How to Keep Your Home and Avoid Foreclosure

If you fail to make your mortgage payments each month, your bank or mortgage lender may take action to repossess your home.

After all, it’s not technically your home until you’ve paid the mortgage in full.  Until that time, you AND the bank own the home.  So if you don’t hold up your end of the bargain, the bank could come knocking.  And the news won’t be good!

The legal proceeding is known as a “foreclosure,” and will result in the loss of your home, foreclosure fees, additional legal fees, and possibly a deficiency judgment if your outstanding liens exceed the current value of your home.  Your credit will also be shot when all is said and done.

The foreclosure process usually goes something like this:

You lose your job, become ill, or simply fall behind on your mortgage payments after your adjustable-rate mortgage resets. Unfortunately, these aren’t typically valid reasons to miss your mortgage payment(s).

When you originally applied for your mortgage, you probably verified asset reserves to prove to the bank that you could afford to pay the loan for a certain period of time, even if you failed to receive additional income for some period of time.

Once you miss your first payment, the bank or lender will hit you with a 30-day late. At this point your credit will take a huge hit (how long does a foreclosure stay on your credit), and a representative from the bank or lender may call you, or send you a notice in the mail regarding your failure to pay on time.

The bank or your loan servicer may also discuss a forbearance plan with you to resolve the missed payment and get you back on track. This is basically a special payment plan the bank/servicer sets up with the borrower to either lower payments or suspend payments so you can continue paying your mortgage.

Alternatively, there’s the possibility you could take advantage of a special refinancing or loan modification program to make your payments more affordable going forward. But you will still need to prove to them that you’ll be able to handle the new financing terms.

If you fail to speak with your lender/servicer, and continue to miss mortgage payments, you will be hit with a 60-day late, followed by a 90-day late.  That will impact your credit pretty significantly, and any chances of refinancing or seeking a forbearance plan may be lost.

Once you hit the 90-day late mark, the bank or lender will send a Notice of Default. The NOD essentially states that you have 30 days to make the payment current, appear in court, or face the risk of a foreclosure. If 30 days go by and you fail to appear in court or make your payments current, the court can schedule an auction to sell your home within 7 days.

If the auction ends without a buyer, the bank or lender will gain ownership and likely perform maintenance on the property, clear up any title issues, then put it on the market.

After paying legal fees, foreclosure fees, late fees, and losing your home, you’ll be hit with a huge ding on your credit report. A foreclosure will drop your credit score dramatically and prevent you from borrowing from A-paper banks for many years to come.

Various Ways to Stop a Foreclosure

The scenario above is just one way late mortgage payments can end in foreclosure.  Luckily, there are a number of ways you can stop foreclosure, though not all of them will allow you to keep your home. They include:

Refinance
– Forbearance Plan
– Partial Claim
– Pre-Foreclosure Sale
Deed in Lieu of Foreclosure

Loan Modification
Short Refinance
Short Sale

As I mentioned above, a refinance may ease payments and get you back on track. But you will need to qualify and exhibit the ability to make the payments.

Your bank may also be able to save you from foreclosure by putting you on an interest-only home loan or a shorter-term ARM to lower the monthly mortgage costs.  Ironically, these will reset in the future and could land you back in a tough spot.  However, it would buy you some time to get back on your feet.

A forbearance plan is a payment plan set up by your lender/servicer to ease or even suspend payments until you are current again.

A partial claim allows the mortgagee to advance funds to the mortgagor (the borrower) in the form of a promissory note. So long as you are not delinquent over 12 months, HUD may grant you a partial claim (for FHA loans), which will bring your mortgage payments current. It is essentially a second mortgage behind your existing lien that collects no interest, and is not due until you pay off your first mortgage or sell your home.

A pre-foreclosure sale, such as a short sale, will help you avoid a foreclosure, but unfortunately at the cost of selling your home, likely for much less than it’s worth.  It will also ding your credit in the process.

