Homeowners seeking to stop foreclosure in the state of South Dakota should be aware of all their alternative options before making any decision regarding a deed of trust or mortgage in default. In most cases, there are alternatives to foreclosure available to homeowners that actively seek other options. The foremost authority and party available to help struggling homeowners will be their lender, who may be able to offer several important options to prevent foreclosure. In addition, having a lawyer counsel you on all your options, as well as assist with negotiations with your lender is important. Outlined below are some of the most common methods used by homeowners in South Dakota to prevent foreclosure.
Lender Assistance Programs and Other Lender Based Foreclosure Prevention Methods
The lender of one’s mortgage or named as beneficiary on one’s deed of trust is really the most important party in any foreclosure prevention strategy. All decisions related to a deed or mortgage in default must be approved by a lender, and therefore, remaining in close contact with one’s lender, or their loss mitigation department, is important. Some of the most common and initial methods lenders use to prevent default or foreclosure on a property, include:
- Offering homeowners forbearance periods, which allow the homeowner to forgo making payments on a given mortgage loan for a pre-determined period of time. This temporary reprieve will allow homeowners to retain financial footing and be able to make future payments on property secured loans
- Offering homeowners loan modifications, which may adjust an existing mortgage or deed of trust agreement in a manner that makes meeting payment obligations easier for homeowners in the short and long term
- Offering homeowners refinancing options, which will entail existing one’s existing mortgage or deed of trust agreement and entering into an entirely new property loan, which will ideally contain more favorable terms, rates, and other considerations for the homeowner
Government Counselors and Federal Laws to Prevent Foreclosure
The federal government, in response to an impending nationwide foreclosure crisis, offers relief counselors in every state that can counsel struggling homeowners on their options to prevent foreclosure, which will include insight into eligibility for applicable federal and state foreclosure prevention protections. Some of the more notable federal programs and laws aimed at assisting homeowners struggling to meet existing home loan payments include:
- The Homeowner Affordability and Stability Act: This act contains provisions that allow certain eligible homeowners and their participating lenders to adjust the terms of existing mortgages and deed of trust agreements into federally supported terms that benefit the homeowner
- The HOPE for Homeowners Act: This act allows certain eligible homeowners to enter into fixed rate, long term mortgages backed by the FHA, if their lender participates in the program
- The Emergency Economic Stabilization Act and the Mortgage Forgiveness and Debt Relief Act: These two acts provide homeowners tax relief from having mortgage debt forgiven by their lender from becoming taxable income under IRS laws
Deed in Lieu of Foreclosure and Short Sales to Prevent Foreclosure
Another set of options for homeowners swamped in existing home loan agreements take the form of selling or trading their home with a third party, or even their lender, in order to pay off all existing debt related to a home. While some homeowners can feasibly sell their current residence and pay off outstanding home loan obligations in full, most cannot. The following options, deed in lieu of foreclosure and short sale, are two options that may benefit some homeowners.
- Deed in lieu of foreclosure is a process by which a homeowner returns the title or deed to their primary residence to the mortgage lender or deed of trust beneficiary, in exchange for the lender agreeing to cancel or forgive all outstanding debt obligations.
- Short sales are a process by which a homeowner locates an interested third party buyer willing to purchase a home at a set price, which is less than the value of the outstanding mortgage obligations owed by the homeowner. In exchange for the large lump sum payment, a lender will agree beforehand to forgive any amount short from the sale of the property.
Both these options afford homeowners the chance to get out from under a burdensome mortgage or deed of trust obligation, but do not allow one to keep their home. These options also promote the ability of a homeowner to avoid a deficiency judgment, which may arise following a foreclosure.
Chapter 13 and Chapter 7 Bankruptcy to Prevent Foreclosure
Under current bankruptcy laws, any filing for bankruptcy automatically places what is known as an automatic stay on creditor collection actions, which will include foreclosure actions. With this brief reprieve, homeowners may be able to develop a longer term foreclosure prevention strategy, which may include continuing the bankruptcy process under Chapter 13 or Chapter 7. The following benefits can be derived from filing bankruptcy to prevent foreclosure, including:
- Chapter 13, which is reorganization under the bankruptcy codes, could allow a homeowner to reduce certain debt obligations, which may include the mortgage or deed of trust agreement. Under the supervision of a bankruptcy trustee, homeowners can consolidate all outstanding debts into one pre-determined payment, which is both manageable to the homeowner and reasonably helps settle outstanding debt obligations.
- Chapter 7, which involves discharge and liquidation of debts and assets, could be used to liquidate the home and discharge any debts left over from the sale of the residence. Additionally, federal and state bankruptcy laws contain exemptions specifically for homesteads, which in the state of South Dakota may include primary residences up to an unlimited dollar value.
Consulting with an attorney is essential to learn if bankruptcy may work with your foreclosure prevention actions and can help address your overall debt versus income situation.
Getting Legal Help to Stop a Foreclosure in South Dakota
Having an attorney’s advice and counsel from before the onset of default is always helpful when mounting a foreclosure prevention action. Most foreclosure prevention actions will require the assistance of an attorney to ensure they promote terms and conditions favorable to the homeowner, including determining the eligibility of the homeowner to engage in certain programs and actions. Consult with a foreclosure prevention lawyer soon after or before consulting your lender on mortgage or deeds of trust facing default.
