As the forty-fifth ranked state in the nation in foreclosures, Montana has fewer people facing the loss of their home, but that still means hundreds of residents in “Big Sky Country” are looking for ways to stop foreclosure. This title theory state requires that the property title be held in trust until the mortgage is paid in full. When a homeowner misses payments, a lender can begin non-judicial foreclosure proceedings without a court order, since most mortgages in Montana contain a power of sale clause giving them that right. Such foreclosures generally take 140 to 150 days, which means that borrowers have considerable time to stop foreclosure before the process is complete, after which they have no right of redemption. However, if a non-judicial foreclosure does take place, the lender has no right to seek a deficiency judgment for the difference
Avoiding Foreclosure through Lender Assistance
Lenders can be an unexpected source of help for those facing the threat of foreclosure on their family home. Especially for those who contact their lender early, before they go into default, there may be some alternatives to foreclosure:
- Refinancing or adjusting the terms of the mortgage through loan modification, generally for those who can show they will be able to maintain lower payments.
- Taking the loan out of default status and reinstating it to its active status if the borrower is expecting additional income with which they can bring the mortgage up to date.
- Allowing the borrower to miss a few payments or make a few partial payments if they’re facing a temporary financial crisis. Part of this forbearance agreement includes an agreement that the borrower will make up those payments at an agreed-upon date.
Avoiding Foreclosure through Government Assistance
Several state and federal programs exist to help the homeowner change the terms or rates of their loan to enable them to get back on track and continue to complete their mortgage obligation. Some federal programs include:
- New legislation to protect homeowners from having to pay income tax on forgiven debt amounts. This law is called the Mortgage Forgiveness Debt Relief Act of 2007.
- Federal incentives for lenders who provide opportunities to adjust the terms of unmanageable mortgages or to refinance them with FHA-backed loans. They are also encouraged to forgive late payments and early payment penalties and to reduce the amount of the principal owed. The two most prominent of these programs are:
- The Hope for Homeowners Act
- The Homeowner Affordability and Stability Act
The best source of information and assistance to apply for these programs, in conjunction with a foreclosure attorney is a foreclosure avoidance counselor from the U.S. Department of Housing and Urban Development (HUD).
Avoiding Foreclosure through Bankruptcy
Bankruptcy provides a number of protections for those in serious debt trouble that can help them save their home and begin to rebuild their credit. However, there will be damage to that credit score for a number of years as a result.
- The process begins with a court-ordered hold on all collection and foreclosure actions, giving homeowners time to catch their breath and plan their next step.
- If they qualify, debtors may choose Chapter 7 bankruptcy, which results in many of their consumer debts being erased, although they may face liquidation of some of their personal property in the process. The good news is, Montana has a homestead exemption of $250,000, which can help save many homes.
- Others may file for Chapter 13 bankruptcy, which provides help for filers to reorganize their debts and create a repayment plan with lower payments. As long as the borrower maintains those payments, they should be able to pay off their debts and keep their home.
Avoiding Foreclosure through Home Sales
The final option for some people is to relinquish their home, but on their own terms. If no other alternatives are sufficient to save a borrower’s home, they may have to choose to sell it before their lender forecloses. The ideal situation would be to sell it for more than the remaining debt, but in a troubled market, that may be impossible.
- Another option is a short sale, whereby their lender agrees to accept a lower sale price to pay off the mortgage. This can be a time consuming option and many buyers will not wait for this type of sale to be approved.
- A final option is a deed in lieu of foreclosure, in which the borrower offers the deed to their home and the lender accepts it as payment in full on their loan. A good negotiator may also be able to convince the lender to allow the homeowner to realize some income from the sale. They may also get them to forgo making a negative report to the credit bureaus.
Getting Legal Help Stopping Foreclosure in Montana
There are complex legal aspects to each of the options to avoid foreclosure. In addition, while someone in financial trouble may balk at consulting an attorney to help them, it may save them a great deal more money, and even their home, in the end. A carefully chosen, experienced, and dedicated foreclosure attorney can protect borrowers from scams, legal loopholes, and unwise decisions, while helping homeowners to find the most advantages alternatives to foreclosure.