One final option is a deed in lieu of foreclosure, which allows you to sell your home back to the bank that financed your mortgage. It is a great way to avoid foreclosure proceedings, but again results in the loss of your home.

It must be voluntary, and both parties must act in good faith. The bank/lender must buy the property for at least fair market value, but will usually not proceed if that value exceeds the existing liens.

Contact a local HUD approved counselor for help in foreclosure matters. Click the following link for a list of HUD Approved Housing Counseling Agencies.

One final thing to note is that despite all the available, regulated, and honest means available for saving your home from foreclosure, many foreclosure scams are also prevalent.

These scam artists will do their best to contact you during pre-foreclosure to rip you off using a variety of tactics including bait and switch schemes, equity skimming, fake bailouts, and overpriced help that leads nowhere. So always do your due diligence when seeking foreclosure help to avoid making matters even worse.

Read more: How long after foreclosure can I purchase a home?


42 Comments

  1. Lisa Steele July 11, 2015 at 7:26 pm -

    I am over a year behind on my mortgage. I do not want to lose my home. I have been working with the lender to try to rectify the situation. However I received a auction letter in the mail which made me really panic. what can you do to help

  2. Colin Robertson July 15, 2015 at 11:43 am -

    Lisa,

    Your lender/loan servicer should be the one helping you out. Be sure to stay in close contact with them and/or explore loan modification programs such as HAMP to see if you can avoid losing your home. The Making Home Affordable phone number is (1-888-995-HOPE). It may help. There are also state housing agencies (https://www.ncsha.org/housing-help) that could provide assistance. Good luck!

  3. marcey allard August 19, 2015 at 12:34 pm -

    can you help

  4. Colin Robertson August 20, 2015 at 9:29 am -

    Marcey,

    I only write about potential solutions.

  5. Heather September 13, 2015 at 8:57 pm -

    My company buys houses for cash we are connected nationally. It might be a solution for you to contact us and avoid years of damage to your credit.

    I’ve been through this situation myself, and I wish I would have known about some of my options when all the banking options ran out.

    Please feel free to contact me, I would be happy to see if there is a possible solution for you.

  6. christl September 17, 2015 at 9:51 am -

    My father is dying from Cancer and the bank is foreclosing. Can he stay until he passes?

  7. Colin Robertson September 17, 2015 at 11:25 am -

    Hi Christl,

    Sorry to hear that. You may want to contact the bank/loan servicer to see what they can do to accommodate him.

  8. Laura conklin September 22, 2015 at 8:53 am -

    Hi Colin,

    My boyfriend has been dealing with his mortgage company’s 3rd party people for months now. He had spoke to a woman who “Supposedly” modified his loan for him and dropped the payments and just extended the length of years to pay the house off. He is constantly working and never paid attention but he sent in the payments and 3 months found out that they weren’t accepting them and had sent them back. The woman who made the modification didn’t make it and now according to the 3rd party company doesn’t exist. They are giving him information he needs last minute and making it impossible for him to do the modification. They are putting the house up for sale Sept. 25, 2015…Friday. Is there any way to avoid this other than filing for bankruptcy?

  9. Colin Robertson September 22, 2015 at 11:56 am -

    Laura,

    Might be a question for an attorney or a complaint with the CFPB or similar agency as it’s a very serious matter involving the loss of a home.

