It can feel very scary when your bank starts a foreclosure action against you. The action may show up in the public records for your county and you may suddenly be facing a foreclosure sale date scheduled against your home.
It is always good to learn as much as you can about what you’re up against in order to understand all your options to delay or stop your foreclosure.
Stop foreclosure by going through your mortgage lender’s “loss mitigation process”
- You can use the loan modification process to help you achieve a mortgage modification so you can resume mortgage payments and keep your home. An approved and accepted loan modification will stop your foreclosure. If you have a Fannie Mae, Freddie Mac, FHA, VA, or USDA loan, there may be government programs to help you achieve a mortgage modification (to keep the home).
- You can request forbearance on your mortgage loan. If approved for forbearance, your mortgage servicer will temporarily stop requiring monthly mortgage payments for an agreed upon time.
- You can complete a reinstatement of the past due amounts in order to bring your loan current and keep the home. A reinstatement is a one-time payment in full of all your missed mortgage payments and any related fees. After you reinstate, you then resume your normal monthly mortgage payment.
- You can work out a new repayment plan with your bank or mortgage servicer to catch up on mortgage payments and keep the home. A repayment plan allows you to resume your regular mortgage payments with an agreed-upon extra amount on top of your regular payment that goes toward the arrears. Once your repayment plan is done, you continue with regular mortgage payments.
- If you want to short sell your home or deed it back to the bank (because you owe more than the home is worth), there are ways to apply and negotiate approval for a Deed in Lieu or a Short Sale Agreement with your lender. These agreements will help you stop foreclosure and get out of your home before the auction date.
Delay foreclosure by applying for loss mitigation even if you don’t expect to be approved
Even if you don’t end up approved for a loss mitigation or loan modification option, if you can get a complete application into review with your mortgage lender BEFORE you have a foreclosure sale date scheduled, this will likely delay your foreclosure timeline because the bank will put the foreclosure activity on hold for 30-days while they complete their review.
If you’re just looking for time in the home, it may be worth it to submit a complete loss mitigation application to get the standard 30-day hold period while the bank reviews the application.
If you already have a foreclosure sale date set, this delay tactic may not help you because, if you end up denied prior to your sale date – the bank will likely just keep your foreclosure sale date in place. This is only a good strategy if you apply for loss mitigation before you have a foreclosure sale date scheduled against the home.
Stop foreclosure by using foreclosure defense laws and protections
- For homeowners in Washington State, you may be eligible for Foreclosure Mediation under the Foreclosure Fairness Act. This is a government-help program designed to stop foreclosure so you can communicate directly with your bank. Either a housing counselor or a foreclosure attorney will be required to help you apply for mediation.
- You can sue your bank using the foreclosure litigation process. A lawsuit will slow down or stop the foreclosure. This may be a good option if you’re facing a nonjudicial foreclosure. If you are facing a judicial foreclosure process, you would likely present your defenses to foreclosure within the judicial process already, so most people who choose to sue their bank are facing a non-judicial foreclosure. You want to make sure that you have a valid legal reason for suing your bank before you do so – suing your bank just to get more time in the home isn’t always the best option.
- There may also be ways to use civil litigation to sue your bank under federal laws like RESPA, TILA, the FDCPA, and the CFPB.
Stop foreclosure by completing an equity sale of your property before the foreclosure sale date
If you want to sell your home and recover your equity, you may want to consider selling the property on the real estate market before your foreclosure auction date.
(If you’re considering this, you may want to partner with a distressed sale manager to handle the foreclosure aspect of the sale as these sales often take place on a tight timeline).
Use bankruptcy to stop foreclosure
Sometimes, you may need to stop your foreclosure process fast (or you have found that nothing else is working to stop your foreclosure). If you’ve run out of time to work with your lender or servicer, you may need to consider bankruptcy to stop foreclosure.
A Chapter 7 or a Chapter 13 bankruptcy stops foreclosure actions. Once you file bankruptcy, an ”automatic stay” goes into place which stops the foreclosure. Your mortgage lender can ask the bankruptcy court to lift the stay (by filing a motion) but even if this happens, you will likely still be able to delay foreclosure for 1-2 months using the bankruptcy process.
A Chapter 13 bankruptcy may also help you keep your home long-term by establishing a payment plan that allows you to pay back the missed mortgage payments over a certain amount of time.
A Chapter 7 bankruptcy doesn’t allow you an opportunity to catch up on mortgage payments or keep the home long-term, so this type of Bankruptcy is mostly beneficial in delaying the foreclosure sale and getting rid of other unsecured debt, not in figuring out a long-term solution.
If you’re considering filing bankruptcy, the first step is always to have a consultation with a bankruptcy attorney about your particular situation so you get the best advice.
Foreclosure from a Homeowner’s Association (HOA)
If you’re facing foreclosure from an HOA, you will likely want to have a consultation with a foreclosure attorney as soon as possible.
If you don’t communicate with your HOA about your missed payments, at some point, your HOA will likely file a lawsuit against you in order to start the foreclosure process. If you have received a summons and complaint from your HOA, you likely have 20-days to retain an attorney and issue your response.
HOA foreclosures can also be resolved by direct negotiation with the HOA (or their attorney) to resolve the debt. You may be able to negotiate a repayment plan with your HOA in exchange for them stopping the foreclosure action against you until they have been paid in full.
You also may be able to negotiate a settlement of past dues with them to end the lawsuit.
With that said, you don’t want to wait until your HOA sues you to resolve the matter. HOAs usually notify you in writing when you start to owe them money. It is always preferable to be proactive and reach out to them before they file a lawsuit against you to negotiate a settlement or repayment plan.
Delay an eviction after foreclosure
If your home goes to foreclosure and you are at risk of being evicted, you should figure out how much time you legally have in the home. In Washington, following a non-judicial foreclosure, you have 20-days to vacate the property before you can be evicted.
If you need more time to move, you might be able to reach out to the purchaser of your property to see if you can negotiate an extended move-out timeline.
You can also respond to the formal eviction complaint if you’re willing to risk the buyer getting an eviction judgment against you. Responding will draw out the eviction timeline but it’s not a great idea unless you have a valid reason to defend against the eviction.
Simply “needing more time” will likely not cut it. Since you want to preserve your ability to rent a new place, you likely wouldn’t want to risk ending up with an eviction judgment against you.
Something to be aware of…
Companies that offer you a “foreclosure refinance” or an easy loan to stop foreclosure may be scamming you. These companies may not always be making you legitimate offers so be careful that you don’t get taken advantage of during a stressful time.
It is always best to speak with a mortgage or foreclosure defense attorney in your state because:
- They will be able to tell you, realistically, which options you should try and which aren’t available to you.
- They can help you understand whether you’re facing a judicial or non-judicial foreclosure.
- They can evaluate your foreclosure timeline and help you pick the right option for your individual situation
- They will be able to tell you if there are any foreclosure laws protecting you
The consequences of foreclosure can be devastating – they often include an auction of your property followed by a short move-out timeframe. As soon as you are aware that you are facing foreclosure proceedings, you should get some help.
If you are in Washington State and looking for help with foreclosure prevention or want to discuss foreclosure alternatives, please reach out to me directly at (425) 654-1674.