Homeowners struggling to stop foreclosure in the state of Ohio should be aware of and consider all applicable options when it comes to adjusting, refinancing, relieving, or discharging their existing mortgage obligations. Ohio uses mortgage loans are the primary method of securing real estate property to an outstanding lender obligation, which requires lenders utilize judicial foreclosure to recover a property attached to a mortgage in default. Per Ohio foreclosure statutes, this will take approximately one-hundred and fifty days, if uncontested by the homeowner. If a homeowner does wish to contest foreclosure proceedings, preferably before a mortgage enters into a default, included below are some of the most notable methods of doing so.
Reaching Out to Your Lender before Default Occurs
Your lender’s loss mitigation department is the best initial place to consult with regarding an impending default on a mortgage. By remaining proactive about your financial struggles and staying communicative with your lender, one or more of the following options may prove available and applicable to your needs, which can help stop a foreclosure from occurring. Some of the most notable lender provided alternatives to foreclosure include:
- Forbearance, which if approved by your lender, will allow a homeowner to miss or make partial payments on an existing mortgage loan for a pre-determined period of time, usually several months. This ideally allows a homeowner to retain their financial stability in the interim time, while building all unpaid money back into the life of the loan
- Loan modification, which can take the form of any number of adjustments to an existing mortgage, which may include transitioning from a variable rate to a fixed rate mortgage, adjusting the terms of payment, extending the life of the loan, or other adjustments that make meeting currently payment obligations more manageable for a homeowner
- Loan refinancing, which allows a homeowner to enter into an entirely new mortgage, while relieving them of the terms and obligations of the old one. Ideally, refinancing will reduce overall principal amount owed, cut down interest rates, ensure a fixed interest rate, and promote other provisions, which will ultimately make monthly payments more manageable for the homeowner
Getting in Touch with HUD and FHA Counselors on Federal Assistance
The federal government, in response to a nationwide foreclosure crisis, has taken to helpful steps for consumers facing default on their existing mortgage loan. First, informed, and helpful counselors are available for consultation, free of charge, at local FHA and HUD offices in all fifty states. Through these counselors, or even an attorney, homeowners can learn about their eligibility for the second measure of assistance from the federal government, which are laws designed to protect and assist struggling homeowners. The most relevant and notable of these laws include:
- The Homeowner Affordability and Stability Act, which offers homeowners assistance with adjusting their existing mortgage through their lender. Ultimately, the Act seeks to make monthly payments more manageable for struggling homeowners in default and facing foreclosure
- The HOPE for Homeowners Act, which if you are eligible, transitions a variable rate mortgage through your lender into a fixed rate, thirty-year mortgage that is backed by the FHA
- The Mortgage Forgiveness and Debt Relief Act of 2007 and the extension of provisions under the Emergency Economic Stabilization Act of 2008, which offers homeowners with forgiven debts, related to foreclosure prevention certain tax breaks, which include preventing any forgiven debt related to foreclosure prevention from becoming taxable income.
Offering Short Sale or Deed in Lieu of Foreclosure Agreements
Another option to prevent foreclosure is through deed in lieu of foreclosure or short sale agreements with your lender. In certain cases, a lender maybe will take the sale value of a home, or the title of the home itself, in exchange for forgiving mortgage debts. Though it does not give a homeowner the ability to retain their primary residence, it does prevent future debt obligations, such as deficiency liens, that may arise following a judicial foreclosure.
- Short Sales, which involve finding a third party buyer willing to make an offer on a given property, revolve around a prearranged agreement with your lender. By selling one’s home, and using the income from the sale to pay off an existing mortgage, a homeowner can get out of their existing mortgage agreement. However, as is the case with many devalued properties, the sale value of the home will not cover the existing mortgage debts. In the case of a short sale, the lender agrees to forgive the amount “short” following the home sale, on a prearranged basis.
- Deed in lieu of foreclosure is similar to short sale in that it revolves around a lender agreeing to take a given property in exchange for forgiving all debts related to an outstanding mortgage agreement, but instead of involving a third party buyer, a lender will simply accept the deed to the property itself.
Using short sale and deed in lieu of foreclosure will depend on the agreement of your lender to do so. In addition, considerations that may affect a lender’s eagerness to engage in these transactions will be the actual value of a home, the amount of equity in an existing mortgage and home, and other factors.
Considering Bankruptcy as a Means of Foreclosure Prevention
Bankruptcy is also another means of preventing foreclosure used by some homeowners. Through simply filing either Chapter 13 or Chapter 7, a homeowner can put an automatic stay on existing creditor collections attempts, which would include foreclosure proceedings. Moving forward, the following chapters of bankruptcy can offer homeowners these foreclosure prevention options:
- Chapter 7 liquidation, which if approved via a means test, will discharge an existing mortgage debt, but at the cost of liquidating one’s assets, including the primary residence. However, in the state of Ohio, Chapter 7 property exemptions up to a certain dollar amount may be helpful to certain homeowners.
- Chapter 13 reorganization is also another method that may allow certain homeowners to consolidate all outstanding debt obligations into a manageable method of repayment, including adjustments on principal amounts owed and other considerations, which will allow a homeowner to remain in their residence, assuming they are able to meet the conditions set forth by their Chapter 13 trustee
Getting Legal Help to Prevent Foreclosure in Ohio
If you are a homeowner struggling to meet your financial obligations concerning an existing mortgage in the state of Ohio, consulting with an attorney, in addition to your lender and FHA and HUD counselors is in your best interest. An attorney will prove instrumental in facilitating any of the aforementioned foreclosure prevention strategies, as well as dealing directly with your lender for you.