  10. Charles Givens October 19, 2015 at 7:32 pm -

    My wife and I started making payments in August of 2005. We paid each and every month on line and was 2-3 weeks early on every payment we ever made. In June of 2013 the mortgage company locked us out of our online account with no explanation. I called them and asked them why are we locked out from making our monthly payments. The response was it was in legal. I asked why and they said that they couldn’t tell me. I asked them can we still pay on our loan and they said no because it is in legal. At this time they stopped all monthly statements that were being mailed each and every month. I would keep in contact with them each month asking them why is it in legal and can we make a payment. Same answer as before. I went to bank and even tried to pay it at their branch. Again I was told by the bank itself, we can’t take your payment. Now here we are over 2 years of them not wanting to except our payments to where they are foreclosing on us. I had to retain a lawyer to help us with everything that happened to us. They finally sent a letter to our lawyer stating that they locked up our account and refused our payments because of some type of description problem. Now they want the payments that they wouldn’t take from us before or we face foreclosure. Do we as consumers have a chance to go after them for wrong doing and or have a chance to make them stop the foreclosure. We have proved that we we’re never late not even 1 time and as stated before we never missed a payment. Not sure if we would have any legal recourse against the mortgage lender. Any information will greatly help us. Thanks.

  11. Colin Robertson October 20, 2015 at 3:16 pm -

    Charles,

    Sounds like a question for your lawyer…good luck.

  12. Tanya December 14, 2015 at 4:43 pm -

    I am 13 months behind in my mortgage. They offered me a streamline modification, where they will give me a trial period of 3 months and then my mortgage term will become 40 years, maturing in 2055. We originally took this mortgage in 2003. What I want to know is what happened to all the payments prior

  13. Colin Robertson December 15, 2015 at 4:45 pm -

    Tanya,

    Those missed payments may have been added to your outstanding loan balance. Best to ask them directly what the loan amount will be on the modified loan including missed payments, fees, etc.

  14. Kyle December 16, 2015 at 4:44 pm -

    Hey Colin,

    We aren’t in horrible shape, we have been catching up on our mortgage, and at this point we are only 15 days behind. We had Wells Fargo send us a letter at the end of November saying if we didn’t make our single back payment by Dec 16th they would foreclose. We made the payment on time, but are currently 15 days behind on this month. We received a call from WF tonight and they threatened to start foreclosure on the 31st of Dec if we aren’t fully caught up.

    Can they file foreclosure on us for being (currently 15 days) one month behind as this bully on the phone with my wife claimed? WF has been a horrible lender, and instantly started to bully us when I had a job loss last year. We were originally 2 months behind but are less than one month behind now. They have been a horrible company to deal with, and I just want to know if they are just making empty threats, or can file foreclosure for being a month late, even though we continue to pay them.

  15. Colin Robertson December 21, 2015 at 11:20 am -

    Kyle,

    Sorry to hear that. You may want to get a professional (lawyer) involved and/or notify the CFPB or another agency if you feel you’re being mistreated. Good luck.

  16. Jacquelyn Stephens December 30, 2015 at 9:04 pm -

    I’m currently staying at my grandparents condo to take care of it instead of letting it sit since they have passed away last year, an I’ve gotten a notice from the condominium association for foreclosure, the house is paid off, once the association has filed a nod is there anything to stop the foreclosure process??

  17. Colin Robertson December 31, 2015 at 10:54 am -

    Jacquelyn,

    You may want to contact the HOA and see if you can pay the dues and penalties to get the account back in good standing instead of dealing with costly foreclosure proceedings. Good luck.

  18. Abby January 1, 2016 at 6:25 pm -

    I had gotten sick and had to stop working about 2 1/2 years ago. I’ve been trying since then to modify my mortgage. The bank did nothing to help. At first we were on time with payments, but I did notify the bank very soon we’d be unable to make the payments. They said if you’re current on your mortgage you won’t qualify for a modification. They told us we’d have to be behind on our payments before the bank would even open a mod application. Well…unfortunately that is where we ended up, late as we told them we would be. Then they tell us, you have to be current for them to help us. Seriously! We had to hire an attorney…after the bank filed a foreclosure on our home, and after us submitting countless mod packages never seeing the bank review one of them. They’d constantly tell us we were missing documents and continue to close the package process on us. The worst part is that it is a Sonymae mortgage and the lender does not participate with any of the government assistance programs that any other mortgage could help us. This lender ends up getting paid for the home whether we pay it or not. It is a horrific situation. What would give them incentive to help anyone in this type of mortgage if they lose nothing. Any advice would be so helpful. I’m at my wits end with this bank.

