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How To Stop a Foreclosure

Foreclosure can damage your financial and personal life. Get helpful tips on how to stop foreclosure.

Foreclosure has become a rather common occurrence in the past several years. [©Shutterstock, 2010]
©Shutterstock, 2010
Foreclosure has become a rather common occurrence in the past several years.

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

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:

  • Refinance Your Mortgage -- See if the lender is willing to offer lower interest rates or if you can get a better offer from another lender. Refinancing may involve some initial extra costs, but it could mean lower monthly interest payments.
  • Reinstatement, Forbearance or Alteration of Your Repayment Plan -- A lender may be willing to write down the total amount owed or allow a borrower to lower or halt payments for a short period of time until getting finances in order. The lender also may be willing to let you pay off a portion of the payments due every month until getting caught up.
  • Prioritize -- Go through your finances to see whether spending can be cut. While health care, housing and food should be the top priorities, other expenses such as entertainment, trips and restaurant visits should be cut to a minimum.
  • Sell Other Assets -- Maybe you have an expensive TV, jewelry or something else that could be sold. Even though the proceeds may seem insignificant in comparison to the mortgage, these actions demonstrate the effort needed to catch up with payments and may make a lender more willing to improve the conditions of your agreement.
  • Talk to a Counselor -- The U.S. Department of Housing and Urban Development (HUD) provides a list of approved housing counseling agencies on its website. These agencies can provide more detailed advice on how to stop or avoid foreclosure.


Free Foreclosure Help

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.

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