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How to stop foreclosure

What to do if your lender is about to take your home

June 30, 2023

Foreclosure happens when homeowners are no longer able to make their mortgage payments and the lender takes back ownership of the property. And while it’s a daunting, overwhelming prospect for homeowners, it may not be a hopeless one.

If you’ve fallen on hard times due to job loss or other unforeseen circumstances and are concerned you’re headed toward foreclosure, being proactive is one of the most essential steps you can take.

Key insights

  • There are numerous options available to a homeowner before reaching the foreclosure stage.
  • Options might include loan modification, mortgage forbearance or government assistance programs.
  • A homeowner has the best chance of stopping foreclosure when they work with their lender right away.

The foreclosure process

The exact foreclosure process varies from state to state, but there are a few generalities you can expect. Typically, the lender starts sending foreclosure notices three to six months after the first missed payment.

Here’s how it breaks down:

  1. Around day 10 or 15 after a missed payment, the lender starts charging late fees.
  2. Thirty days after the first missed payment, the mortgage lender considers the loan in default. The foreclosure process can technically start at this point, but this is generally considered the preforeclosure phase. There are still options available to you during preforeclosure, such as loan modification.
  3. If the foreclosure process continues, the lender notifies the homeowner and issues public notices with key dates.
  4. If there is no resolution, the lender sells the property through an auction to try to recoup as many funds as possible. Meanwhile, the homeowner has a short amount of time to leave the property and find a new place to live.

Even if the foreclosure process has started, you can stop it from progressing further if you take swift action.

“There are often many options a homeowner does not know about when they are facing foreclosure and in most instances foreclosure can be avoided if the consumer is proactive and reaches out to their mortgage service to explain their hardship,” advised Thomas Showalter, founder and CEO of Candor Technology.

Preventing foreclosure

If you’ve missed some payments or are in the preforeclosure phase, the best course of action is to quickly work with your lender to determine the best option to stop the foreclosure from happening.

While each of these options may present some challenges, they could offer the chance to stay in your home and get back on track with mortgage payments.Mortgage forbearanceLoan modificationGovernment assistance programsDeed-in-lieu of foreclosureShort saleLegal actionBankruptcy

Where to get help if you’re facing foreclosure

Foreclosure may feel like the only option, but there are resources available.

First, there are ways to negotiate with your lender. As mentioned, the most essential part is to contact them early when you’re first experiencing trouble with payments.

Note that lenders have a legal obligation to help with loss mitigation. This means they must provide notices and give ample time for response. It also requires your servicer to work with you to review your options. To do this, you have to fill out a loss mitigation application with the lender, which they have 30 days to respond to.

There are numerous counseling services available, too. The Department of Housing and Urban Development (HUD) is a government agency assisting homeowners through counseling free of charge. The goal is foreclosure prevention by going through the options available to you and making an informed decision.

» MORE: Credit counseling vs. debt settlement

Watch out for foreclosure scams

Unfortunately, there are numerous scams targeting those who are in a vulnerable or panicked financial situation. These scams may pose as lenders offering relief, or even use wording or logos that look similar to government agencies — but they are in fact scammers.

Look for warning signs that you’re dealing with a scam, including when a company or individual:

  • Charges upfront fees
  • Tells you to stop making mortgage payments
  • Asks you to make payments to someone else other than your loan service provider
  • Tries to rush your paperwork
  • Pressures you into making a quick decision
  • Claims to conduct an audit on your finances
  • Asks you to sign over the title

If you are unsure if you are receiving information from a scammer, you can always call your lender and ask them to verify the mailing or solicitation. You can also call a HUD-approved housing counselor and they can offer assistance.

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Candor Technology Contact

Jacob Gaffney

Gaffney Austin LLC