The Ultimate Guide:

Can You Stop A Foreclosure Once It Starts?

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Facing the possibility of home foreclosure in the USA is an incredibly daunting experience. 

When confronted with a notice of foreclosure, it’s all too common for individuals to worsen their situation by avoiding the issue. 

However, assistance is available. This guide is designed to offer you a comprehensive array of practical solutions and protect you from actions that might exacerbate the problem. 

There’s no reason to panic or feel overburdened. Countless individuals have navigated this challenging circumstance successfully. Rest assured, you’re in capable hands. 

We’re committed to supporting you through this tough phase in your life. Now, let’s get started.

Table of Contents
Can You Stop A Foreclosure Once It Starts

1. How To Stop Foreclosure on Your Home

Here are the nine key steps to consider when trying to prevent the foreclosure of your home or property. Some options are more advantageous and won’t adversely affect your future, while others carry greater risks. Therefore, review this article and choose the strategies that best align with your current circumstances and urgency level.

So, here’s how to halt the foreclosure of your home:

  • Acknowledge Avoidance Behaviors
  • Talk to HUD-Approved Housing Counseling Agency (SV 390)
  • Contact Your Mortgage Lender
  • Propose A New Payment Plan.
  • Understand the ‘loss mitigation’ process
  • Explore Foreclosure Loans and Bridge Loans
  • Apply for Debt Relief
  • Consider a Voluntary Foreclosure
  • Filing For Bankruptcy

These are your nine primary alternatives.

But before we delve into each of these, let’s clarify a few things:

What does ‘foreclosure’ mean?

Why might a foreclosure notice be issued for your home?

What are the potential outcomes if the case proceeds to court?

What Does Foreclosure Mean?

Foreclosure occurs when your bank or mortgage lender starts a legal procedure to take possession of your home due to unpaid mortgage debts. Once they foreclose on the property, they typically sell it to recover the outstanding debt. With a mortgage, the bank holds the property title while you repay the loan.

If you fail to make these payments, you violate the mortgage agreement. This gives your lender the legal right to the property’s equity and the ability to evict you for the purpose of selling the home.

Why Are Foreclosure Notices Issued?

The path to foreclosure begins with missing a mortgage payment.

It’s often said, from financial advisors to family members, that missing a mortgage payment is one of the worst financial missteps.

While it’s a serious matter, missing a payment is not rare and doesn’t automatically result in home loss. Each lender has a different response, which might include imposing late payment fees or increasing interest rates.

Missing a second payment usually leads to written warnings from your lender, making prompt communication with them crucial. To halt further proceedings, you must agree to repay the overdue amounts (arrears) by a specified date.

stop foreclosure on your home

Failure to communicate with your lender or to settle the arrears allows the lender to file for foreclosure. This involves:

  • Submitting a justification for their action to a court.
  • Notifying you about their filing.

It’s important to recognize that a lender’s move to foreclose does not guarantee the loss of your home.

There are still various measures you can take at this stage.

The court will set a date for a hearing, and you’ll receive the hearing details, your lender’s claims, and a defense form to fill out. You should also prepare a budget to demonstrate your repayment ability to the court. 

Settling the case outside of court is often still a possibility at this point, and legal advice can be instrumental in negotiating with your lender.

If you’re unable to reach a settlement, the foreclosure hearing will take place.

The worst-case scenario: 

– is a court ruling in favor of the lender, resulting in an eviction notice. 

You would then have to leave your property within a designated period, usually 28 to 56 days. The lender will then sell the property to settle the debt. 

On the other hand, the court might suspend the foreclosure, allowing you to remain in your home and possibly sell it yourself. In certain cases, if you can reach a payment agreement, you might still be able to save your home.

The two most favorable outcomes are:

  • Adjournment, which provides more time.
  • Dismissal, which stops the foreclosure process altogether.

Adjournment is common in complex cases, while dismissal occurs if the lender is found to be acting unlawfully.

Remember: Missing your court date can result in an automatic ruling in your lender’s favour.

Even if the judge decides in favor of your lender, it doesn’t definitively mark the conclusion of your situation.

You have the option to consult with a legal professional regarding the process of filing an appeal.

Additionally, there remains the opportunity to negotiate new payment arrangements with your lender, extending all the way up to the eviction date.  

Despite a decision favoring your lender, it’s important to remember that this doesn’t irrevocably seal your fate.

Seeking guidance on appealing the decision is a viable course of action.

Moreover, the window for establishing revised payment plans with your lender is open until the actual day you are required to vacate the property.

Remember: Banks don’t want to deal with the eviction and home-selling process. Their ideal scenario is for you to continue living in the property as a long-term, paying customer. Reaching an agreement with you aligns more closely with their interests than proceeding with foreclosure and sale.

