The majority of foreclosures could be stopped if homeowners communicated early with their lenders and documented all their communications in writing.  By educating yourself and finding out what your options are to save your home from foreclosure, you can stop the foreclosure process if you start early enough. The biggest mistake that many homeowners have made is waiting too long to seek foreclosure help.

If you think you are going to be in default or you are already behind in your mortgage payments, contact your lender immediately and explain your financial situation. Ask them what options are available to stop any foreclosure actions against you.   You may also want to consult with a foreclosure defense real estate attorney, a free HUD certified housing counselor, your mortgage broker or a mortgage modification company.

Options to Stop Foreclosure
The following are options that may be available to you in order to stop the foreclosure process on your home:

• Refinance your existing mortgage. With the new Obama foreclosure prevention plan allowing homeowners  to refinance their primary residences with as little as 5% equity in their home, more homeowners will qualify  to refinance now and be able to get lower monthly mortgage payments avoiding foreclosure. Only loans backed by Fannie Mae and Freddie Mac are eligible and the loan must be a conforming loan $417,000 or under.  Prior to the new plan, homeowners needed at least 20% equity. You must be current on our loan though. The plan does not pertain to investment properties or jumbo loans over the $417,000 limit.
• Mortgage Modification. Ask your lender if you qualify for a mortgage modification if you do not qualify for a refinance. A mortgage modification is different from refinancing as it is a modification of your existing loan and a not a new loan.  Either the terms are extended, the interest rate is lowered, sometimes debt is forgiven or the arrearage is applied to the back end of the loan. Again you must show income that you can pay the new mortgage so if you are not working or show sufficient income, you will not qualify for a loan modification or a refinance.
• Deed in Lieu of Foreclosure. A deed in lieu of foreclosure is simply where you sign a deed back to the lender and hand them the keys to the house walking away without having to pay off your mortgage.
• Selling Your Home. If you do have equity, you may want to sell your home and downscale to something that is more affordable or just rent for awhile until your financial situation improves.  If you have lost your job or your hours have been cut, you are facing a divorce, illness or death in the family, selling your home may be the best option.  Consult a Realtor and have them market your home and help you find the right buyer.In today’s market, you must price your home at market or slightly under to sell it because there is so much competition from other distressed properties, such as short sales and bank owned foreclosures (REO’s).
• Short Sale. A short sale is when you ask the lender to take a reduced amount on your mortgage and approve the sale at a lesser amount than you owe on the mortgage to a buyer who is willing to purchase the home.  The shore sale process can take anywhere from 30 days to 60 days or longer. You will want to have a Realtor list your property and help you find the right buyer. However, an attorney, title company or short sale company should negotiate the short sale with your lender. The risk is that the bank will now approve the sale and your home could go to foreclosure if you do not make your mortgage payments while you are waiting for approval.
• Loan Rescission. If you suspect that you are a victim of predatory loan practices, you may want to seek the advice of a foresensic loan specialist to review your loan.  Most real estate foreclosure defense attorneys can perform this review for you and let you know if you have legal grounds to rescrind your loan.   You have three years from the time you discover the predatory loan practices in which to file a legal action to rescind the loan.
• Reinstatement. Any time during a foreclosure process, the homeowner can pay the defaulted amount including any fees and costs and the loan can be reinstated.
• As a last resort you may need to file bankruptcy. Certain states protect primary residences and other personal assets from bankruptcy and you may be able to keep your home and your car and pension plan.  However, you will need to consult with a bankruptcy attorney as the bankruptcy laws are complicated.

Be sure to visit our stop foreclosure category for more information.