February 27, 2023
Mortgages are the biggest debt most people have. When your finances change and you can no longer afford your mortgage, you miss payments, and your home becomes subject to foreclosure. Facing the loss of your home is overwhelming.
There are several ways you can stop foreclosure and keep your home including mortgage forbearance, deferral, repayment plans, reinstatements, loan modifications and bankruptcy. Your mortgage company calls these options Loss Mitigation.
All of these options vary by loan, lender, servicer and your particular financial situation. None of these options are guaranteed.
Request a Forbearance
Mortgage forbearance allows borrowers who are experiencing temporary financial challenges to put a hold on their monthly mortgage payments for a short-term period. During the forbearance period, the lender expects that you will use that time to get your finances in order so that you can resume your regular monthly payments. The key thing to understand about forbearance is that you’ll owe the amount that was suspended at the end of the forbearance period. So, if you were in forbearance for six months, at the end of the forbearance period, you will need to pay back the six months’ worth of mortgage payments. This may be done either as a lump sum or as part of a repayment plan.
Request a Deferral
Deferral may allow you to add some or all of the missed payments to the end of your loan. The amount deferred would be paid back when the property is sold, or the loan matures or goes into default or is refinanced.
Request a Repayment Plan
A repayment plan usually requires some kind of up-front payment (less than the past due amount) followed by monthly payments over a relatively short period of time (sometimes 3 to 6 months) to pay back the remaining past due payments.
Reinstatement Your Loan
Reinstatement requires you to pay back the past due amount in full in a single lump sum payment. Reinstatement is possible even after the foreclosure case is filed, but you must get a reinstatement letter from the law firm for the mortgage company. The reinstatement letter will have the amount, payment instructions and payment deadlines.
Apply for a Loan Modification
A loan modification does exactly what it sounds like. It modifies the terms of your existing loan by adding the past due amount to the end of your loan and recalculating a new payment at a new interest rate over a new repayment period. If you are not eligible to refinance, a loan modification may help to make your monthly payments more affordable, allowing you to stay current on the loan and remain in your home.
Mortgage Loan Modifications may lower your monthly payments by extending the length of the loan term or reducing your interest rate (when interest rates are falling) . Lowering the payments to a manageable monthly payment can give you the opportunity to avoid foreclosure and keep your home. You must be able to prove your ability to make the lowered payments to qualify for a loan modification.
Not all loans offer modifications and not all borrowers meet the eligibility requirements for a possible modification.
File a Chapter 13 Bankruptcy
If none of the options above work (and sometimes even if the options above are possible) a Chapter 13 bankruptcy may be the solution for you to reorganize your debts and reshape your future. The biggest advantage of Chapter 13 bankruptcy is the potential to save stop a foreclosure sale and get up to 5 years to pay back past due payments. When you file a Chapter 13 case, some of your debts are reorganized into a single payment, which may lower your monthly payments. The repayment plan is then paid out in installments over a 3-to 5-year period. Individuals with a regular income who can demonstrate the ability to start paying back their debts are eligible to file a Chapter 13 case.
If you are behind on your payments, a Chapter 13 bankruptcy may help you save your property by temporarily stopping a sale and giving you up to 60 months to pay back the past due balance or potentially a lower balance on your debt.
If you are facing foreclosure, time is of the essence. You must file a bankruptcy case BEFORE the court sells your property for the bankruptcy to possibly help.
Your home is your greatest investment. Do not begin the process of defending your home from foreclosure alone. There are important deadlines to meet and steps to take to strengthen your case. A foreclosure lawyer can make you aware of all possibilities for trying to save your home. Every homeowner’s situation is unique.
I am offering a free initial consultation to help you understand your options. Click here to schedule.