  19. Colin Robertson January 6, 2016 at 11:42 am -

    Abby,

    Sorry to hear that, it sounds truly awful. Sadly, I’ve heard of this type of thing happening more often than not. You may want to file a complaint with the CFPB, or tell your bank you plan to if they won’t help. Maybe that will motivate them. Good luck.

  20. Abby January 8, 2016 at 3:46 pm -

    Thanks so much Colin…I really appreciate the advice. I am going to speak with my attorney about reporting the bank to the CFPB. I think that would be a great next step. The lawyer had mentioned an agency at one time that they’d contact if the bank did not cooperate, wonder if it was the CFPB. I will ask them. I hope and pray there is an end to this nightmare, sooner rather than later. Will let you know how things go.

  21. Patrice January 9, 2016 at 3:09 am -

    No offense, Colin, but I see no advice given from you! You always seem to just pass the buck! I did want to comment on Abby’s situation. What did the lawyer actually do for you? You should have asked him these questions. He sounds as if he passed the buck, too. Just what did he do you? Just commenting….

  22. Colin Robertson January 9, 2016 at 7:54 pm -

    Patrice,

    I try to give an overview and actionable tips as well…but let’s face it, foreclosure is between the homeowner and the lender/loan servicer. It’s not passing the back but rather making the point that you need to deal with your lender/servicer to sort things out. Or possibly consult a lawyer. I’m not offended. Let me know what I could add that would be more helpful. Thanks.

  23. Abby January 11, 2016 at 9:18 am -

    Hi Patrice,
    Thank you for your comments. It is a very good question you asked…“what did the lawyer actually do for you?” I am very concerned about my current legal representation. I felt that once a lawyer gets involved, there should be more aggressive action taken, to force the banks’ hand. I have not seen anything new happening. Only more of the same…submitting package after package with the exact same issue, where the bank just continues to ask for “so called” missing documentation. Or more of the same documents, already submitted. The only thing that had changed from hiring an attorney is that they submit the package for me, and ask me only for what new or current docs that are requested by the bank. Although it alleviates the stress of me having to deal with the bank directly, if no momentum in the process is gained…what actual benefit is there. Oh, and they do attend the settlement conferences…two so far with no assertive action by the court. I know I shouldn’t have to ask my attorney to take a more aggressive stance, as it should be what one hires legal council for. But it is unfortunately the situation I’m in. I have asked my attorney to contact the banks attorney and work to make something happen. But nothing new has transpired. I’d hope to avoid having to change legal representation and then have to start over. I could not afford that financially or emotionally. I did contact another lawyer for advice to see if my current representation was on the right track. They said the repetitive nature of the package submission is typical even after the courts are involved, but felt the response that was sent to the initial foreclosure action wasn’t as strong as it could have been. I thought once the courts are in the picture it should expedite this process. But I’m finding out that is not the case. This has certainly taken its toll on me and on my husband. So I recently did some research online to try and find help, and that’s when I found this site. I have a follow up call with my lawyer today to discuss what options there are to put us in a stronger position. This whole nightmare feels never-ending and I feel completely helpless! I am open to trying anything at this point.

  24. Steve February 14, 2016 at 12:25 am -

    My wife had become very ill 5 yrs ago with a lifelong illness. We fell behind on 4 months of payments over the past 5 years due to huge medical set backs. The bank is giving us the chance to apply for loan modification but our home is in pre-forecloses and they stop taking payments which is putting us further behind ( we are saving every monthly payment). Is this normal? Will we lose our home? Do I need a lawyer?

  25. Colin Robertson February 14, 2016 at 3:44 pm -

    Steve,

    The CFPB restricts “dual tracking” so lenders can’t pursue foreclosure while also considering a loan modification. Theoretically this may protect you but it also may not hurt to keep a close eye on the bank/servicer to make sure they don’t move forward with foreclosure.

