The coronavirus pandemic has caused economies to shut down throughout the country, and millions of people have been furloughed, or have lost their job for good. Experts are predicting that due to these challenging conditions, hundreds of thousands of homeowners will face foreclosure within the next year. In Florida alone, some believe the foreclosure rate will increase by 300 percent. So, if you are a homeowner in the Sunshine State and you are in fear of losing your home, it is important that you understand the steps to take to stop it.
What Not to Do When Facing Foreclosure
Before taking steps to stop a foreclosure, it is important that all homeowners know what to avoid.
If you are facing foreclosure, you should be wary of:
- Individuals who claim they can stop the foreclosure if you sign over the title to your home.
- Individuals who want you to authorize them to set up financing they claim will save your home.
- Foreclosure prevention companies or loss mitigation companies that charge exorbitant fees.
- Mortgage brokers who want to charge you upfront, which is illegal under Florida law.
- Mortgage brokers, attorneys, and other professionals that cannot prove they are licensed in the state.
- Individuals or companies who offer to purchase your home in a foreclosure sale and rent it back to you in a rent-to-own strategy.
- Anyone who offers to negotiate with your servicer or lender and that is not a mortgage broker or lawyer.
- Any company that charges an upfront fee, claims they can stop the foreclosure and encourages you to stop making payments.
Now that you understand what not to do, it is important that you also know the steps you should take. There are several ways to stop a foreclosure and the one you choose will likely depend on whether or not you want to keep the home.
Keeping Your Home when Facing Foreclosure
Homeowners facing foreclosure often think the situation is hopeless and that losing the home is inevitable. Fortunately, this is not always true.
There are many possible solutions that can help you keep your home, including:
- Loan modification: A loan modification will permanently change one or more of the terms of the mortgage loan. Loan modifications can change the interest rate, the length of the loan, and even the principal amount. Of course, your lender has to agree to a loan modification so, when requesting one, it is best to work with an attorney who can negotiate on your behalf.
- Forbearance: A solution that many have turned to during this very difficult time, a forbearance temporary suspends or reduces your mortgage payments. However, forbearance does not usually suspend the interest that will accrue. Lenders are often willing to offer a forbearance if the homeowner can show that they will soon get back on their feet financially and continue to make mortgage payments.
- Reinstatement: Reinstatement works quite simply – you agree to pay a lump sum that will bring your mortgage out of default, and you must pay that lump sum by a certain date. Always ask your lender about any penalties, fees, and other expenses that can drive up the amount of the lump sum, as they are sometimes quite high.
- Repayment plan: A repayment plan works similarly to reinstatement. The lender will add up the amount you are overdue and will add a small percentage of that amount to your monthly mortgage payment. Due to the fact that you will only pay back a little bit at a time, a repayment plan takes longer than reinstatement to bring your mortgage up to date.
- Refinancing: Refinancing a mortgage is not the best option for everyone who is facing foreclosure, but it can work in certain situations. Refinancing is different from a loan modification because it gives you an entirely new mortgage instead of simply changing the terms of your existing loan.
In some cases, your lender may combine these options. For example, they could agree to a loan modification and a repayment plan.
Not Keeping the Home when Facing Foreclosure
No one wants to think about losing their home but, in some situations, it is the only way to avoid foreclosure. Although the below options will not help you keep your home, they will keep the foreclosure off of your credit record, which is extremely harmful.
The three most common ways to avoid foreclosure when you do not plan on keeping the home include:
- Short sale: A short sale occurs when the homeowner sells a home to a buyer for less than what is owed on the mortgage. The lender may write off the difference, or they may pursue a deficiency judgment against the original homeowner.
- Deed-in-lieu: Sometimes, a lender will agree to accept the deed to the home in lieu of filing a foreclosure lawsuit. A deed-in-lieu will not work if there are additional mortgages on the property or if there are liens against the property, such as those for unpaid taxes.
- Assumption: This option is not as common as the other two, but is still sometimes a possibility. An assumption occurs when a buyer purchases the home and takes over the debt on the mortgage.
No matter the solution you choose for avoiding foreclosure, you will have to work and possibly even negotiate with your lender. A foreclosure defense attorney can take on this task for you, and give you the best chance of a positive outcome.
Our Florida Foreclosure Defense Lawyers Are Here to Help
If you are facing foreclosure, it is important to understand that there are ways to avoid it and keep the foreclosure off of your credit report. At Loan Lawyers, our Fort Lauderdale foreclosure defense attorneys will review your case, outline the options and advise on the one best for you, and communicate with your lender on your behalf. Call us today at (954) 807-1361 or contact us online to schedule a free consultation and to learn more about how we can help.
Loan Lawyers has helped over 5,000 South Florida homeowners and consumers with their debt problems, we have saved over 2,000 homes from foreclosure, eliminated more than $100,000,000 in mortgage principal and consumer debt, and have recovered over $10,000,000 on behalf of our clients due to bank, loan servicer, and debt collector violations. Contact us for a free consultation to see how we may be able to help you.