Avoid Foreclosure

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A wise borrower, who feels that he will default the mortgage, will find out any possible ways to avoid foreclosure. Once the property is foreclosed, the process of repossession of the property by the lender is more or less completed and he will not be able to help himself to save the property; that is immovable, and thereby loss the property. If foreclosed, he should stop claim on the property to avoid eviction order of the court. A deficiency judgment may be initiated by the mortgage against the debtor if the property is worth less than the total amount he owes on the mortgage loan. Thus, he will bear the burden of additional amount. Both the foreclosure and the deficiency judgment will damage the credit history of the debtor in qualifying for credit in future. It, therefore, will be wise to avoid foreclosure if possible.

If the debtor cannot make payment in time, he should call or write to the lender as soon as feasible explaining his situation and financial information like his monthly income and expenditure. Based on these data, the lender may allow the borrower to avoid foreclosure by arranging a repayment plan or even providing for a temporary reduction or suspension of the payments. For this, he has to prove that he has recently experienced a reduction in income or an increase in living expenditure. He must agree on the new arrangement. Even the mortgage can be modified to refinance the debt and extend the term of the mortgage. An affordable level of monthly payment may be available for him.

The lender may file a partial claim to bring the mortgage current and the debtor will execute a Promissory Note, which is interest free, and a lien will be placed on the property until full payment is made. To avoid foreclosure, a pre-foreclosure sale can be done. The debtor can sell the property for an amount less than the amount necessary to pay the loan on the conditions that the loan is at least two months delinquent; he should sell the property within three to five months and the value of the property must meet government guidelines.

If the alternatives mentioned do not work, the borrower, as a last resort, can voluntarily submit the lien on the property to the lender to avoid foreclosure. This can not save the property but his credit rating won’t be damaged. He must beware of scams to avoid people who like to take advantage of his financial difficulty.