What can a Missouri homeowner do to help prevent foreclosure?

Homeowners in Missouri face possible foreclosure when they default on their mortgage even by one payment. However, most lenders do not start foreclosure proceedings for several months. Those who default on their loans usually face non-judicial proceedings. In Missouri, it generally takes between 60 and 90 days before the foreclosure process is completed. During this time the homeowner may pursue several alternatives to stop the foreclosure.

Government Resources to Stop Foreclosure

Many state and federal governments have created programs to help struggling homeowners save their homes from foreclosure. The federal programs provide incentives to lenders to adjust the terms of high rate or variable rate loans or refinance them altogether.

Two federal programs taking advantage of these incentives are

• The Hope for Homeowners Act
• The Homeowner Affordability and Stability Act

Lenders also earn incentives by negotiating lower loan principal amounts and forgiving early payment penalties and late fees. Also, the Mortgage Forgiveness Debt Relief Act of 2007 prevents the IRS from taxing any forgiven debt monies as income.

Lender Resources to Stop Foreclosure

Homeowners should work with lenders as soon as possible when they face financial crises. Reaching out to a lender demonstrates good faith and the lender may provide information about resources to stave off a possible foreclosure. These benefits may be through a lender's mitigation department and may include:

• Forbearance – a lender may be willing to allow a few missed, late, or partial payments if the borrower is facing a temporary financial crisis and if they agree to make up those payments at a specific date later in the loan schedule.

• Loan modification – a lender may be willing to change the terms or rates of a loan for a reliable borrower who demonstrates their ability to begin making payments again at the lower installment rate.

• Loan reinstatement – if a borrower who is in default can show that they will be coming into additional money to use to make several large payments or one lump sum payment to catch up, the lender may reinstate the loan.

Bankruptcy Resources to Stop Foreclosure

Bankruptcy may also provide homeowners an option need to save their property. Bankruptcy aids the defaulting homeowner by the following:

• It begins an automatic stay on any foreclosure proceeding as well as other debt collection actions, giving the borrower time to pursue their bankruptcy petition.

• Those who file Chapter 13 bankruptcy are allowed to formulate a plan to repay their debts, including their mortgage, at reduced rates. If they follow through on the entire plan, they may be able to retain their home.

• Those who file Chapter 7 bankruptcy are allowed to discharge most of their debt. Missouri allows a homestead exemption of $15,000 which may help some debtors to protect their homes.

Talk with a bankruptcy attorney to further discuss how a Missouri homeowner can help prevent a foreclosure.