Homeowners faced with foreclosure in the state of South Carolina should consider all of their applicable options when questioning how to stop foreclosure proceedings on their primary residence. The state of South Carolina primarily uses mortgage loans as the primary security instrument in real estate financing, and in turn, the South Caroline state statutes require lenders to use judicial foreclosure proceedings to close on mortgages in default. Below are outlined several common methods used by homeowners to prevent foreclosure on their primary residence, including both short term and longer-term measures. Having legal counsel to consult and assist with negotiating with lenders during any foreclosure prevention action is important.
Using Your Lender to Prevent Foreclosure
Most mortgage lenders, if not all, assist homeowners if their mortgage enters or is about to enter into default. In most cases, it is in the lender’s best interests not to allow a given property to enter into foreclosure, and in turn, many lenders offer homeowners that are struggling to make payments the following options:
- Forbearance: If approved by your lender, a forbearance request will allow a homeowner to miss or make partial payments on a given mortgage loan for a pre-determined period, usually several months. This allows the homeowner to regain financial stability ideally to make future payments and all unpaid monthly payment amounts are built back into the lifetime of the mortgage loan
- Loan modification: If available through your lender, loan modifications adjust the terms, rates, or other attributes of an existing mortgage in a manner that makes meeting monthly payments more manageable for homeowners
- Loan refinancing: If available, homeowners can enter into an entirely new mortgage agreement with their lender, or another lender, which will ideally provide them with more favorable rates, terms, and a smaller principle amount owed
All of the aforementioned methods to prevent foreclosure will rely on cooperation with one’s lender and most likely a lawyer, in order to obtain the most favorable terms and rates.
Taking Advantage of Government Programs and Counselors
Federal housing crisis counselors, through the U.S. Department of Housing and Urban Development and the Federal Housing Administration, are available to homeowners for free advice and insight regarding foreclosure prevention tactics, as well as applicable federal and state laws that may assist homeowners. These counselors are educated and informed about existing federal and state specific laws and statutes enacted to assist struggling homeowners, and can determine if you are eligible for one or more of the following notable federal acts combating a nationwide foreclosure crisis, including:
- The HOPE for Homeowners Act, which provides assistance to eligible homeowners interested in obtaining fixed rate mortgages to replace their existing variable rate mortgage
- The Emergency Economic Stabilization Act, which furthers the provisions of the Mortgage Forgiveness and Debt Relief Act, which offers homeowners the ability to avoid income taxes related to forgiven mortgage debts
- The Homeowner Affordability and Stability Act, which if eligible, can provide mortgage adjustments for homeowners struggling to meet their existing monthly mortgage payments
In addition to these federal laws, other federal laws and specific statutes in the state of South Carolina may be able to assist struggling homeowners. By consulting with a lawyer or a federal housing crisis counselor, homeowners can learn more about all other applicable options for government relief available to them.
Using Short Sale or Deed in Lieu of Foreclosure to Get Out of Overwhelming Mortgages
Another viable alternative to saving a home, but one that can still prevent foreclosure is through selling one’s primary residence. If a homeowner can sell their home for an amount larger or equal to that owed on an existing mortgage, they may be inclined to do so. For homeowners that cannot sell their home for a sufficiently high value to cover all outstanding mortgage obligations, the following options may be available, if properly negotiated beforehand with your lender, including:
- Short Sale: Short sales revolve around the sale of a distressed property for an amount less than the total amount owed on an existing mortgage. In a pre-arranged short sale deal, a lender will agree to forgive any debt left following the sale of a given property at a set price negotiated beforehand.
- Deed in Lieu of Foreclosure: This option allows homeowners to turn over their title and ownership of a given home to their lender in exchange for cancelling all applicable mortgage debt obligations.
While both these options do not allow a homeowner to remain in their residence, it does allow homeowners to back out of burdensome mortgage obligations and start anew. Additionally, each of these options will prevent foreclosure, which in the state of South Carolina; can result in deficiency judgments against a homeowner and more debt.
Considering Bankruptcy as an Alternative to Foreclosure
Another option available to struggling homeowners would be filing bankruptcy, most likely under Chapter 13 or Chapter 7. While any bankruptcy filing does offer an automatic stay on foreclosure actions temporarily, the longer-term implications and relief available through bankruptcy include the following:
- Chapter 13: Reorganization of debts under Chapter 13 may allow a consumer to reduce monthly payments on a mortgage, while consolidating that payment alongside all other debt obligations, into one pre-determined monthly amount owed set forth by a bankruptcy trustee. Ultimately, if obligations to the trustee are met, a homeowner can keep their home and probably greatly reduce their overall amount of debt owed to creditors, including mortgage lenders.
- Chapter 7: Liquidation of assets under Chapter 7 will most likely force the sale of one’s home, while discharging any debts left over from a mortgage lender’s creditor claim. However, it does alleviate the burden of an overwhelming mortgage and other debts. Federal homestead exemptions for a primary residence stand at $18,450, while South Caroline state homestead exemptions under Chapter 7 are $5,000 and $10,000 for joint owners
Getting Legal Help with Foreclosure Prevention in South Carolina
Homeowners facing default, or who are currently in default, with their mortgage should seeking legal counsel to learn more about all of their legal options. Typically, a foreclosure prevention strategy is a multi-faceted venture requiring consulting with attorney, dealing directly with your lender, and considering applicable federal and state statutes that may help stave off an impending foreclosure. The sooner a homeowner consults with a lawyer about their mortgage in default, the more likely a favorable outcome can be achieved.
