Have you fallen behind on your mortgage payments and need to know how to stop foreclosure at the last minute?
You might feel hopeless or powerless to the potential of losing your house.
However, you might be able to save your house by using one of these 7 strategies to stop foreclosure last minute. Read below for more information on how you can stop or delay foreclosure!
How To Stop Foreclosure in Georgia At The Last Minute
1. File for bankruptcy in Atlanta, Georgia.
The first step to stop foreclosure at the last minute involves filing for bankruptcy.
When you file, the court issues an order containing an “automatic stay,” putting a foreclosure on hold.
While the lender can get around an automatic stay by filing a motion, even if their motion is granted, it will take a couple of months to take effect.
If the lender does not make a motion to remove the stay, the hold will last throughout the remainder of the foreclosure process, which can last up to 4 months.
What are the risks of bankruptcy?
- The inability to file another bankruptcy for a certain period of time, and can lose your protection against new collection actions (such as wage garnishments).
- Credit takes a hard hit, and even if you can get credit, it comes with significant interest rates.
Chapter 13 bankruptcy may allow you to save your home if you are ALREADY in the bankruptcy process.
Chapter 7 may help you if you can no longer make payments.
Bankruptcy stops foreclosure dead in its tracks.
Once you file a bankruptcy petition, federal law prohibits any debt collectors, including your mortgage lender, from continuing collection activities.
Foreclosure is considered a collection activity, and so the day your lender becomes aware that you have filed for bankruptcy, the foreclosure process will effectively be frozen.
But here’s the rub; once you get to court, the bankruptcy trustee’s role is simply to play referee or mediator between you and your creditors.
Bankruptcy really just buys you more time to replace your lost job or recover financially from a temporary disability; it doesn’t let you off the hook for your debts.
The law requires your mortgage company and other creditors to work in good faith with you to formulate a reasonable repayment plan so you can get back on track.
Consult with a bankruptcy attorney regarding whether filing for bankruptcy is a good strategy for you.
2. Apply for a loan modification.
It is easier to apply for a loan modification before you are facing the daunting task of how to avoid foreclosure, but it is still possible to do this at the last minute.
If the modification is approved, your foreclosure remains stopped unless you stop making payments again.
Unlike repayment plans and forbearance, mortgage modifications are designed to lower your monthly payments over the long term and, often, bring you current on the loan.
If you can’t afford your mortgage payment now, or won’t be able to in the near future, a loan modification is most likely the best approach to remaining in your house.
There are many reasons why borrowers might need modification, including:
- Their income stream was disrupted by a layoff or injury and a new job at the same pay is just not available.
- Their interest-only loans caused the principal to reach a preset cap, which in turn dramatically pushed their monthly payment upwards to an unaffordable level.
- Their interest rates reset higher.
- Something happened in their life that required them to reprioritize their budget—for instance, a medical emergency or a child in trouble.
Here are some of the ways your servicer might modify a mortgage to reduce your payments:
- Reduce your mortgage’s interest rate to the current market rate, if it’s lower than what you’re supposed to be paying now.
- Convert from a variable-rate to a fixed-rate mortgage, which could bring the payment down.
- Extend the loan’s repayment period—for instance, from 30 years to 40. This will bring down the monthly payment, but delay for many years the time when you can begin to build equity.
- Reamortize the loan, which involves adding the amount of the missed payments to the principal balance and issuing a new loan at a new interest rate for a new period of time. Reamortization can result in an increased payment (for example, if the interest rate stays the same or increases) or a reduced one (for example, if the interest rate is reduced and the loan period is increased).
3. Sue your lender.
If your lender is using a nonjudicial process to foreclose outside of court, then you can actually file a lawsuit against the lender.
This is risky for several reasons.
First of all, it can be very costly.
It’s you against an institution.
Second of all, since you are the plaintiff challenging the foreclosure, you will have the burden of proof (meaning that it’s on you to provide evidence that you are not at fault).
To prevail in your lawsuit against your lender, you will need to prove to the satisfaction of the court that the foreclosure should not take place because, for example, the foreclosing lender:
- Cannot prove it owns the promissory note
- Did not act in compliance with state mediation requirements
- Violated the state’s Homeowner Bill of Rights
- Did not follow all of the required steps in the foreclosure process (as determined by state law), or
- Made some other grievous error
4. Foreclosure Workout.
Up until the time your home is scheduled for auction, most lenders would rather work out a compromise that would allow you to get back on track with your mortgage than take your home in a foreclosure.
Banks are in the business to lend money, not to manage properties.
They would rather not take back your property if they can figure out a way to help you get back on track.
