If you fall behind in your mortgage payments, the possibility that you may lose your home can make you feel devastated and helpless. The worst approach in that situation is ignoring notices from your lender and doing nothing. Most people don’t realize that if you are the victim of a foreclosure, you have options. In fact, depending on your circumstances, you may be able to avoid and stop foreclosure — but only if you take action.
Mortgages — and the laws that govern them — are extremely complex. The options available to you depend in large part on your individual circumstances. Sometimes a modification — even on less than favorable terms — is the best recourse when you are in default. In some circumstances, you may want to consider litigation as a way to resolve your mortgage default. Consulting with an experienced housing counseling program like the one at Southwest CDC is the best approach to identifying the viable options you have.
To illustrate the different ways foreclosure may be avoided here are some of the most common ways of addressing unpaid mortgages. In some cases, the resolution may involve using two or more of these tools together.
FORBEARANCE
Forbearance is a temporary reduction or suspension of mortgage payments. This option gives you time to overcome the issues that caused your inability to make payments, but does not necessarily resolve any delinquency. Forbearance is one of the tools used as part of the federal response to Covid-19 homeowner issues. However, because the delinquency is not resolved, you may end up owning a balance after forbearance is over. To resolve your post-forbearance balance, you will have to pay a lump sum or structure a payment plan to repay missed amounts until you get caught up. It is important to know your rights and options after forbearance.
LOAN MODIFICATION
A mortgage or loan modification is a change in your mortgage loan that enables you to make up missed payments through any number of mechanisms. A typical mortgage modification will extend the payment terms, lower the interest rate, and add any unpaid amounts due back into the principal balance of your loan. There are obvious pros and cons to a mortgage modification that you must consider before exploring this option. For example, while a mortgage modification may lower your monthly mortgage payments, it may also increase the principal balance of your loan. As a result, you may pay more interest on your loan.
REPAYMENT PLAN
Sometimes lenders will agree to set up a repayment plan through which you can make up your unpaid amounts over a longer term. This is a less common resolution, but is something that some lenders and mortgage servicers offer.
PARTIAL CLAIM / ADVANCE CLAIM
A partial claim is a tool used for FHA-insured loans in which the borrower receives a second loan (typically interest free) that enables them to become current on the primary mortgage. If you have a conventional loan, your lender may utilize an advance claim, which is similar. However, these workarounds are difficult to qualify for, and thus rarely are a viable option.
DEBT FORGIVENESS
Occasionally, but not often, a lender will agree and waive a payment to get you current on your loan. The term that applies to this action is debt forgiveness. Typically, any debt forgiveness comes after you have established a positive payment history on a loan modification. However, any debt forgiveness is usually at the discretion of your lender, so make sure you review any fine print related to any forgiveness claims.
REFINANCING
If you have sufficient equity in your home, the lender may agree to refinancing that increases the balance of your loan to cover back payments and re-amortize the loan over the payback period. Or, depending on the delinquency, you may be surprised to find out that you can refinance the loan with a third party.
DEED IN LIEU OF FORECLOSURE
In some cases, you may be able to deed your home to the lender to satisfy your mortgage obligation. You should only take this action directly with your lender or servicing company. Do not ever deed your property to any other company or individual. A deed in lieu of foreclosure may have tax implications that a foreclosure defense lawyer can help you consider.
SELL YOUR HOME
Selling your home on your own may be a way to resolve mortgage problems. If your home is worth less than the amount you owe on the loan, the sale might be a short sale (selling the property for less than it’s worth), which requires approval of the lender.
FINDING THE BEST AVAILABLE OPTION
If working with your lender does not yield a satisfactory solution to avoid a foreclosure action, or you don’t know how to even begin finding a solution, a mortgage foreclosure defense lawyer or local housing counseling program may be able to help.
HOW TO STOP FORECLOSURE
After a lender or servicer files a foreclosure action, your only option is to defend against and stop the foreclosure. In a foreclosure action, the lender files suit against you as the borrower, seeking judgment for the amount owed plus the right to foreclose the mortgage on your home. A foreclosure action eventually results in a judgment against you, and later the sale of your home by the lender to pay the judgment. But you can defend against the action, just like any other lawsuit. You can file motions, take depositions, or even go to trial.
If you are sued, do not ignore the lawsuit. If you do not defend against the action, judgment will be entered against you, and you may lose your home. You also may face a monetary judgment if your home doesn’t sell for enough to cover your debt. You should not take those risks if your lender files a foreclosure action. Instead, talk with a lawyer with experience to stop foreclosure.
Southwest CDC’s housing counselors, located at 6328 Paschall Avenue, can assist you with these and other housing related issues. Call 215-729-0800 for more information.
