Kansas residents generally face fewer foreclosure threats than many other states, with a national ranking of 31; however, those who do face such procedures are often looking for any options to stop foreclosure that they can find. Kansas is another lien theory state, where a homeowner’s property is security for their mortgage loan. If the borrower defaults on that mortgage, they can only face judicial foreclosure proceedings, which generally allow them 120 to 140 days before they could actually lose their home. They do have the right of redemption in this state, however, which means that they have up to one year to pay the mortgage amount in full, along with foreclosure costs, in order to reclaim their family home. Kansas also allows deficiency judgments against homeowners whose foreclosure sale nets less than the remaining loan amount. There are serious penalties for foreclosure, which means finding an alternative to foreclosure is vital for many homeowners.
Federal Foreclosure Aid
It is important to learn what programs are available from federal and state agencies to help those having difficulty keeping up with their mortgage payments. Foreclosure avoidance counselors from the U.S. Department of Housing and Urban Development offer free advice about which programs for which a borrower may qualify. Among the most powerful programs from the federal government are:
- The Homeowner Affordability and Stability Plan. Federal financial incentives encourage lenders to assist homeowners to refinance or adjust the terms of their loans.
- The Hope for Homeowners Act. This plan also offers incentives to provide FHA refinanced loans or to readjust the terms of existing loans to make them more manageable for struggling borrowers. Those incentives also apply to those who waive penalties for early repayment or late payments, or to lenders to are willing to reduce the principal on mortgage loans.
- The Mortgage Forgiveness Debt Relief Act of 2007. Prior to this legislation, the IRS could tax any forgiven debt amounts as income; however, that is now prohibited.
Lenders’ Foreclosure Aid
It may be difficult to believe that lenders are willing to help homeowners avoid foreclosure, but that is an expensive and time consuming process for mortgage holders. If they believe they have good candidates who merely need a little help to keep their home, they may agree to one of these plans:
- Those borrowers who expect to come into some money to use to catch up on missed or partial payments may convince the lender to agree to reinstate the loan once several large payments, or even one lump sum payment, is made.
- If a lender believes a homeowner may be able to maintain payments at a lower amount or lower interest rate, they may agree to adjust the loan in a mortgage modification process.
- For borrowers who are a good risk, the lender may be willing to agree to a forbearance plan whereby they forgive a few missed, late, or partial payments, with the agreement that the borrower will pay them back at some agreed-upon date, often the end of the loan.
Bankruptcy Foreclosure Aid
Bankruptcy is considered a form of debt relief. In fact, bankruptcy begins with an automatic stay, or hold, on debt collection efforts or foreclosure proceedings during the bankruptcy petition. The bankruptcy options a lender may generally choose are two:
- Liquidation, or Chapter 7 bankruptcy, requires that many filers liquidate some of their personal property, although the result will be a discharge of most debts for those who qualify. In Kansas, most residential property carries an unlimited exemption, allowing filers to save their homes.
- Reorganization, or Chapter 13 bankruptcy, allows the bankruptcy trustee and the filer’s lawyer to assist the homeowner in reorganizing their finances and their debts, resulting in a plan that fits their current finances. In order to save their home they must complete the new repayment plan approved by the court.
Home Sale Foreclosure Aids
When all else fails, some homeowners will be required to give up their homes. For them, the best option would be to sell their home for more than the mortgage balance during the 120 to 140 days a Kansas foreclosure process takes. If that is not possible, they may choose two other options:
- Negotiating with their lender in hopes that they will agree to accept a sale price that is lower than the mortgage balance in what is known as a short sale. It is important to confirm this agreement in writing to avoid a deficiency judgment for the difference, which is legal under Kansas law.
- Offering the deed to the lender to satisfy the mortgage, also known as deed in lieu of foreclosure, may leave the borrower free of their mortgage responsibility. However, this option should also be confirmed in writing to avoid a suit for deficiency from the lender.
Getting Legal Help Stopping Foreclosure in Kansas
The marketplace is filled with those trying to take advantage of homeowners struggling with debt and mortgage default. It is vital to use only those plans that are legitimate and, generally, of little or no cost to the borrower. A lawyer may be the most powerful asset a homeowner has to find the best plan to save their home and protect them from con artists as well. In conjunction with a HUD counselor, these two advisors may provide the most important guidance a homeowner needs.
