Since it is fourth in the nation in foreclosure rates, thousands of Florida residents are looking for ways to stop foreclosure, by any legal means they can find. The good news for those struggling homeowners is that there are a number of options open to them. The bad news is that there are some difficult qualification requirements that not all borrowers can meet. The most important step a homeowner can take is to get as much information about the options as possible, either from a counselor from the U.S. Department of Housing and Urban Development (HUD) or from a dedicated foreclosure attorney.
As a lien theory state, a person’s property serves as security for their mortgage. If the borrower defaults on their loan, the lender has the right to begin judicial foreclosure proceedings, since non-judicial foreclosure is not allowed. That process generally takes from 180 to 200 days to complete, giving the borrower time to look for alternatives.
Working with Creditors
Debtors who begin working with a lender early in the process may be able to avoid foreclosure. There are a number of options concerning which a borrower may be able to secure an agreement to delay or circumvent the loss of their homes.
- Good faith discussions may convince the lender to permit a few missed or partial payments, with the stipulation that they be made up at the end of the loan. This forbearance can be negotiated through the lender’s loss mitigation department.
- Evidence that the borrower may be receiving additional income in the near future may convince the lender to reinstate the loan once those large payments are made, bringing it back to its former terms.
- Evidence that the borrower may be able to fulfill the loan requirements if they were modified, either by smaller payments, lower interest, or a change in terms—such as moving from a variable rate to a fixed rate loan—may convince the lender to approve such a modification.
Taking Advantage of Government Programs
Several programs might be able to help a homeowner facing foreclosure, if they are qualified. While there are a number of programs, for which the lender may want to consult a HUD counselor, three of the most prominent are:
- The Hope for Homeowners Act, which provides incentives for lenders who are willing to adjust the terms of mortgages, particularly those with high-interest or variable-rate terms, to FHA-backed loans with more acceptable rates. Lenders are also encouraged to waive early repayment and late charges and reduce principal amounts.
- The Homeowner Affordability and Stability Plan also encourages lenders to refinance home mortgages at lower rates and with smaller payment schedules.
- The Mortgage Forgiveness Debt Relief Act of 2007 prohibits the IRS from taxing mortgage amounts that have been forgiven as “income.”
Considering Bankruptcy
While most people would hope to avoid bankruptcy, there are elements that may help filers stop foreclosure and keep their homes. The negative aspect of this plan is, of course, that the filer’s credit score is damaged for several years. Nevertheless, the fact that every bankruptcy begins with a court-ordered automatic stay, or hold, on foreclosure or debt collection processes can give the debtor time to catch their breath and make plans for a successful solution.
- Liquidation, or Chapter 7 bankruptcy, may require the debtor to liquidate some of their personal property, although Florida allows an unlimited exemption for a filer’s residence. In addition, Chapter 7 results in most of the filer’s consumer debt being discharged, or erased, allowing them to direct more of their income to paying off their mortgage and saving their home.
- Reorganization, or Chapter 13 bankruptcy, allows the borrower and their lawyer to work out a repayment plan with lower monthly payments that will result in most or all debts being repaid over a designated period. If the filer fulfills that agreement, they should be able to retain their home.
Attempting a Short Sale or Deed in Lieu of Foreclosure
In some cases, none of the efforts to stop foreclosure will preserve a person’s home. However, the homeowner still has one options: to sell their home before the foreclosure takes place. Depending on the market, they may be able to sell the home for more than they owe, realizing a profit by which they can secure other housing and move on without damaging their credit score. If they are unable to do so, there are two other alternatives:
- They may receive an offer that is only slightly less than they owe, and their lender may agree to accept that offer as payment in full for the mortgage, known as a short sale. However, it is crucial to receive confirmation of such an agreement in writing, since Florida allows lenders to sue for deficiency judgments, or the difference between the selling price and the amount that is owed.
- They may negotiate with the lender to accept the property deed in lieu of foreclosure to fulfill the mortgage. In some cases, the lender will even agree not to report the transaction as a negative mark on the borrower’s credit rating. Again, this agreement must be made in writing or the lender may still be able to sue for deficiency.
Getting Legal Help Stopping Foreclosure in Florida
Two of the most powerful avenues of borrower assistance in Florida are a dedicated lawyer and a HUD counselor. They know the law and the government programs, who can qualify for these alternatives to foreclosure and the steps to take advantage of them. There are many con artists attempting to prey on struggling homeowners, making qualified advice vital to stopping foreclosure and solving financial problems.
