Home Foreclosure Help - Stop Foreclosure

Keeping The Property Vs. Selling The Property

If your monthly house payment (including property taxes and insurance) does not exceed 40% of your gross monthly income, it should be possible for you to keep the property. If the payment is greater than 40% of gross monthly income, consider selling or transferring the property to avoid negative impacts to your credit.

Don't give away equity if you can keep it with a home equity loan and put it in your pocket!

Lender Workout

Before exploring new options, have you tried to come to terms with your existing lender? Lenders want the loan to be current, not to have to complete a foreclosure. Can you make up the defaulted amount over a period of months? Can you re-write the note and include the defaulted amount? Can you give the lender a deed-in-lieu of foreclosure and preserve your credit? These are questions you should ask yourself and possibly your lender if you haven't done so already. They will want to know why the loan is in default and why you think you will be able to make the payments in the future. Temporary financial setbacks that have since been cured are the best candidates for this. Your lender will probably not be inclined to discontinue foreclosure proceedings if they have reason to believe they will have to start again in 6 months.

When a lender is looking at a solution for a defaulted loan, there is a range of solutions ranging from a simple repayment plan all the way down to completing the foreclosure action. The options are listed below in the order most lenders will prefer to workout a defaulted loan with the repayment plan being the preferred, most used option:

Repayment Plan: A formal or informal plan to re-pay the lender all of the past due amounts and fees over a period of time. This type of workout will usually require a downpayment, then monthly payments along with your regular monthly payment.
Forbearance: The lender has the capability to reduce or suspend payments for a period of time allowing you to recover from a financial setback.
Loan Modification: Designed to resolve default for longer term financial problems, this could include reduction of the loan interest rate, or reducing payments.
Loan Assumption: If the loan cannot be brought current and kept current, the payments on some loans can be assumed by a new borrower.
Pre-Foreclosure Sale: Sale of the property before the foreclosure can be completed. If proceeds from the sale aren't enough to fully repay the loan, this is often referred to as a "Short Sale".
Deed In Lieu of Foreclosure: This is the least preferred of all the options, and often not acceptable to the lender due to title issues or the presence of other loans against the property.

A successful workout to keep the property is dependent on the lender being able to determine that the homeowner suffered a financial hardship and will have the financial capability to be able to keep the loan current. A successful workout involving a pre-foreclosure sale or Deed In Lieu of Foreclosure will be dependent on the lender being able to determine there was a financial hardship and that foreclosure is inevitable. Most lenders will require the following documents as the minimum for considering a loan workout, and many lenders will not consider a workout until the loan has been delinquent for at least 90 days:

Hardship Letter: This letter describes the hardship that caused the loan to go into default and describes your preferred solution to bring the loan current. The hardship should be involuntary, such as divorce, job layoff or medical reasons. This letter will also include your proposal for a workout and the reason you are confident the workout plan will succeed.
Paystubs: One or two current paystubs from each person occupying the property who is contributing to the payment of household expenses. The lender will use this to determine the feasibility of any repayment plan, or to determine foreclosure is inevitable.
Tax Returns: Self employed borrowers will need to provide the last two years tax returns along with a current profit and loss statement. Many self employed borrowers don't receive paystubs, the lender will use the tax returns to determine income levels.
Financial Statement: A statement outlining all of your income, assets and liabilities. This statement provides a "snapshot" of your financial situation allowing the lender to determine the economic hardship can be overcome.

One key thing to remember if you are attempting to complete a workout without outside assistance is to submit ALL of your paperwork together as a package and be sure to keep copies of everything. Your lender needs all of the information to be able to make a determination of which type of workout may be appropriate.

Refinancing And New Junior Loans

Basic lending guidelines will require all home loans will total up to less than 70% of the current market value of the property. If you have more equity than that, you should have no difficulty in obtaining a new refinance or 2nd Trust Deed to bring your loan current. Expect higher interest rates and loan fees.

Click here to get help refinancing your home to stop foreclosure: Home Loan Assistants

Loans To Get You Current

If you experienced a temporary financial setback that has since been cured and are going to be able to keep the property, first consider family and friends for a loan to get current. It's much cheaper than hard money loans, but MAKE SURE you will be able to pay them back. You do not want to put them in the position of having to foreclose to get their money back. Hard money loans are typically private investors who will lend money based on equity in the property. Credit and income are not issues of importance and loan approval is usually a matter of days with funding following shortly. Loan amounts will usually be enough to bring existing loans current, pay the financing costs and put some money in your pocket. Loans will be amortized over 30 years to keep the payments lower and the balance will be due in 2 to 5 years.