Homeowners wishing to stop foreclosure on their primary residence in Rhode Island should consider all applicable and available options. A number of methods to prevent foreclosure, both temporary and longer term, are available to most homeowners, but require consulting with several other parties to determine eligibility. Having an attorney assist with any foreclosure prevention action is beneficial, as well as is consulting with HUD approved counselors at their local offices across Rhode Island. Below are several feasible methods of stopping foreclosure, which will require varying levels of intervention of an attorney and your mortgage lender or deed of trust beneficiary.
Consult with Your Lender about Immediate Foreclosure Prevention Options
The first place to seek relief from impending default or foreclosure actions is one’s lender. In response to a wave of foreclosures and defaults, many lenders are willing to offer several common forms of relief to eligible homeowners that can prevent an impending default or foreclosure. Consult with your lender as soon as possible about the feasibility of the following options, including:
- Loan refinancing, which can take a homeowner out of an existing mortgage agreement and place them into a new mortgage agreement, ideally with favorable terms, rates, and other factors
- Loan modification, which will adjust a current mortgage loan in one or more ways, which ideally, will make meeting monthly payment obligations more manageable for homeowners
- Forbearance requests, which if approved by a lender, will allow a homeowner to miss or make partial payments on an existing deed of trust or mortgage loan temporarily, with the unpaid amount being built back into the total amount owed on a loan
Seek Out Federal Housing Counselors and Applicable Federal Foreclosure Programs
Through the FHA and HUD, the federal government offers free counseling to struggling homeowners. These local offices of the HUD are good sources of information on one’s eligibility for federal foreclosure relief programs, as well as state specific initiatives in Rhode Island. The most notable of current foreclosure prevention legislation, includes:
- The Emergency Economic Stabilization Act of 2008, which extended provisions of the Mortgage Forgiveness and Debt Relief Act into 2012, provides homeowners with forgiven debt related to a mortgage in default tax breaks from this debt becoming taxable income with the IRS
- The HOPE for Homeowners Act, which offers eligible homeowners the chance to refinance their current variable rate mortgages into fixed rate, thirty-year mortgages backed by the FHA
- The Homeowner Affordability and Stability Act, which offers eligible homeowners the chance to adjust their existing mortgage loan in a manner that makes monthly payments more manageable in the long term
Look into Short Sale and Deed in Lieu of Foreclosure Arrangements with Your Lender
Depending on a number of factors, some homeowner may consider either short sale or deed in lieu of foreclosure actions as a method of ridding mortgage loan obligations and getting out of a home swamped in debt. Both options require negotiating with your lender, but afford homeowners in default and facing foreclosure the following options:
- A short sale can provide homeowners the opportunity to sell their home to a third party at an amount less than the total amount owed on an outstanding mortgage, with the lender approving beforehand to forgive any amount short of the total amount owed.
- A deed in lieu of foreclosure allows a homeowner to simply return the title to their home to the beneficiary of the deed of trust or to their lender, with the lender agreeing to cancel all outstanding debt obligations related to that property
Both of these options do not allow a homeowner to remain in their residence, but do offer options to prevent foreclosure proceedings and deficiency judgments.
Consider if Bankruptcy Filing Is a Good Alternative to Foreclosure
Another option open to homeowners to prevent foreclosure is through bankruptcy. By filing for bankruptcy, the courts will place an automatic stay on all collections attempts made by creditors, which will include stopping all foreclosure proceedings or power of sale actions by one’s lender, at least temporarily. Further down the line, the following chapters of bankruptcy afford homeowners certain benefits that can prevent foreclosure, including:
- Chapter 7 bankruptcy allows a homeowner to discharge debts, including a mortgage, but at the cost of having to liquidate all non-exempt assets. In Rhode Island, there is no homestead exemption available to persons filing Chapter 7, and federal homestead exemptions stand at $18,450.
- Chapter 13 bankruptcy affords homeowners the opportunity to reorganize and consolidate all debts into one monthly payment made through a bankruptcy trustee. The Chapter 13 process may allow homeowners the chance to negotiate down existing mortgage debts and others, while giving them the opportunity to remain in their home as long as they meet payment requirements to the trustee.
Getting Legal Help to Stop a Foreclosure in Rhode Island
Instrumental to any foreclosure prevention action will be a lawyer that understands the applicable foreclosure laws in the state of Rhode Island and your specific case. Having dedicated legal counsel, alongside information from the HUD counselors and your lender, is critical to making any informed decision regarding your ability to remain in your home and meet financial obligations related to a mortgage or deed of trust.