Receiving a foreclosure notice might feel overwhelming, as if your world is turning upside down. 

However, it’s typically the beginning of a challenging yet solvable journey. 

Having explored the ‘what‘s and ‘why‘s, it’s time to delve into the ‘how’s.

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Starting from section 2, we’ll examine the specific steps you can undertake to prevent foreclosure, providing you with actionable strategies and solutions to navigate this difficult situation.

2. Acknowledge Avoidance Behaviors

Under significant financial strain, it’s common to feel paralyzed by fear.

This might lead to avoiding mail, not answering calls, or seeking refuge under the comfort of your blankets. Such a reaction is a normal human response to the threat of losing something deeply cherished – your home.

Here’s the deal:

If you’re already making progress with your action plan, you might skip this section.

However, if you’re still in a state of avoidance, shifting your mindset is one of the best things you can do. Instead of seeing that intimidating letter as a gateway to further problems, try to view it as a crucial step towards resolving your situation. 

Admittedly, that’s easier said than done. 

The word ‘foreclosure’ emblazoned on a document can be incredibly daunting for anyone.

Give yourself a brief period to acknowledge and process these emotions – the shorter, the better. Take a moment to relax. Have a cup of coffee.

Then, with as much swiftness as you can muster to maintain momentum, take the smallest step towards action. Embrace the adage, ‘feel the fear and do it anyway’, and start to tackle the challenge head-on.

stop foreclosure

By suggesting action, we’re not simply advising you to ‘just pay your bill.’

At this stage, it’s likely that paying off your mortgage isn’t financially feasible for you.

A good initial step could be to look up your lender’s mortgage support line and save it in your phone.

Starting with manageable actions can pave the way for tackling more significant challenges ahead.

Did You Know: In the United States, under the Fair Debt Collection Practices Act (FDCPA), debt collectors are prohibited from using threatening, abusive, or profane language in their communications, ensuring that the collection process remains respectful and within legal boundaries. It’s a victory for consumers.

3. Talk to HUD-Approved Housing Counseling Agency

The initial advice you’ll likely receive from a support agency is to communicate with your mortgage lender. However, it’s still beneficial to contact a support agency first.

They can offer valuable guidance on how to effectively prepare for this conversation. Additionally, they can assist you in creating a budget, which will be crucial when negotiating a new payment plan with your lender.

If you’re hesitant to make a call, there are online budgeting tools available for free use. Sometimes, just hearing a supportive voice can be both helpful and reassuring.

Call center agents at these agencies are specifically trained for these situations. An organization like 995hope.org is an excellent resource in such cases.

They are experienced, non-judgmental, and won’t rush you off the phone.

Use their online budgeting tool to help you make a decision.

Important: They’re not the only resource out there – see our ‘Resources for further help’ section at the end of this guide.     

4. Contact Your Mortgage Lender

Dealing with mortgage payment difficulties isn’t new for lenders; they encounter such situations regularly. 

The primary step in resolving any conflict, including financial ones, is to initiate communication. 

We understand:

It’s a common misconception to view banks as adversaries, but in reality, they have dedicated teams and trained staff prepared to assist. 

Many banks in the U.S. offer specialized helplines: one for those who are already behind on mortgage payments and another for those anticipating future difficulties.

how to stop foreclosure on your home

When you talk to your lender, aim for two main objectives. First, acknowledge your awareness of the situation. 

Lenders are more likely to work with you on a solution if they see you’re actively seeking to address the issue. Foreclosure is a costly and time-consuming process for banks, involving significant legal resources. 

While you might feel frustrated, keeping the conversation constructive is more beneficial in the long run.

The second objective is to negotiate a plan for repaying any overdue amounts. 

This involves proposing a new payment plan that works within your current financial capacity.

Approaching this conversation with a clear understanding of your financial situation and a proposed plan can significantly increase the chances of reaching a mutually agreeable solution.

Pro tip: Always ask if your mortgage plan includes mortgage protection insurance. 

If it does, you may be covered against certain situations that have affected you financially, such as injury or redundancy.  

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5. Propose A New Payment Plan

Proposing to your lender that you ‘pay what you can’ might be a strategy to prevent the foreclosure of your home.

It might not be the full payment amount or within the timeline set in your mortgage agreement, but it can help you get back on track, allow the lender to recoup some funds, and potentially halt court proceedings.

Legally, your lender is required to consider any reasonable offer you make.

So, what is a reasonable offer:

Your budget is key here. If you’re unable to pay any amount to your lender currently, you have a couple of alternatives:

1) Propose to extend your mortgage payment term.

