Missouri ranks thirtieth in foreclosure rates in the nation, with generally over 30,000 residents facing some form of foreclosure annually and many desperate efforts to stop foreclosure on those homes. As a title theory state, the title to a home is held in trust until the mortgage is paid in full. If the homeowner defaults on that loan, they generally face non-judicial foreclosure based on a power of sale clause contained in the mortgage. If there is no power of sale clause, the lender must file suit for a judicial foreclosure. In Missouri, it commonly takes between sixty and ninety days to complete the foreclosure process, during which time the borrower may pursue several alternatives. If those efforts fail and the lender buys the home at auction, the homeowner then has the right of redemption for one year after the sale; however, they must notify the court of their intentions within twenty days, and they must post a bond to cover all fees and costs of redemption in order to reserve the right of redemption. Lenders have no right to seek a deficiency judgment in Missouri.
Government Resources to Stop Foreclosure
In the interest of more stable families and a stronger economy, many state and federal governments have instituted programs to help struggling debtors save their homes. Many include federal incentives to lenders to adjust the terms of high rate or variable rate loans, or to refinance them altogether.
- The two most common federal programs taking advantage of these incentives are
- The Hope for Homeowners Act
- The Homeowner Affordability and Stability Act
Many lenders can also earn incentives by negotiating lower loan principal amounts and forgiving early payment penalties and late fees.
- A new federal law, called the Mortgage Forgiveness Debt Relief Act of 2007, prevents the IRS from taxing any forgiven debt monies as income.
Lender Resources to Stop Foreclosure
It is important for individuals to work with lenders early when facing a financial crisis to demonstrate good faith and to utilize any resources they may offer to stave off foreclosure. A foreclosure attorney can help ensure a borrower receives all the benefits possible, often through a lender’s loss mitigation department:
- 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 can be a drastic and damaging step, but it may provide the final hope that some homeowners need to save their property.
- First, because it begins with a hold on foreclosure and debt collections, giving the borrower some breathing room to pursue their petition.
- Second, because some people may file Chapter 13 bankruptcy, which allows them 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.
- Third, because others may file Chapter 7 bankruptcy, which allows them to discharge many of their debts, though they may have to liquidate some of the personal property in the process. Missouri allows a homestead exemption of $15,000 which may help some debtors to protect their homes.
Home Sale Resources to Stop Foreclosure
Some people are in such deep financial trouble that they cannot save their homes. But they may be able to find alternatives better than foreclosure. Some may be able to sell their home themselves for more than the mortgage amount due, clearing that debt and providing money to relocate. If the market does not provide that kind of buyer, there are still other options:
- If they can find a buyer willing to pay less than what they owe, and they can negotiate with their lender to accept that sale price to fulfill the home loan, that short sale will clear their mortgage debt. Borrowers must be sure to get that agreement in writing. Even though there is no right to deficiency judgments in Missouri, any such contracts are more secure if there is a hard copy on file.
- Some homeowners may find that their lender is willing to accept the deed to the home as fulfillment of their mortgage debt, as a deed in lieu of foreclosure. In addition, an attorney who is a good negotiator may convince the lender to agree to allow the borrower to take some income from the sale, and they may even agree to forgo sending a negative credit report.
Getting Legal Help Stopping Foreclosure in Missouri
There are many debt consolidation companies and loan modification “counselors” who charge high fees and provide little or no service. It is important to have a knowledgeable attorney to help avoid those scams, to help discern which programs will work for their client, and to help them apply appropriately. That, along with a HUD counselor, is generally all a homeowner needs other than a determination to work hard to save their home.
