There are a number of protections in place for Alaska residents to stop foreclosure, even if they are in default of their mortgage agreement. The primary means of foreclosure in Alaska is non-judicial power of sale, which is generally included in deeds of trust. However, where judicial foreclosure is required, Alaska law allows for it. Like many states, Alaska is a title theory state, which means that the title to a home is held in trust until the mortgage is paid in full, making it easier to invoke non-judicial foreclosure. However, any deeds of trust or mortgages may have unique provisions that a homeowner facing default and foreclosure should be aware of before attempting to stop the process. In addition, there are a number of financial, federal, and state provisions that may provide solutions during the ninety to one hundred days required for an Alaska foreclosure.
Communicating with Creditors
One of the simplest, and often most effective, means of stopping foreclosure can begin by simply talking with a lender to negotiate a process for lowering or extending payments. It can be vital to begin this process when it appears that it will be difficult for a borrower to continue making regular payments. However, there must be some evidence that the borrower will be able to make regular, smaller payments for the life of the loan. Some of the most common options include:
- Loan modifications, by which the terms of the loan may be adjusted, including the rate of repayment, whether it is an adjustable rate or fixed rate loan, and even the principle amount of the loan.
- Forbearance, which means the lender agrees to allow the borrower to miss a number of payments or make partial payments for a specified period of time, with an agreement for when and how those payments will be made up.
- Loan reinstatement, which results in an agreement between the lender and the borrower to suspend foreclosure if the debtor can either catch up on missed loan payments or present a feasible plan for doing so over a specified period.
Federal Government Assistance
There are several federal plans by which struggling homeowners may be able to receive assistance, if they are eligible. The requirements to be approved are specific, but with the help of a HUD counselor and a dedicated attorney, the borrower my find a plan to help them stop foreclosure.
- The Homeowner Affordability and Stability Plan allows some borrowers to turn variable or high rate mortgage adjusted to lower, often fixed, rate loans through the FHA.
- The HOPE for Homeowners Act assists approved debtors to have their mortgages, including variable rate mortgages, refinanced at a lower, fixed rate
- The Mortgage Forgiveness Debt Relief Act of 2007 protects borrowers from having their forgiven debt classified as “income” and taxed by the IRS.
Selling a Home When Facing Foreclosure
There are some options for those who would rather sell their home than lose it in foreclosure proceedings.
- Short Sale – a process by which a borrower attempts to sell their home but cannot find a buyer to pay the full amount owed. The lender may agree to accept the lower amount, however, that agreement should be confirmed in writing before the sale is made. The primary drawbacks to this solution are that the homeowner generally receives no income from the sale and it often takes several months to receive lender approval, making it difficult to find buyers who are patient enough to wait.
- Deed in lieu of foreclosure – similar to a short sale, except that the borrower does not have to sell the home himself or herself. If the buyer is finding it difficult to find an appropriate buyer, the lender may be willing to affect that sale. The primary drawback of this process is, again, that the homeowner often receives no income from the sale with which to secure other housing. One of the benefits, however, is that there is often time to find alternate housing during the negotiation process.
In Alaska, the law does not allow a lender to sue for deficiency if a home is foreclosed upon and sold at auction for less than the amount owed, but that does not apply to a short sale or deed in lieu of foreclosure. That is why it is vital to have a lawyer assist in creating an agreement in writing to protect the homeowner from deficiency judgments.
Bankruptcy May Be a Wise Solution
It is often assumed that bankruptcy is the last, worst option of those in financial trouble, but it may be the wisest choice for some, because:
- The courts put an automatic stay, or hold, on all collection or foreclosure procedures until the bankruptcy is completed. A creditor may petition the court to lift the stay, but before that happens, the borrower will still have some breathing room to determine a solution and attempt to stop foreclosure.
- Chapter 7 bankruptcy allows the debtor to have much of their consumer debt erased, often including a mortgage, although a lien holder may still be able to invoke the lien and foreclose on their home. However, with other debts erased, it may ease the financial burden enough to allow the borrower to catch up on and continue their mortgage payments.
- Chapter 13 bankruptcy allows many debtors who have the means to make lower payments to reorganize their finances and negotiate a workable repayment plan. If the borrower meets the requirements, they may be able to save their home.
Getting Legal Help Stopping Foreclosure in Alaska
Information is a powerful tool for those facing foreclosure. Enlisting the help of counselors from the U.S. Department of Housing and Urban Development (HUD) and a committed attorney should provide the debtor with the facts about federal and state laws and assistance programs, as well as the terms of their mortgage. In addition, the loss mitigation department of their lender can provide valuable information about their alternatives to foreclosure.
