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?



64 Comments

  1. Roberta Perez January 11, 2018 at 8:51 pm - Reply

    My Mother passed away Jan 2016. I was living with her and I am still living here. The payments are $950.00 a month.
    She went through a divorce and was re buying the house.
    I am waiting for a disability hearing. I had worked for 20 years for the United States Postal Service. So I had a retirement account. I was able to get that money and make the payments. The money ran out after a year and a half.
    I am now behind 5 months. I will be getting my pension
    but not until May. Yes, the mortgage people will not talk to
    to me because my name is not on there. And the worst
    thing is no will was ever done! I don’t know what to do.

  2. Greg December 10, 2017 at 3:35 pm - Reply

    We are losing our house with 3 little girls living in it. I have money and am trying to pay but they wont accept it. I am so lost and the lender will not work with me. It’s as if they want me to lose my house.

    • Colin Robertson December 10, 2017 at 8:39 pm - Reply

      Greg,

      If the lender is unwilling to help, have you thought about reaching out to a state housing counselor to seek assistance. Or a similar third party? Good luck! This link is HUD’s Foreclosure Avoidance Counseling page: https://apps.hud.gov/offices/hsg/sfh/hcc/fc/index.cfm

  3. kim December 4, 2017 at 2:05 am - Reply

    I am 2 bank payments behind on my mortgage. my husband had major heart surgery. so he on disability. we went 8 months without any income our children paid the bills. because 1 year ago he had his knee replaced so all of our money we had saved is what got us thru that 3mths. we had no time to save any money. then all of a sudden this happens we had to wait 6 mths to sign up on disability it got approved quick no back pay from them. we owe 15 thousand more on the mortgage. is there any program in the state of w.v that could help us. thanks kim. are credit is ruined it is like a 570. kim c from barbour county w.v today date is Dec. 4th.

    • Colin Robertson December 4, 2017 at 8:33 am - Reply

      Kim,

      There is the West Virginia Housing Development Fund (WVHDF), which is the state’s affordable mortgage finance agency. They may offer solutions, though you may also want to speak with your lender/loan servicer to see what options they offer to get you back on track. Good luck!

  4. Adam Looman November 10, 2017 at 12:47 pm - Reply

    Hello Colin,
    my family and I have been renting a house for the last 4 years and then we received something in the mail that the house is going to be auctioned in December of this year if the back taxes are not paid or the house is not brought up to current status. so I asked a few friends from church and they advised us not to pay the landlord rent but to find out who the owner of the home is and to pay them while I try to find another place to live. I’m obviously finding another place to move us but now the landlord is saying that its not true and is trying to get money out of us and saying he has to move back in. I haven’t made a payment in a few months but during that time he never contacted us in anyway the only form of communication that i received was a notice to vacate in 60 days as per the civil code of my state but it was given 2 days after we received the notice in the mail of the property auction. will i be forced to pay the landlord the money he is demanding on top of saving to get a new place. I’m a single father with 5 kids and not many options. brutal truth if possible.

    • Colin Robertson November 10, 2017 at 4:07 pm - Reply

      Adam,

      Hard to say…I don’t know if a renter is exempt from paying rent just because the owner is delinquent on property taxes. If the renter is still getting a roof over their head and all else that they agreed to with the lease it may not matter that the owner is getting fined or facing the risk of losing the home. If those actions eventually affect the renter in some way, it might be a different story, just not my area of expertise.

  5. Paul Davis October 24, 2017 at 8:41 am - Reply

    Unfair and corrupt mortgage practices. Wells Fargo was the original mortgage on our new brownstone in downtown Savannah. We had to move to Cincinnati because of my wife’s work. We missed a few payments and were notified the day before (one day) Wells Fargo sold out property and brownstone to another individual. Now we are renting and have lost all of our equity that we had in that brownstone (100K+). Is there a statute of limitation on how long we have to take WFM to court to try to get our money back? Is there anything we can do? This happened in 2012

  6. Emily white June 17, 2017 at 7:58 am - Reply

    Can the bank foreclose on my house if I’m not currently living in it due to repairs it’s needing. We are also working on getting it on the market after repairs are done. All payments are made on time, but we just don’t currently reside there at the moment. Is foreclosure a possibility?

    • Colin Robertson June 19, 2017 at 9:49 pm - Reply

      Emily,

      Not sure what your agreement is with the bank and if you informed them of the repairs and your intention to list once complete to prevent foreclosure proceedings.

  7. patricia dame April 21, 2017 at 6:13 pm - Reply

    Didn’t get to pay last month on modify. I want to quick sale what do I do first? Ive tried contacting bank. Loan threw. And my husband talk to people about chapter 13. I just want away from house cost to much too much house and property to take care of because im usually gone 2 to 3 weeks out on road and only home maybe 1.5 days. What are my options please help. Next week hauling bees and wont get a chance to stop at all and no reception on phone for a lot of time.

  8. charles kozel April 6, 2017 at 12:09 am - Reply

    Behind 9 months ,loan mod not a possibility, have hearing may 2 2017,I have job just fell behind.Need more time to save I have past due amount but lacking the legal fees.i need more time and don’t want to loose home and don’t know what to do.have poor credit and tried money mutual and other loan comps but denied due to my poor credit.

  9. Jose Espinoza March 29, 2017 at 3:26 pm - Reply

    My name is Jose. I own 35000 in my house I’m behind 1 month of 775. I don’t have work my house value is 130.000. I don’t want to be in foreclosure.

  10. Rob February 21, 2017 at 7:11 pm - Reply

    Colin I’ve gotten a forclosure letter I’ve tried everything including hud I have a fha loan I don’t want to lose my home I don’t know where me and the kids will go I’ve already did a loan modification any information may help

    • Colin Robertson February 23, 2017 at 10:09 am - Reply

      Rob,

      Sorry to hear that. Getting in touch with your lender/servicer about loss mitigation options, speaking to housing counselors, seeking out loan mods, asking family for help, etc. are generally the options borrowers employ to lower/defer payments in order to maintain homeownership. Good luck.

  11. Andy February 16, 2017 at 10:50 pm - Reply

    My mom passed few years back and left the house to me and my brothers. It seems the mortgage company found out she passed and now won’t talk to us about the mortgage loan. We have been paying but fell behind and now it may go to foreclosure. To get out out we need to pay what’s due and some reinstatement fees. Is that correct? Will that be all it takes. The deed was put into our names but mortgage company still won’t tell us anything.We plan on selling eventually.

    • Colin Robertson February 17, 2017 at 10:08 am - Reply

      Andy,

      Hard to know without all the details, especially as they won’t speak to you. Seeing how serious it is, could be advisable to speak with a real estate attorney or someone else knowledgeable about foreclosure law and inheritance that can establish communication with the lender.

  12. Keith February 11, 2017 at 1:26 pm - Reply

    Hey i am 90 days behind on my usda mortgage i have the money to bring it current i recieve a letter notice of acceleration of loan can i save my mortgage

    • Colin Robertson February 15, 2017 at 3:26 pm - Reply

      Keith,

      Probably best to speak directly with your lender/loan servicer to get the proper details. Good luck!

  13. Georgette M Williams February 3, 2017 at 10:41 pm - Reply

    I’m trying to save my home, my sell date was February 1st and the mortgage company has brought it back, can I still save it?

    • Colin Robertson February 4, 2017 at 4:25 pm - Reply

      Georgette,

      I don’t know, may want to speak with the lender/loan servicer directly and/or a housing counselor to determine all your options. Good luck!

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