When it comes to foreclosures, you’ve got more options than you may think, but you don’t have a lot of time. Learn the 5 things you can do to SLOW or STOP the clock on your foreclosure.
1. Talk to your lender - This seems simple, but this is where most people go wrong. We get it. Nobody likes crawling back to their lenders begging for extensions or admitting that they just can’t make payments anymore. But ignoring the problem isn't going to make it magically disappear. Be upfront with your lender. If you’ve suddenly found yourself in-between jobs or in the middle of a divorce, say so. Most lenders are in the business of lending, not owning houses. They want to help you stay in your home! They may be able to help you with a forbearance, more or less a pause button for payments; a lowered interest rate or an extended term, either of which could reduce your monthly payments; or any number of other restructuring approaches. But you’ll only find out if you ask!
2. Ask to see the note - If you are going through court proceedings make sure you ask to see the note. At worst, this will buy you a few days as your lender scrambles to produce the document; and at best, it will buy you months of stalling. Why would this be such a big deal? Electronic records! During the 2008-2012 housing bubble, lenders routinely destroyed the original loan documents when they were electronically recorded. How does this help you if the electronic record is on file? Because only the original document is enforceable! That’s right - if your lender can’t produce the original document that you signed, they can’t force your to pay or foreclose on your property. A 2008 Texas Law Review article concluded that 41% of sampled loans were missing paperwork! It’s worth a shot.
3. Consider bankruptcy - This option isn’t a get out of jail free card. It will hurt your credit score a bit, but it certainly can give you the time you need to get your life back on track. Chapter 13 bankruptcy stops the creditor phone calls and puts you on a payment plan so that all of your creditors are satisfied in due time. This is a great solution if you just had a setback, but you are able to make payments long-term. Chapter 7 bankruptcy more or less forgives much or all of your debt and let’s you start fresh. In many cases, you may have to liquidate your assets (including your home) for this to work, but this could certainly be a good option.
4. Sell your home on your own terms - If you have little equity in your house or if you owe more than the house is worth, you may want to partner with a real estate agent familiar with short sales. A short sale is when you sell the house for less than you owe on the mortgage. Short sales will ding your credit for three years, which is still and improvement over the 7-10 years that will haunt you for a foreclosure. Keep in mind that your lender will need to agree to the terms. If you do have equity in the home, consider listing it for sale on the open market or with an investor. If you work with an investor, ask whether they are willing to make up the back payments as part of the purchase agreement. While this might lower the money in your pocket, it could halt the foreclosure proceedings and prevent further damage to your credit score. Everything is negotiable!
5. Do something - Most people are so overwhelmed with the foreclosure process that they shut down and just do nothing. In this case, inaction is the worst action. You have the power to stop or slow the foreclosure, but you need to make a move before the clock runs out!
If you’re in the Central Florida area, see more tips at
www.stevenjantzen.com or give us a call at (321) 430-4048
