The Best Way To Stop Foreclosure

Determining the best way to stop foreclosure depends on the specifics of your situation.

Various factors like the amount of equity in your home, your monthly payments, your current financial circumstances, what your monthly income is, and how far behind you are on your mortgage play a huge role in coming to an educated decision on the best way to stop foreclosure.


Here's how the foreclosure process works.

The Timeline

30 days... Your troubles actually start as soon as you miss a single payment. Lenders may not contact you until you've skipped a second payment, but most will report the first late payment and every subsequent delinquency to the credit bureaus. Even a single late payment can devastate your credit score, the three-digit number that lenders use to help gauge your creditworthiness.

Each subsequent "late" further decreases your score, making it more difficult and more expensive to get a loan or a refinance that might help your situation. In addition, lenders typically tack on late fees of 5% or so for each missed payment.

60 to 90 days... Eventually, if the payments aren't made, the lender will file a "notice of default" with a local courthouse and send you a letter saying that the foreclosure process will start unless you make up the missing payments, late fees, and other associated costs.

How quickly the notice is filed depends on the individual lender and your individual state. Some lenders halt the foreclosure if you contact them to work out a payment plan or otherwise explain your situation. Others are more aggressive and start the process as soon as possible to try to protect their investment. Usually, this notice of default means that the amount you owe has shot up as well, since the lender typically adds substantial fees to cover its legal costs.

The notice of default is generally picked up by the credit bureaus, further depressing your credit score and making refinancing the loan extremely difficult.

90 days more.... Borrowers typically have 90 days from the notice of default to make up the deficit before the lender sends out a "notice of sale," which sets a sale date for the house (typically within the next 15 to 30 days).

In some states, it can be much longer. But your situation is not getting any better. After missing mortgage payments for 3 or 4 months a mortgage company may "call" or "accelerate" the home loan. Once this happens they no longer take a single monthly payment, instead insisting all back payments be made at once.

While other options short of paying all back payments may be negotiated, the biggest mistake people make at this time involves allocation of what little cash they do have.

It almost seems natural since the mortgage company says they do not want your money, and the second mortgage company, credit card companies and others call everyday demanding money, the proper thing to do is pay the others.

If there are ten people calling, making nine happy means fewer calls for you and less headaches in the short run. In the long run this is a critical mistake. At some point you will need those funds to save your home. Many options exist to stop a foreclosure; but they will all require money. So start saving some money for your lender. After all, if you stop making your credit card payments, they give you a bad entry on your credit report. If you can't work out a loan program with your lender, they take your home!

The first step in stopping your foreclosure is learning how to do so. You have options; you just need straight answers on what exactly they are.

By: Robert Spencer

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