The foreclosure process starts once you get a Notice of Default (NOD) from your lender. You’ve missed at least three mortgage payments, maybe more, so there seems to be no way to avoid losing your home. However, there are a few strategies that can set you on track. A foreclosure attorney near Los Angeles can help choose the right path and navigate the process.
You don’t always have control over the situation. A sudden illness, job loss, divorce, death in the family, increased interest rates, and unexpected repairs are just a few reasons you may struggle to meet your mortgage obligations. Here is a look at some options if foreclosure seems inevitable.
Work Out a Compromise with Your Lender
For most lenders, a deal that would get you back on track with your mortgage is preferred over auctioning off your home. Depending on your situation, your lender may agree to a repayment plan (forbearance) or add monthly fees until you catch up with missed payments. They may also change the terms of an adjustable loan, such as freezing or lowering the interest rate. Back payments can be added to your loan balance as well, especially if you have equity and meet specific guidelines, to re-amortize the loan (this is also known as refinancing).
Seek a Buyer
Even if your lender has initiated the foreclosure process, you can aggressively seek a buyer for your home. You can do this after the lender files the NOD; but the sale must be closed before an auction is scheduled. A short sale offer can save the lender time and effort, depending on the market, as they’ll need to resell your home during foreclosure. However, it might require making a strong pitch to convince your lender this is the best option. But the process can work out if you follow through with it.
Deed in Lieu of Foreclosure
You can voluntarily sign the deed for the home back to the bank. This can keep you in your home; however, this option impacts your credit just as much as foreclosure. Lenders don’t often agree to this option. They might fear you don’t understand the process. The financial burden on the lender can be high as well. To improve the odds of acceptance, provide the lender with proof of financial distress, that you’re voluntarily requesting a deed in lieu, and that you’ve been unsuccessful in trying to sell the home.
Have a Buyer Assume Your Loan
The assumption/lease option can avoid foreclosure. For this to work, the lender must agree to modify the loan and delete the “due on sale” clause in the mortgage agreement. Once the lender approves the new buyer’s qualifications, you might be able to negotiate a down payment with that party. With the lease option, the buyer becomes your tenant. You retain ownership of the property, but the lease payments must cover your mortgage payment, property tax, and insurance.
When you file for bankruptcy, you’re protected under federal law and debt collectors can no longer pursue any collection actions. That includes foreclosure. Bankruptcy, therefore, freezes the foreclosure process and allows you to negotiate a payment plan with your lender and creditors to help get back on track. Our experienced legal team at OakTree Law can assist in determining if bankruptcy is right for you, or whether an option such as loan modification will work.
To speak to our bankruptcy attorney in Los Angeles or Orange County, call 562-219-2979 or request a free evaluation online today.