Foreclosure can damage your financial and personal life. Get helpful tips on how to stop foreclosure.
Foreclosure rates have risen dramatically in the past few years, according to the Mortgage Bankers Association. The largest increases have affected subprime borrowers -- those with poor credit history -- but holders of prime loans have been negatively impacted as well. Keep reading to gather some tips on how to stop foreclosure.
The foreclosure process begins when the lender sends a notice of default (NOD) to the borrower, declaring a default has occurred and that legal action may be taken. An NOD may only be sent if the borrower is significantly behind on payments (usually 90 days, but it varies from state to state), meaning the borrower has already missed one or several payments. After the NOD has been sent, the borrower usually has around 90 days to remit payments on the loan. If he or she fails to do so, the lender can file a notice of sale, usually meaning the borrower's home will be repossessed and sold within a month.
There are measures that can be taken to stop the foreclosure process. Be aware, though, the further the foreclosure process has gone, the harder it will be to stop. If receiving an NOD, you already are far behind on payments and it is likely your credit score has deteriorated. Therefore, the first and perhaps most important tip on how to stop foreclosure would be to avoid falling behind on mortgage payments in the first place. If you fall behind on payments or are concerned about that happening, contact your lender immediately and see if a feasible payment plan can be arranged. There are several other steps that can be taken during the early stages of the foreclosure process:
There are numerous companies that offer foreclosure services. While many of them are perfectly legitimate, they are likely to charge significant fees. The HUD-approved housing counseling agencies are free of charge and can provide the same service. Most lenders also are willing to answer questions free of charge because it's in their best interest to work out the problem as well. During the foreclosure process, lenders incur legal fees and run the risk of getting less for the property at a foreclosure auction than the mortgage is worth. The estimated average cost associated with foreclosure for the lender is $50,000 to $60,000. Again, prevention is key.
Remember to maintain open and honest communication with your lenders to avoid losing property and compromising your credit score. If facing foreclosure, ask for help as soon as possible. The faster action is taken, the faster you can pull out of debt and regain financial balance.