Homeowners in the state of Utah, who wish to stop foreclosure on their primary residence, should be aware of the general outline of options available to them before making any decisions about a home in default. The state of Utah permits both deeds of trust and mortgages, while most lenders will utilize some form of trust deed, with power of sale provisions, to secure property financed through a lender. This means that most lenders will use some form of power of sale foreclosure, otherwise known as non-judicial foreclosure, to expedite the foreclosure process, though state statutes do permit judicial foreclosure. The timeline for an uncontested foreclosure is as little as four (4) months, which requires homeowners facing default or currently in default to make informed decisions rather rapidly. Below is an outline of the most common methods to prevent foreclosure available to homeowners in the state of Utah.
Foreclosure Prevention Options Available through Lenders
Your lender is most likely the best place to consult first regarding impending financial difficulty, or if already in default, about an impending foreclosure. Lenders frequently offer homeowners several options to prevent foreclosure, which is in the best interest of the lender, as well. The following are some of the commonly provided methods to prevent foreclosure offered by most lenders, including:
- Loan refinancing: Refinancing an existing deed of trust agreement or mortgage will entail a homeowner entering into an entirely new mortgage or trust deed with the same, or a different lender. Typically, if possible, a homeowner will seek to enter into a new home loan agreement with better terms, rates, lower principle amounts, and other conditions more favorable to the homeowner, in both the short and long term
- Loan modification: Loan modification is another option, which if available and done properly, will allow a homeowner to adjust their existing home loan agreement in a manner that makes meeting monthly payment obligations more manageable for them currently and into the future
- Forbearance periods: A forbearance request, if approved by your lender, will allow a homeowner to forgo making payments on an outstanding loan obligation for a set period, typically several months, in order for them to regain financial stability
The only way to determine if any of these options, as well as potentially others, are available to you as a homeowner is to consult with your lender as soon as you foresee potential problems meeting existing deed of trust or mortgage obligations.
Using Government Assistance and Applicable Federal and State Foreclosure Prevention Laws
Aside from consulting an attorney and your lender, homeowners should also look to consult with one of the FHA and HUD counselors provided in their area by the federal government. These counselors are on hand to provide free consultation and information to homeowners struggling to meet their home loan payments. Typically, these counselors are a good source of information regarding one’s eligibility for federal foreclosure relief programs, as well as for information on relevant Utah state statutes on foreclosure. Some of the most notable pieces of federal legislation in place to assist homeowners in default and facing foreclosure include:
- The HOPE for Homeowners Act, which offers lenders incentives to give homeowners the chance to adjust their existing mortgage or deed of trust agreement into one that is more manageable on a monthly basis, typically making the loans fixed rate and reducing exorbitantly high interest rates
- The Emergency Economic Stabilization Act and the Mortgage Forgiveness and Debt Relief Act of 2007, which changed the previous IRS statutes that made forgiven debts, related to mortgages in trouble a form of taxable income. Until 2012, forgiven debts related to foreclosure or mortgages in default or facing default will not be deemed taxable income.
- The Homeowner Affordability and Stability Plan, which provides lenders with federal incentives to offer homeowners refinancing. Typically, the refinancing will take a homeowner from a variable rate mortgage into a federally backed long-term, fixed rate mortgage that will be more manageable for the homeowner.
Deed in Lieu of Foreclosure and Short Sales
Some homeowners are resigned to the fact that they can no longer afford to live in their current primary residence. If this is the case, many will opt to sell their homes, only to recognize the market value of the home is less than the total amount owed on an existing mortgage, or that no interested buyers are currently looking at their property. Lenders, however, have offered these following methods of sale for eligible homeowners wishing to unload a burdensome property and get rid of the attached mortgage loan debts.
- Short Sales, which will entail a pre-arranged deal with a lender that uses a third party buyer to purchase a distressed property for a price lower than the actual value of the debt owed on that property by the homeowner. The lender then agrees to forgive the debt amount left short following the sale of the property.
- Deed in Lieu of Foreclosure, which will entail a homeowner returning the title to a home or allowing the deed of trust beneficiary to take over the deed to the home, in exchange for the lender agreeing to forgive all outstanding debts related to that property.
Bankruptcy and Foreclosure Prevention
Another option that many homeowners do not initially consider, but that is available, is Chapters 13 and 7 bankruptcy filing. Through filing for either Chapter 7 or Chapter 13, the courts will immediately place an automatic stay on collections actions by creditors, which will include foreclosure proceedings. Furthermore, each of chapter of bankruptcy can offer homeowners longer-term solutions to their impending foreclosure crisis, including:
- Chapter 7, which will allow a homeowner to discharge all mortgage related debts, albeit with the mandatory sale of their home as well. Under federal Chapter 7 homestead exemptions, primary residences up to the value of $18.450 may be kept, and under the Utah state exemptions, allows primary residences up to the value of $10,000, doubled for joint filers, to be retained.
- Chapter 13, which allows a homeowner to consolidate all debts under the supervision of a bankruptcy trustee, will provide homeowners with a prolonged plan for meeting all debt obligations, including their mortgage or deed of trust agreement. This will allow a homeowner to retain their primary residence, so long as they continue to meet the requirements set forth by a bankruptcy trustee.
Getting Legal Help with Foreclosure Prevention in Utah
Having an attorney advocate your foreclosure prevention actions is truly a good decision. Not only does this take a large burden off the homeowner, but also, it allows homeowners to make the most informed and savvy decisions when it comes to stopping foreclosure.
