How To Avoid Home Foreclosure

Mortgage foreclosure can occur if homeowners, who have taken a VA, conventional loan, or an FHA insured loan, default on mortgage payments. Foreclosure can lead to the lender gaining possession of a borrower’s home. If the value of the home is less than the mortgage amount owed, the homeowner may have to pay the balance amount to the lender under a deficiency judgment. Foreclosures will have a negative impact on the credit score of a home owner. Therefore it is imperative to learn how to avoid foreclosure.

In order for a home owner to avoid foreclosure, there are several things that a homeowner can do.  These include communicating to the lender your inability to make payments as soon as possible and requesting assistance.  If required, homeowners should back their communication with relevant financial figures like expenses and income from different sources.  They should not abandon their premises or they may not qualify for the foreclosure assistance.   

There are several housing counseling agencies approved by the US Department of Housing and Urban Development.  These agencies offer the latest information on the different programs initiated by government and private organizations that are designed to help homeowners facing the prospects of foreclosure.  Housing counseling agencies, which also provide credit counseling services, offer their services at no cost.   

In order to avoid forbearance, homeowners can try applying for Special Forbearance.  This may cause a revision of the repayment schedule and in some cases the payment may be revised, or even suspended.  A rise in expenses and a fall in the monthly income might enable homeowners to qualify for a new monthly plan.  Likewise, mortgage modification may result in extension of the period of repayment and may open up refinancing alternatives.  Homeowners who have undergone a financial difficulty could benefit from mortgage modification as they can chart out a more manageable repayment plan. 

Homeowners can also take recourse to a deed-in-lieu of foreclosure.  This requires voluntarily handing over the property to the lender.  This deed does not hurt a homeowner’s credit rating as much as a foreclosure.  A homeowner, who is a defaulter on payments, and doesn’t qualify for other alternatives, has not been able to sell the house, and is not in default with respect to other mortgages, qualifies for a deed-in-lieu of foreclosure.   

A homeowner’s qualification for any of the above mentioned alternatives will be determined by the lender.  However, homeowners should cautions of solutions that are not genuine.  It is highly recommended to get the help of housing counseling agencies in such cases.  Homeowners in financial difficulties are prone to fall prey to scams such as equity skimming in which a homeowner is tricked into signing the deed of the property to another person.  There are several counseling agencies that are not genuine and frequently charge homeowners for services that can be done for free.  It is very important that homeowners check the background of the counseling agency before choosing a particular firm.