your home and pay off the rest of your mortgage. To successfully use this tool and stop a foreclosure, you must negotiate rent payments that cover more than your mortgage payment, property tax, and insurance obligations, combined. To do this, you need to retain a real estate attorney who understands the current rental market and has experience with residential leases.
Option #3: Shot Sale
For many of our clients, this option is their first choice if they are not determined to stay in their homes. While a Short Sale is a great option, it is not as simple as it sounds, especially if the lender is not willing to accept this alternative. A short sale allows you to sell your property short of the amount owed to your lenders. To do this, ALL of the lien holders must agree to accept less than the amount owed on the property. Additionally, a Short Sale might have significant tax implications. Because of these issues, it is important to use a good real estate attorney who can present an offer to your lenders and convince them that this option will save time, money, and trouble.
Option #4: Assumption
A loan assumption is when a lender gives ownership interest of a property to another person who accepts responsibility for the terms, payments, and obligations of the mortgage loan. These days, almost all mortgages contain a “due on sale” clause. This contract clause requires the loan to be entirely paid off by the time the property is transferred. It’s hard enough to find someone willing to take over a mortgage, but it’s even harder to find a bank or lender who will agree to waive the “due on sale” clause. While it can’t hurt to explore this option, we recommend only utilizing it if you’re already thinking about filing for bankruptcy.
Option #5: Bankruptcy
Although it may seem like a scary notion to consider, the truth is filing Chapter 7 or Chapter 13 Bankruptcy can stop a foreclosure dead in its tracks. However, because the bankruptcy process can be costly, time-consuming, and a detriment to your credit score, it’s best to reserve this tool until after the foreclosure process has already begun.
Is a Foreclosure in Your Future? Explore Your Legal Options Today
Contact the real estate attorneys at The Law Offices of Ruben and Ruben if you’re facing a foreclosure. Our experienced and compassionate legal representatives have worked with financiers, lenders, contractors, homeowners, and developers in a variety of real estate issues. No matter the complexity of your case, our team to help you pursue a favorable case result that safeguards your standard of living and prepares you for the next stage of your life.
Contact The Law Offices of Ruben and Ruben at (240) 641-8572 to schedule a free consultation.