  26. Amy February 16, 2016 at 12:44 pm -

    Up above you talk about a partial claim. How do I go about looking in to that? I do have a FHA loan.

  27. Colin Robertson February 16, 2016 at 2:35 pm -

    Amy,

    Probably start with your loan servicer to inquire about a partial claim via FHA-HAMP.

  28. Tom February 18, 2016 at 10:51 pm -

    Colin,

    My bank has informed my attorney that they are going thru with the foreclosure on my home even after telling us both they were going to work with us and allow me to make payments but (no letter). The bank understands the tragedy that took place to me and that I was unable to work for 1 year after being shot multiple times by my neighbor; which is the reason I had an attorney prior to the foreclosure. The bank was offered a promissory note of the home being paid off with the insurance funds which they agreed over the phone but no letter from the bank; it’s like the bank intentionally mislead us.
    I was able to go back to work 8 months prior to the banks foreclosure but they wouldn’t let me pay on my mortgage at the time even when I had the money to catch up the past due payments and did not given any reason for my being locked out of my mortgage account in order to make payments.
    My attorney believes my best chance at this stage is to file a Chapter 13 Bankruptcy to slow the process down thereby giving time for the land owners insurance to settle the injuries I acquired from being shot multiple times. He is arranging a meeting for us both to speak to the bankruptcy attorney together…he may be scared of losing his percentage of the insurance claim but is hoping to bring this issue before a Judge I guess.
    We have also just found out that my home is listed under web sites that sell foreclosure properties before the foreclosure has been filed or taken place; we also believe the bank has a buyer already which is being looked into.

    Any words of wisdom other than good luck?

  29. Ven Gence March 13, 2016 at 5:44 am -

    Tom,

    I would suggest treating the bank the
    same way as your neighbor treated you.
    These villains have no sympathy for you.
    So no pity will be given unto them.

  30. Debbie March 13, 2016 at 10:55 pm -

    Hi Colin. Not sure if this is the way to proceed to ask a question, but I’ll give it a try. I just have one question. I am 2 months behind on my mortgage payment and I am putting my house up for sale by owner. Can my mortgage company hinder or stop the sale due to the delinquency? I would appreciate any feedback, Thank you!

  31. Colin Robertson March 16, 2016 at 10:14 am -

    Debbie,

    I don’t think they would try to hinder a sale as it probably wouldn’t be in their best interest, but they would likely want to collect late fees and penalty interest, etc. on top of the mortgage payoff amount.

  32. Debbie March 17, 2016 at 4:47 am -

    Thank you so much for responding! Very much appreciated! Have a great day!

  33. Mo April 14, 2016 at 7:12 pm -

    I have been assisted by a broker who told me he would get me my loan modification. He had a lawyer who would help but I learned three years ago that no documents were actually submitted and the bank has recently taken ownership over the house. I am still in my home but I am fighting eviction and just want my house back. I payed my mortgages on time but the bank wouldn’t restart my mortgage after it was stopped even, after me requesting several times to allow me to continue paying if the modifcation wasn’t going through. This was done initially because of the high interest rate but now I am faced with possible eviction.

  34. Kathryn May 25, 2016 at 3:27 am -

    My father’s house (nj) is already foreclosed, must be out in 3 weeks. But he has been very ill, in and out of a coma in the hospital for months. My brother is POA. How could we stall this process?

  35. Colin Robertson May 25, 2016 at 2:00 pm -

    Kathryn,

    Maybe reach out to the loan servicer and let them know the situation if you haven’t already.

  36. Linda keckler June 12, 2016 at 4:24 pm -

    Heather-does ur company ever buy properties at foreclosure sale and lease-option back to heir? Cash or cashier check required at foreclosure sale as u probably know.