Portions of this article were written by Danielle Davey, of the law firm Sloan, Eisenbarth, Glassman, McEntire & Jarboe, LLC
If you fall behind in your mortgage payments, the possibility that you may lose your home can make you feel devastated and helpless. The worst approach in that situation is ignoring notices from your lender and doing nothing. Most people don’t realize that if you are the victim of a foreclosure, you have options. In fact, depending on your circumstances, you may be able to avoid and stop foreclosure — but only if you take action.
Mortgages — and the laws that govern them — are extremely complex. The options available to you depend in large part on your individual circumstances. Sometimes a modification — even on less than favorable terms — is the best recourse when you are in default. In some circumstances, you may want to consider litigation as a way to resolve your mortgage default. Consulting with an experienced housing counseling program like the one at Southwest CDC is the best approach to identifying the viable options you have.
To illustrate the different ways foreclosure may be avoided here are some of the most common ways of addressing unpaid mortgages. In some cases, the resolution may involve using two or more of these tools together.
FORBEARANCE
Forbearance is a temporary reduction or suspension of mortgage payments. This option gives you time to overcome the issues that caused your inability to make payments, but does not necessarily resolve any delinquency. Forbearance is one of the tools used as part of the federal response to Covid-19 homeowner issues. However, because the delinquency is not resolved, you may end up owning a balance after forbearance is over. To resolve your post-forbearance balance, you will have to pay a lump sum or structure a payment plan to repay missed amounts until you get caught up. It is important to know your rights and options after forbearance.
LOAN MODIFICATION
A mortgage or loan modification is a change in your mortgage loan that enables you to make up missed payments through any number of mechanisms. A typical mortgage modification will extend the payment terms, lower the interest rate, and add any unpaid amounts due back into the principal balance of your loan. There are obvious pros and cons to a mortgage modification that you must consider before exploring this option. For example, while a mortgage modification may lower your monthly mortgage payments, it may also increase the principal balance of your loan. As a result, you may pay more interest on your loan.
REPAYMENT PLAN
Sometimes lenders will agree to set up a repayment plan through which you can make up your unpaid amounts over a longer term. This is a less common resolution, but is something that some lenders and mortgage servicers offer.
PARTIAL CLAIM / ADVANCE CLAIM
A partial claim is a tool used for FHA-insured loans in which the borrower receives a second loan (typically interest free) that enables them to become current on the primary mortgage. If you have a conventional loan, your lender may utilize an advance claim, which is similar. However, these workarounds are difficult to qualify for, and thus rarely are a viable option.
DEBT FORGIVENESS
Occasionally, but not often, a lender will agree and waive a payment to get you current on your loan. The term that applies to this action is debt forgiveness. Typically, any debt forgiveness comes after you have established a positive payment history on a loan modification. However, any debt forgiveness is usually at the discretion of your lender, so make sure you review any fine print related to any forgiveness claims.
REFINANCING
If you have sufficient equity in your home, the lender may agree to refinancing that increases the balance of your loan to cover back payments and re-amortize the loan over the payback period. Or, depending on the delinquency, you may be surprised to find out that you can refinance the loan with a third party.
DEED IN LIEU OF FORECLOSURE
In some cases, you may be able to deed your home to the lender to satisfy your mortgage obligation. You should only take this action directly with your lender or servicing company. Do not ever deed your property to any other company or individual. A deed in lieu of foreclosure may have tax implications that a foreclosure defense lawyer can help you consider.
SELL YOUR HOME
Selling your home on your own may be a way to resolve mortgage problems. If your home is worth less than the amount you owe on the loan, the sale might be a short sale (selling the property for less than it’s worth), which requires approval of the lender.
FINDING THE BEST AVAILABLE OPTION
If working with your lender does not yield a satisfactory solution to avoid a foreclosure action, or you don’t know how to even begin finding a solution, a mortgage foreclosure defense lawyer or local housing counseling program may be able to help.
HOW TO STOP FORECLOSURE
After a lender or servicer files a foreclosure action, your only option is to defend against and stop the foreclosure. In a foreclosure action, the lender files suit against you as the borrower, seeking judgment for the amount owed plus the right to foreclose the mortgage on your home. A foreclosure action eventually results in a judgment against you, and later the sale of your home by the lender to pay the judgment. But you can defend against the action, just like any other lawsuit. You can file motions, take depositions, or even go to trial.
If you are sued, do not ignore the lawsuit. If you do not defend against the action, judgment will be entered against you, and you may lose your home. You also may face a monetary judgment if your home doesn’t sell for enough to cover your debt. You should not take those risks if your lender files a foreclosure action. Instead, talk with a lawyer with experience to stop foreclosure.
Southwest CDC’s housing counselors, located at 6328 Paschall Avenue, can assist you with these and other housing related issues. Call 215-729-0800 for more information.
Portions of this article were written by Danielle Davey, of the law firm Sloan, Eisenbarth, Glassman, McEntire & Jarboe, LLC
