If you are behind on mortgage payments and fear foreclosure, you should understand that it may not be your only option. Depending on your situation, there may be some alternatives.
Although some of the alternative options still result in you losing your home, not all of them do. The key is to act immediately once you start getting behind on your payments.
Work with your mortgage servicer
According to the U.S. Department of Housing and Urban Development, the person you should first reach out to when you are struggling to pay your mortgage is your mortgage servicer. This individual may be able to help you avoid foreclosure, but your chances are greater if you contact this person at the first sign of financial trouble.
Explain your situation to the mortgage servicer, whether it is a short-term or long-term hardship. The mortgage servicer will have you provide certain documents such as bank statements, pay stubs or a hardship letter, if applicable. These will help the servicer make the appropriate recommendations for mortgage assistance.
Alternatives to foreclosure
FindLaw outlines some of your options when facing potential foreclosure. If your new financial situation is temporary, your lender may be willing to make changes to the mortgage itself, such as suspending or lowering payments for a set period of time, so you can keep the home.
The lender may also modify the terms of the mortgage, such as extending the loan period to reduce monthly payments. If you are able to begin paying the full mortgage again, you may be able to take a one-time payment from an insurance fund to restore your current mortgage.
If you are unable to continue to pay the mortgage, you may be able to avoid the consequences of going through foreclosure. One option is to sell the house for less than the mortgage loan amount. Another option, if any of the other options do not work out, is to give the property back to the lender.
Foreclosure Defense Litigation
If the mortgage servicer will not work with you, and you want to save your home, you can still defend a mortgage foreclosure lawsuit. It is important to file the required responses immediately and to hire a lawyer experienced in defending such suits. Just because you fell behind in your mortgage payments, does not mean that you do not have defenses to the foreclosure. A vigorous defense can give you leverage to persuade the mortgagor to work with you. There are numerous defenses to foreclosure lawsuits that can help you keep your home. Your attorney can help you defend it and give you time to improve your finances so that you can rehabilitate your mortgage.
Chapter 13 Bankruptcy
As a last resort, if you want to save your home and are unable to work something out with the mortgage servicing company, Chapter 13 bankruptcy is a powerful tool. It allows you to use provisions of federal law rehabilitate your mortgage whether the mortgage company wants to work with you or not! Chapter 13 requires that you have sufficient income to pay your regular bills, including your mortgage payment, and have money left over to pay the past due payments over a period of no more than 5 years. Another advantage to Chapter 13 is that it helps you discharge other debts that may have accumulated during a rough financial period. Many homeowners can attest to the benefits of Chapter 13 to help them recover from difficult financial times.