As you may know, foreclosure is a common occurrence in today’s society. Due to economic and financial hardships, homeowners all across the US are behind on their payments, and even worse, facing foreclosure. Because of this, many homeowners want to know, “when is it too late to stop foreclosure?” If you fall into this category, you’ll want to pay close attention to this article.
The process of facing foreclosure isn’t pleasant for any homeowner. When someone is facing foreclosure, they are under extreme pressure and emotional distress. Not to mention, the added stress from being heavily solicited. Nonstop mailers, repeated phone calls, text messages, emails, you name it. It can get pretty overwhelming. The good news is, there are solutions available to homeowners who are facing foreclosure.
Let’s take a look at some of your options.
Options for Homeowners Facing Foreclosure
Firstly, one of the most important things is understanding your state’s foreclosure laws and procedures. Here in the state of Missouri, a lender can foreclose on a homeowner in default using either a judicial or non-judicial foreclosure process. This means, if there’s a “Power of Sale” clause present in the deed of trust, the lender can foreclose using the non-judicial foreclosure process. Thereby, eliminating any need to file a lawsuit against the borrower(s) in default. If the power of sale clause doesn’t exist, the lender will have to foreclose using the judicial foreclosure process.
In order for a non-judicial foreclosure to occur, the power of sale foreclosure guidelines must be followed. Or else, you have the right to file a lawsuit against the foreclosing party. Typically, you’ll want to ask the court to stop the foreclosure proceedings until a judge can hear your side of the story. When you speak to the court, request these three things:
- a temporary restraining order
- a preliminary injunction, and
- a permanent injunction.
Temporary Restraining Order (TRO)
Applying for a TRO means that you’ll have to convince the judge that undergoing foreclosure will cause “irreparable injury.” With foreclosure being a serious issue, most courts agree that foreclosure causes irreparable injury. Once the TRO has been filed, the foreclosing party only has one or two days to respond. If there’s no response, the court may rule in your favor, granting the TRO. In the event your approval is granted, there are some drawbacks. The judge may require you to post a bond in case you lose the case, which can be costly. Depending on your level of income, the judge may grant a waiver. But there must be validity in your position, and other issues regarding your mortgage loan.
For more information about temporary restraining orders involving a mortgage lender, consult with an attorney.
A preliminary injunction hearing is a hearing whereby the court examines the paperwork to balance the equities. Meaning, the court must determine who is taking more of a loss. If you’re denied, the TRO will end, thus ending the preliminary injunction simultaneously. Although your lawsuit is still active, you’ll have to ask a higher court for a “writ” to overrule the lower court’s denial. However, if the judge rules in your favor, a preliminary injunction will be issued. The preliminary injunction will allow you to reinstate your defaulted mortgage loan.
Permanent injunctions are one of the most time consuming yet rewarding options available to you. Because of the back and forth with the court and foreclosing party, it takes a while to lift the injunction. If the court does decide to rule in your favor, the foreclosing party will have to reach a settlement with you. For example, a forbearance plan or a loan modification, allowing you to stay in your home.
However, you must prove to the judge that the foreclosing party didn’t adhere to state foreclosure laws or mortgage terms. This process can take time, so it is best for you to collect supporting documentation for your case.
How to Stop Foreclosure at the Last Minute
If none of the above is applicable, you may be wondering how to stop foreclosure at the last minute. Below is a list of some options:
- Filing bankruptcy
- Loan modification
- Forbearance plan
- Repayment plan
- Deferment plan
Filing bankruptcy is one of the surest ways to freeze an upcoming foreclosure. Even if things are coming down to the wire, and you’re wondering when it is too late to stop foreclosure so I don’t lose my home. What makes filing bankruptcy worth consideration is the time it takes to complete it. While you’re going through bankruptcy, everything is put on hold so that the courts can examine your debts and determine who’s owed what.
Nonetheless, the two most common types of bankruptcy are Chapter 7 and Chapter 13. Both will allow nearly 6 months to restructure your debts. However, Chapter 13 bankruptcy requires you to set up a payment plan with your creditors, while Chapter 7 bankruptcy requires you to liquidate personal assets to pay unsecured debts. Unfortunately, there are drawbacks to filing bankruptcy. One of them being significant credit damage on top of the late payments. A bankruptcy can drop your credit score 200 points or more. The better your score, the more damage will be done. At this point, you must decide what is best for you. Would you rather keep your home or have a bankruptcy on your credit report for up to 10 years?
To find out more about how to stop a foreclosure at the last minute using bankruptcy, consult with your attorney.
As previously mentioned, a loan modification can help you stay in your home when you’re on the verge of foreclosure. Loan modifications require qualification based on your income, recent bank statements, and tax returns. Once you’ve submitted your mortgage assistance application, hardship letter, and proof of income, the lender will determine if you qualify. If so, you’ll be able to restructure your mortgage loan to something more favorable. Those that do not qualify can request to appeal the lender’s decision. Usually, the mortgage lender will request a written correspondence if you decide to submit supporting documentation for your claim. If you’re able to prove you can afford your home, the bank should approve it.
Forbearance plans between a mortgage lender and borrower usually involve suspended payments so that you can bring your loan current. Like loan modifications, these types of agreements enable you to stay in your home without going to foreclosure. If you do not comply with the agreement, the lender may decide to foreclose. Below is an example of what one might look like:
- First Payment | 01/01/2020 | $0.00
- Payment 2 | 02/01/2020 | $0.00
- Payment 3 | 03/01/2020 | $0.00
- Balloon PMT | 04/01/2020 | $6,762.10
A repayment plan is when the lender increases your mortgage payment by adding part of the arrears to each payment so that you get caught up. Your mortgage lender will determine the period based on how much you owe and what you can afford to pay. When the repayment period is over, you’ll return to your normal mortgage payment. Here’s an example of a typical repayment plan:
- 1st PMT | 01/01/2019 | $1,314.25
- 2nd PMT | 02/01/2019 | $1,314.25
- 3rd PMT | 03/01/2019 | $1,314.25
- 4th PMT | 04/01/2019 | $1,314.25
- 5th PMT | 05/01/2019 | $1,314.25
- 6th PMT | 06/01/2019 | $1,314.25
- 7th PMT | 07/01/2019 | $1,314.25
- 8th PMT | 08/01/2019 | $1,314.25
- 9th PMT | 09/01/2019 | $1,314.25
- 10th PMT | 10/01/2019 | $1,314.25
- 11th PMT | 11/01/2019 | $1,314.25
- 12th PMT | 12/01/2019 | $1,314.25
- Balloon PMT | 01/01/2020 | $46,774.33
Every payment must be made on or before the scheduled due date, or the plan will be canceled. Please contact your lender for more information as each lender operates differently.
Deferment plans allow you to skip payments and temporarily stop interest so that you can get caught up. Similar to a loan modification or forbearance plan, your payments may be due once the time period is over or added to the back of the loan. This plan is usually only offered to homeowners who’ve never been late. Which will extend the life of your mortgage loan. Contact your lender to see if you qualify.
When Is It Too Late to Stop Foreclosure?
The foreclosure process is never pleasant for any homeowner. The best thing you can do is contact your lender immediately to see what options they have. What you don’t want to do is contemplate when is it too late to stop foreclosure. You’ll only make matters worse. If you need mortgage assistance, and you’re looking for a reputable company to help you, feel free to contact us. We assist homeowners just like you who meet the criteria above and want to keep their homes. For those that are upside down on their mortgage and facing foreclosure, a short sale may be your best bet. We are a short sale processor, foreclosure prevention specialist, as well as a local home buyer. Simply click here to contact us or send an email email@example.com.