Repayment Plan: Keeping Current and Catching Up
With a repayment plan, you arrange to make up your missed payments over time and stay current on your ongoing payments.
This approach is usually the most feasible and easiest to negotiate with your servicer.
For it to work, your income will have to be able to cover both current and makeup payments.
Example. Say you are four months behind on your payments of $1,500 a month, for a total of $6,000. Paying an extra $1,000 a month over the next 6 months would bring you current.
Repayment plans typically last three, six, or nine months.
Servicers usually don’t offer longer plans because most borrowers find it difficult to make larger-than-normal payments for an extended period of time.
Sometimes the servicer can approve a repayment plan immediately without asking the lender for permission.
The longer it will take you to catch up, the likelier it is that your servicer will have to get permission from the lender.
Reinstatement: Getting Caught Up on the Loan
Many states give you, by law, the right to reinstate your mortgage (make it current by paying off the delinquent amount in a lump sum).
Or your mortgage contract might give you a period of time during which you can reinstate and stop a foreclosure.
Redemption: Paying Off the Loan
In all states, you can redeem the loan (pay off the entire loan) before the sale.
Some states give you a period of time after the sales date to redeem the mortgage by paying it off in full (plus interest and costs) or by reimbursing whoever bought the home at the foreclosure sale.
Forbearance: Getting a Break From Payments
Under a forbearance agreement, the servicer or lender agrees to reduce or suspend your mortgage payments for a period of time.
In exchange, you promise to start making your full payment at the end of the forbearance period, plus an extra amount to pay down the missed payments.
Forbearance is most common when someone is laid off or called to active military duty for a relatively short period of time and cannot make any payments now but will likely be able to catch up soon.
In forbearance, unlike a repayment plan, the lender agrees in advance for you to miss or reduce payments for a period of time.
But both forbearance and repayment plans require extra payments down the line to bring the loan current.
Forbearance for three to six months is typical; forbearance for longer periods is less so.
Refinancing Your Loan
Another possible option for keeping your house is to refinance your mortgage, perhaps under the federal Home Affordable Refinance Program or HARP.
Normally, refinancing is available only if you have equity in your home. But under HARP, you might be able to refinance even if you’re underwater. With a HARP refinance, you could:
- get a lower interest rate
- get a shorter loan term, or
- switch from an adjustable to a fixed-rate mortgage.
One catch, though, is that you must be current on your mortgage payments to get a HARP to refinance with no 30-day (or more) late payments in the last six months and no more than one late payment in the past 12 months.
And refinancing through HARP might not reduce your payment by a lot, but it will help you avoid nasty interest rate resets that might be in your future under your current mortgage.
HARP is set to expire on December 31, 2018.
5. The Short Sale Process.
After your lender files a NOD but before they schedule an auction, if you get an offer from a buyer, your lender must consider it.
If they foreclose on your home, the lender is going to simply turn around and try to resell it; if you present them with a reasonable short sale offer, they may see it as saving them the time, effort and trouble of finding a qualified buyer in a soft market.
So, if your home is on the market, continue to aggressively seek a buyer for it, even after your lender initiates the foreclosure process.
Read The Complete Short Sale Process From Beginning to End for action steps you can take to unload your home fast, then make your best pitch as to why your lender should agree to the short sale.
6. Deed in Lieu.
A deed in lieu of foreclosure is exactly what it sounds like.
The homeowner facing foreclosure signs the deed to the home back over to the bank – voluntarily.
This sounds like it would be a great option, but actually has the same impact on a homeowner’s credit that foreclosure does.
Lenders are very reluctant to agree to take a home back through a deed in lieu of foreclosure for a number of reasons:
- They fear the homeowner will sue later alleging they didn’t understand what was happening,
- the lender must pay any second or third mortgages or home equity lines of credit (HELOCs) off before executing a deed in lieu,
- and the lender wants to be certain that the borrower’s financial distress is real.
Allowing the foreclosure process to proceed is one way the lender can be sure the borrower is not faking poverty.
As such, a deed in lieu of foreclosure is virtually never granted unless:
- foreclosure is imminent
- the owner has had their home on the market for several months and been unable to sell it
- there are few or no junior loans or liens the lender will have to pay off
- the seller can document their financial hardship
- the seller initiates the process and documents the voluntary nature of their request for a deed in lieu
Even when all these factors are present, many lenders will not agree to a deed in lieu, but it is worth a try!
7. Contact Breyer Home Buyers To Stop Foreclosure At The Last Minute
If you live in the city of Atlanta, Breyer Home Buyers has connections with the city that allow us to know how to stop foreclosure at the last minute in certain situations.
If you are facing foreclosure and considering your options, call us at (423) 463-7269 to see if your house is a good fit.