For example, if you have ten years remaining on your mortgage, you might agree to extend it to twelve years, but with lower monthly payments.

2) Ask Request to spread the overdue payments across your entire existing term. 

This means your mortgage term remains the same, but you’ll pay a bit extra each month for the remaining period. This is known as ‘capitalizing the arrears’.

Let’s say your monthly mortgage payment is $2,800, you’re two months behind, and you have a total of 5 years left on your mortgage. 

This means you have $2,800 x 2 = $5,600 in total arrears. 

To determine the extra monthly amount, divide the total arrears by the remaining months of your mortgage. 

Over 60 months (5 years), this would be $5,600 ÷ 60 = $93.33 per month. So, if your lender agrees, your new monthly mortgage payment would be $2,893.33.

You will eventually need to make sure arrears are repaid in full. 

But this step takes into account time, and overtime is usually how we make money. 

This process gives you breathing space and saves your lender from taking further action. 

6. Understanding the ‘pre-action protocol’

While it might seem otherwise at times, banks don’t have the authority to create laws. They can only establish their terms and conditions. 

Even when we agree to these terms by signing our mortgage agreements, every American has specific rights protected under the law. Banks are not permitted to act arbitrarily or seize property without following due process.

In the context of foreclosure, there is a structured process that lenders must adhere to before escalating the matter to legal proceedings. This includes a series of steps designed to ensure fairness and transparency. 

Your lender is required to clearly communicate the debt amount, consider any new payment proposals you submit, and provide a response to these proposals. 

They must also justify any refusal of your proposal and give you written notice before initiating court proceedings, typically with a set period to prepare, such as 15 working days.

Understanding these rights and the procedural requirements lenders must follow is crucial before appearing in court. 

This knowledge not only prepares you for the legal process but also empowers you to advocate for yourself effectively.

Pro tip: If a lender tries to escalate a possession order to the courts without responding to your payment proposal, you may have grounds for the dismissal.

7. Explore Foreclosure Loans and Bridge Loans

You might be able to halt foreclosure proceedings by securing a bridge loan.

However, this option requires careful consideration. 

Bridge loans are typically costly.

They should be viewed as a short-term emergency solution, only to be used when other options are exhausted. 

While they may not prevent foreclosure entirely, they can provide you with the necessary time to sell your home yourself, even after a foreclosure ruling in the lender’s favor. 

This means much more control over the selling price you may be able to achieve.

8. Apply for Debt Relief

In the United States, one significant option is seeking mortgage forgiveness or modification. 

This can involve negotiating with your lender for a reduction in the principal you owe on your mortgage, opting for a short sale (selling your home for less than the outstanding balance), or transferring ownership to the lender through a deed in lieu of foreclosure.

It’s important to prepare thoroughly before contacting your lender about these options, including gathering financial documents and writing a letter detailing your financial hardship. 

The Mortgage Forgiveness Debt Relief Act offers tax relief for forgiven mortgage debt under certain conditions. This Act was extended several times, most recently in December 2020, allowing a maximum of $750,000 in debt forgiveness to be excluded from taxable income under limited circumstances.

Debt relief programs in the U.S. also include options like bankruptcy, which discharges debt without it being considered taxable income. However, working with debt settlement companies can be risky due to potential high fees, negative impacts on credit scores, and the possibility of lawsuits from creditors.

For those facing financial hardship due to COVID-19, several mortgage lenders have provided relief programs, including forbearance plans and suspensions of foreclosures and evictions. These programs are designed to help homeowners manage their mortgage payments and avoid foreclosure.

For detailed information and assistance, it’s advisable to consult directly with a mortgage lender, a HUD-approved housing counseling agency, or a legal professional to explore all available options and understand the implications of each.

Can you stop a foreclosure once it starts?

Debt relief programs in the U.S. also include options like bankruptcy, which discharges debt without it being considered taxable income. However, working with debt settlement companies can be risky due to potential high fees, negative impacts on credit scores, and the possibility of lawsuits from creditors.

For those facing financial hardship due to COVID-19, several mortgage lenders have provided relief programs, including forbearance plans and suspensions of foreclosures and evictions. These programs are designed to help homeowners manage their mortgage payments and avoid foreclosure.

For detailed information and assistance, it’s advisable to consult directly with a mortgage lender, a HUD-approved housing counseling agency, or a legal professional to explore all available options and understand the implications of each.

9. Consider a Voluntary Foreclosure

A voluntary foreclosure is when a homeowner chooses to vacate their property before an official eviction.

This act is essentially surrendering the keys to the lender, transferring the responsibility of selling the house onto them. While this option eliminates the need for court appearances and halts mortgage payments, it also means acquiescing to foreclosure.

