Foreclosure on your home is a miserable experience that can ruin your finances, your credit and leave you in the lurch trying to find suitable housing for your family. On top of the stress of trying to keep your home, you must fend off scammers trying to rip you off. These fraudulent companies take advantage of you by claiming to act on your behalf to stave off the foreclosure process by having you sign off on the deed to your property to their company or charging you burdensome fees to do what a social worker, housing counselor or a bankruptcy attorney could do for a much lower cost.
When considering these steps, it is wise to contact an experienced attorney to assist you through the legal process of bankruptcy and what your rights are as it pertains to foreclosure.
Repayment Programs
Your bank does not want you to be foreclosed upon or abandon your home, and often will work with you to avoid the foreclosure process. Stay in your home to prove to the bank you are committed to the home and the mortgage. Contact the bank at the first sign that you cannot make a payment. Your bank may enact a special forbearance allowing you to only pay the interest on your existing mortgage, skip a payment or temporarily reduce or suspend your mortgage payments until your finances turn around.
Modification
Modification programs change the terms of your mortgage to reduce the amount that you owe on your home or by decreasing the amount of your monthly mortgage payments to a percentage of your take home pay. The federal Home Affordable Modification Program (HAMP) reduces your monthly mortgage bill to no more than 31 percent of your pre-tax pay. This Mortgage modification program is ideal for workers who have seen their hourly wages decrease or their work hours cut. The Principal Reduction Alternative (PRA) is for homeowners who find themselves underwater on their mortgages. This Mortgage modification program encourages the mortgage service to reduce the amount of principal on the mortgage loan, thereby decreasing the amount of the monthly payments.
Refinance
Refinancing your mortgage helps homeowners maintain ownership of their property when homes experience a decrease in value to the point where more is owed on the mortgage than the home is worth in current market conditions. Homeowners current on their mortgages but unable to enter into a refinance program with the bank might be eligible to refinance their homes through the federal Home Affordable Refinance Program (HARP). If your mortgage was financed through the Federal Housing Administration (FHA), the National Servicing Center of the FHA offers refinancing programs to homeowners who have lost their jobs or are at risk of foreclosure due to default on the mortgage loan.
Bankruptcy
If you are behind on your mortgage with no feasible way to catch up, Chapter 13 bankruptcy may be your best option. First, seek credit counseling, as a completed certificate will be required by the court. Prepare copies of your financial records and propose a repayment plan of your debts, including your mortgage. You must continue to make mortgage payments as you go through this process. Once your plan is approved by the court, you must follow through on your repayment schedule or your home will be foreclosed.
Sale / Short Sale
A short sale allows you to manage the exit of your home without the credit disaster of a foreclosure on your record. The federal Home Affordable Foreclosure Alternatives (HAFA) allows you to prove that your current mortgage payment is unaffordable and allows you to do a short sale or deed in lieu of foreclosure. Another option is a pre-foreclosure sale with approval of your mortgage lender, which allows you to sell your home for less than the amount owed on the mortgage principal, with your bank agreeing to close the mortgage upon the sale of the home. However, in some states you might be responsible to pay the difference between the sales amount and the amount remaining on the mortgage.
Contact an attorney before agreeing to any mortgage modification or deals with your bank or any other entity. In some cases, bankruptcy might be a better option than what the bank or mortgage lender is offering to you.