Foreclosures and COVID-19 Part 2: Saving Your Home in the Last Minute
In the last article, we discussed how a foreclosure happens. Considering the economic toll of the coronavirus pandemic, there are probably thousands of homeowners who are falling behind their mortgage payments. And despite the availability of relief and forbearance options, lenders are still expecting borrowers to pay up.
If you have fallen behind at least three months in your mortgage payments, there are ways you can stop a foreclosure from happening.
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CoViD-19 has hit small businesses hard and caused massive layoffs across the state of Texas. Homeowners will have a hard time keeping up with their monthly payments given that their income is severely affected. This is where a forbearance agreement comes in.
Considering your incapacity to pay, the lender can offer you a forbearance agreement for a certain period. Under this agreement, your monthly payments are reduced until such time that you go back to paying your actual monthly dues along with the forbearance amount. Otherwise, the lender could provide you another option to modify your loan if your financial situation remains unstable.
Apply for HAMP
The Department of the Treasury created the Home Affordable Modification Program to help homeowners who are on the verge of a foreclosure. With the CoViD-19 pandemic in mind, applications for HAMP are on the rise.
Under HAMP, you can access last-minute loan modification options that can put a stop to the foreclosure process. You just have to make sure that your lender agrees with your terms 10 days before the foreclosure proceedings take place.
File for bankruptcy
If the pandemic has damaged your finances, you can prevent your home from a foreclosure by filing for bankruptcy. For this, you may have to pick between Chapter 13 or Chapter 7 bankruptcy, both of which could offer benefits depending on where your home currently is in the foreclosure process.
You can file for Chapter 13 if a loan modification is not possible. Under Chapter 13, you will be able to restructure your debt using a repayment plan covering missed mortgage payments within a three- or five-year period. So long as you pay according to this plan, you can keep your home and even eliminate any unsecured debts in the process. Chapter 7 would be your last resort but it won’t necessarily stop a foreclosure. Instead, it gives you a grace period to stay at the property. This should provide you with enough time to save money for a rental or explore other options.
File a lawsuit
If you think the bank is being unlawful in handling the foreclosure process, you are in the position to file a lawsuit and stop the bank from auctioning off the property. Although more costly than the other options in this list, filing a lawsuit can be advantageous if indeed the bank proceeded with the foreclosure process in a non-judicious manner.
This usually happens when the bank fails to comply with state mediation rules or when there are serious missteps in handling the foreclosure process. If you are unable to substantiate such claims, however, you might want to use other options.
As you can see, a foreclosure is not the end of homeownership. There are options you can use so you can remain in your home up until things get better. Check out Arbrook Realty for more tips on saving your home from foreclosure.