  37. george June 22, 2016 at 11:35 pm -

    My parent’s were trying to bring their mortgage payments down, they had refinance once a couple years back. That had helped at the time but in late 2015 they decide to try refinancing once again with help of some lady, who told them to stop payments for 3 months. She also asked for 5 thousands dollars then she disappeared. My parent’s seeking for help went to other lady, who told them to pre-foreclosure sale to stop the bank from foreclosure but my parents were seeing that the lady was just asking for money but nothing had changed. They completely stop working with this lady and went straight with bank to get help from them. They have continued paying the mortgage but they very close to losing our home. What advice can you give to help prevent that from happening

  38. Colin Robertson June 24, 2016 at 4:27 pm -

    George,

    Unfortunately this type of scam/bad advice seems to be rampant. While it may not be completely avoidable, perhaps researching the company/individual thoroughly, checking their business license, etc. to ensure they are legitimate. And that what they’re offering is legal/makes sense. Hopefully they get it worked out…if their own bank can’t help, maybe the bank can advise them of other options or programs to save their home. There are also government options such as Making Home Affordable. https://www.makinghomeaffordable.gov/pages/default.aspx

  39. Allison August 17, 2016 at 11:45 am -

    Mr. Robertson,

    I am trying to find something out that seems to be eluding my research.

    My husband and I are considering relocating down south (for multiple reasons, we live in PA and do not care for the condition, and high taxes of the state).

    We are able to pay our mortgage. However, our neighborhood is going down hill. Everyone is in such a hurry to sell their houses, they drop to a very low amount and the wrong kind of people buy them. To add to it, the county in which we live invites the wrong crowd by offering government supplied incentives.

    Should the worst case scenario occur, and while we are able to make mortgage payments, we would have to spend thousands and thousands out of pocket to close to sell (given its dropped value, if something comes up in the inspection that must be fixed, a request for sellers assist, the realtor fees and so on), we would not be able to sell. We would not be liquid enough. Therefore, we would have to walk away.

    We both agreed we would be more than okay with renting for awhile. So here’s my question: If we obtained a place to rent before the foreclosure hit, and kept our mortgage current, would we have to prove to the landlord that we can afford the mortgage AND the amount of the rent?

    Kind Regards.

  40. Colin Robertson August 22, 2016 at 7:54 pm -

    Allison,

    That would probably be stipulated in your rental contract and/or between you and the landlord. Some landlords are very meticulous, others don’t seem to care very much as long as the rent check keeps arriving every month. Good luck!

  41. Karen M Sanft September 6, 2016 at 12:25 pm -

    I had taken a 30 k a year pay cut when I became an employee of a company instead of continuing to contract.. I have lived in my house for close to 13 years now.. I went through loan modification & it lowered my 1st mortgage about $150 a month.. Lowered my 2nd by about $75 which is my line of equity… There is a third one as well but that one is almost paid off in full.. I have missed a month here & there my dog got really sick & vet bill’s ran me over 2 k.. My credit is in the toilet because of this.. I have been cutting back on all expenses.. To catch back up.. I need power & internet as I work from home.. I think I’m about 3 months behind total… I know I can pay 2 of them right now but they will not let me access the accounts to pay it… What should I do? When I call I get transferred here & there then back & then by the time I would be able to talk with some one it’s past their normal working hours.. My parents both just pasted away one July 8th & the other in Aug 9th. Both had stage 4 lung cancer.. Father had been battling it for 2 years mother found out she had it day after mothers day my birthday.. Needles to say 2 months later she died… I have had one hell of a summer this year let me tell you.. But I am now ready to come back to earth & try & fix this??? What do I do?? Any advice would be greatly appreciated??

  42. Colin Robertson September 8, 2016 at 9:22 am -

    Karen,

    Really sorry to hear all that. Might be helpful to speak with your loan servicers directly and if they aren’t being forthright, there are agencies that protect consumers such as the CFPB that might be able to help. Good luck.

Leave A Response