Ways to Stop a Foreclosure

Ways to Stop a Foreclosure

Once a Notice of Default is filed, options and timelines become more restricted. It's obviously better to work out a foreclosure avoidance strategy with your lender well in advance.

You will be given a certain time period to bring the payments current, pay the costs of filing the foreclosure and stop the foreclosure. This is called reinstatement of your loan. If you cannot make up the missed payments and the lender will not work with you, here are a few other options to stop foreclosure:

Sell Your Home

Interview real estate agents to get an opinion of market value and average DOM to sell your home. You might be tempted to hire a discount broker, but sellers who are racing against a foreclosure need the experience, constant communication, high level involvement and marketing systems that full-service real estate brokers offer.

Consider a Short Sale

If your home is worth less than the amount you owe, you might be a candidate for a short sale. Even though a short sale may have a negative impact on your credit score, it does far less damage than a foreclosure.

There are actually mortgage programs that will allow you to purchase a home a day out of a short sale, where most lenders require a 4-7 year seasoning after a foreclosure.

Sign a Deed-in-Lieu of Foreclosure

This is called deeding the home back to the lender. The borrower gives the lender a properly prepared and notarized deed, and the lender forgives the mortgage, effectively canceling the foreclosure action. Keep in mind though that this will have the same effect on your credit as a foreclosure does.

Worse Case - The lender might also work an arrangement where a home owner can remain in the home until finding a place to move into.

Owners in default should negotiate the right to retain occupancy, arguing that if the lender followed through on the foreclosure, an owner would still enjoy the right of possession during that procedure.