Homeowners in the state of Tennessee that wish to stop foreclosure proceedings on their home first should consider the specific provisions and clauses included in their mortgage or deed of trust agreement. The state of Tennessee uses both as primary security instruments in property financing, and in turn, the state of Tennessee also permits both power of sale, non-judicial foreclosure and judicial foreclosure proceedings. As a homeowner facing default and an impending foreclosure, understanding the specifics of your lender agreement is essential to mounting any formidable foreclosure defense. Once the details specific to your mortgage or deed of trust agreement are determined with the help of legal counsel, you may want to consider any one of the following measures commonly employed by struggling homeowners to stop a foreclosure.
Contact Your Lender before Default Occurs
It is essential to contact your lender before you enter into default. Some deeds of trust agreements contain clauses that force power of sale proceedings to commence immediately after a lender agreement enters into default. In other cases, homeowners will need time to consider their best options and for their lender to provide alternatives to foreclosure. The best approach to preventing foreclosure is remaining proactive in communications with your lender. Though not guaranteed, many lenders offer the following measures to save homeowners from entering into foreclosure, including:
- Forbearance periods, which allow a homeowner to miss or make partial payment on an existing mortgage or deed of trust for a pre-determined period, typically several months. With this reprieve, a homeowner will ideally be able to regain their financial stability and be able to make future home loan payments.
- Loan modifications, which can take the form of any number of adjustments to existing mortgage or deed of trust agreement with your lender that will make monthly payments more manageable for homeowners
- Loan refinancing, which can be done through your current lender or others, will place a homeowner into an entirely new mortgage loan, preferably with more favorable rates, terms, or principle amount owed
The eligibility of a homeowner to participate in certain loss mitigation measures offered by a given lender, as well as the willingness of a lender to offer these programs, is case specific and may be assisted by legal counsel.
Consider Current Federal and State Foreclosure Prevention Laws
The federal government currently offers free counseling for struggling homeowners with informed counselors at local offices of the FHA. These counselors can guide struggling homeowners through their options, especially those related to federal and state laws that provide relief and protections for homeowners facing default. The state of Tennessee has several statutes and other laws in place providing specific protections for struggling homeowners, and in addition, the federal government has enacted several helpful pieces of legislation to prevent foreclosures, including:
- The HOPE for Homeowners Act, which is federal program providing incentives to lenders to adjust mortgages and other home loan agreements with homeowners that have high interest rate or variable interest rate home loans. Typically, the refinancing will then place an existing home loan into a fixed rate loan with more manageable interest rates, which are backed by the FHA.
- The Homeowner Affordability and Stability Plan, which offers lenders incentives to provide homeowners with refinancing and adjustments on existing mortgages of struggling homeowners, usually those faced with variable interest rates.
- The Mortgage Forgiveness and Debt Relief Act of 2007, which was extended by another federal economic act to the year 2012, prevents the IRS from deeming debts forgiven related to mortgages and foreclosure as taxable income, as it had prior to the passage of these acts.
Not all persons will be eligible for the aforementioned federal programs, but numerous other less notable federal laws are in place protecting homeowner’s rights, as well as state specific statutes affording homeowners relief from impending foreclosure actions.
Look into Deed in Lieu of Foreclosure and Short Sale Transactions
Another viable alternative to foreclosure would be for a homeowner to sell their existing home, while using the proceeds from the sale to pay off an existing mortgage or deed in trust obligation. However, as commonly seen across the country, home values have not risen sufficiently in many cases to cover all outstanding mortgage loan obligations for many homeowners. In these instances, pre-arranged transactions with your lender may offer a solution for homeowners wishing to eliminate all outstanding debt obligations related to a given property and get out an expensive home. These types of transactions include:
- Deed in lieu of foreclosure, which transpires when a homeowner simply returns the deed to their home to their lender in exchange for the lender cancelling out all outstanding mortgage debts
- Short sale, which will entail a third party buyer making an offer an home facing default or foreclosure. The homeowner will then consult with their lender to determine if the lender will accept the proposed sale price, which may not cover all outstanding debts. If a short sale is approved, the lender agrees to accept the proceeds from the sale and forgive any outstanding debt left short following the transaction
Both of these foreclosure prevention methods will require back and forth negotiations with your lender, which should probably include the use of an attorney that understands foreclosure prevention specific to the state of Tennessee.
Consider Bankruptcy, both Chapter 7 or Chapter 13 as Foreclosure Alternatives
Another method of stopping foreclosure, although only temporarily, comes in the form of automatic stays on creditor collection attempts following a bankruptcy filing by a given debtor. Aside from this brief automatic stay period, however, bankruptcy filings may offer a homeowner the ability to keep their home or get rid of an unwanted home and home loan obligation.
- Chapter 7 liquidation, which will discharge mortgage debts, but at the cost of having to liquidate the assets held in a property, as well as many other assets. Federal homestead exemptions for Chapter 7 stand at $18,450, and the state of Tennessee has homestead exemptions for Chapter 7 filings up to $5,000 for single persons
- Chapter 13 reorganization, which will allow a debtor to consolidate all outstanding debt obligations into one monthly payment supervised by a court appointed bankruptcy trustee. Additionally, a debtor may be able to drastically reduce their overall debt through negotiations with creditors during Chapter 13 proceedings, including their mortgage lender
The complex nature of bankruptcy filing, as well as the long term implications of any filing, will require the intervention of an attorney, who will be able to better inform consumers on exactly what property and assets they possess that may be exempt, as well as what debts are dischargeable.
Getting Legal Help with Stopping a Foreclosure in Tennessee
An essential component of any reasonable foreclosure prevention action will be a foreclosure lawyer that understands the nature of lenders facing homeowners in default, the specific applicable statutes related to foreclosure in Tennessee, and the specific clauses and provisions included in your personal home loan agreement. With the assistance of an attorney, homeowners can fully realize all their legal and other options available to prevent foreclosure.