Since this guide focuses mainly on how to favourably stop the foreclosure, we don’t advise this course of action.

Choosing voluntary foreclosure is a way to exit the situation, often considered by those feeling extremely overwhelmed. However, it entails giving up control over the process.

You won’t be involved with the estate agents, meaning you won’t have a say in the sale price or the timeline of the sale.

This could potentially lead to a lower sale price and increasing debt if the property sale is prolonged.

Even though your mortgage payments cease, the interest on these payments continues to accrue until the property is sold.

Therefore, while voluntary foreclosure might seem like a straightforward solution, it’s important to weigh the consequences, including the loss of control over the sale and the potential financial implications.

10. Filing for bankruptcy

Bankruptcy should indeed be considered as a last resort due to its significant and long-lasting repercussions.

When you declare bankruptcy, it can impact your asset ownership and your credit score.

While you might not always lose your home in a Chapter 13 bankruptcy, under Chapter 7, whether you keep your home depends on your equity in it.

Generally, if your equity is below a certain threshold, the trustee likely won’t sell your house, but if it’s above, they might, and you’ll get the exempted amount from the sale.

However, be aware that the lender can still foreclose if you miss mortgage payments.

Bankruptcy also affects your ability to retain other personal assets like vehicles. If you can continue making payments, you might keep your car, but if you’re behind, the vehicle could be repossessed.

Additionally, there are state-specific exemptions for certain personal assets and cash, but these vary.

Your bankruptcy becomes a matter of public record, though it’s not commonly published unless it involves a prominent individual. Bankruptcies can be accessed through the bankruptcy court or online via a PACER account, but this usually involves costs.

Employers might find out about your bankruptcy, especially if your wages were garnished due to debts. With Chapter 13 bankruptcy, the court could order automatic wage deductions for debt payment. However, employers are prohibited from discriminating against employees based on bankruptcy filings.

The impact on your credit score can be substantial. A high credit score can drop by over 200 points, while a lower score might drop by about 130 to 150 points.

This affects your ability to secure loans and the interest rates you might get. A Chapter 7 bankruptcy stays on your credit report for 10 years, while Chapter 13 stays for seven years. Over time, you can rebuild your credit by managing your debt wisely, such as making on-time payments and updating past due accounts.

Deciding between Chapter 13 or Chapter 7 bankruptcy depends on your specific situation. Chapter 13 might be better if you want to keep all your property, while Chapter 7 has more severe consequences but may provide the necessary financial relief. It’s also advisable to consider credit counseling, debt management programs, or creating a viable budget to avoid bankruptcy altogether. For more detailed guidance, consulting a bankruptcy attorney is recommended.

For more detailed information on bankruptcy in the United States, you can refer to Experian​​, Debt.org​​, and FindLaw​​.

Resources For Further Help

The step-by-step government guide to foreclosure: Click Here  

Check if you can get legal aid: Click Here 

For a Debt Advisors of America Free Consultation – (800 920 2365): Click Here 

The organisations listed below are currently offering support.

To Contact FHA and find out more about their loss mitigation programs: Click Here

For a list of NON-PROFIT HOMEOWNER ASSISTANCE PROGRAMS: Click Here  

For Family Promise: Click Here  

 

Let Hardy Assist You

You don't have to do this alone

If selling your home quickly and stress-free sounds right for you, we're here to help. Our service is all about linking you with reliable, local investors who know your neighborhood and are open to meeting in person. Click below to find out more.

Our goal is to assist as many individuals as we can, which led us to develop this detailed guide. If you’re considering selling your home, we’re here to support you.

We offer a service that connects you, at no cost, with one of our thoroughly screened and reputable partners based on your unique needs and situation.

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These partners specialize in facilitating house sales, ensuring you receive the most feasible and realistic offer for your home.

They handle all the legal details and associated costs, and the proceeds from the sale are directly deposited into your bank account. Our partners can accommodate a range of selling timelines, whether you’re looking for a swift sale or have more time to spare.

Generally, quicker sales might result in a lower price, but they also expedite the process.

Ultimately, the approach depends on your specific needs and preferences.

Final Thoughts

We hope this guide has been a valuable resource in guiding you through the steps to prevent the foreclosure of your home.

Our goal has been to equip you with comprehensive knowledge, helping you feel more prepared for any situation that may arise.

It’s essential to remember that while financial stability is important, your mental health is paramount.

Regardless of where you are in the process, maintaining open communication is key. This means regularly talking to friends, family, trusted colleagues, or supportive agencies.

Also, taking breaks from managing phone calls and paperwork is crucial for mental clarity and preserving your well-being during challenging times.

Remember, it’s important to balance addressing financial concerns with taking care of your mental health.

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