Homeowners looking to stop foreclosure proceedings on their home in the state of Vermont need to remain aware of all applicable statutes, laws, and other methods at their disposal to slow or remedy entirely an impending foreclosure. Lenders in Vermont use both trust deeds and mortgages to secure loans made to homeowners, and in turn, most lenders will utilize power of sale clauses in both to expedite a foreclosure process. This process, if uncontested by a homeowner, can occur in as few as 120 days, which means a homeowner needs to act proactively as soon as they recognize default may occur.
Stopping a Foreclosure with Help from Your Lender
Homeowners facing default should consult with their lender as soon as they recognize their inability to meet deed of trust or mortgage obligations. Lenders often have loss mitigation departments willing to assist homeowners, which benefit both the lender and the homeowner. Below are some of the most commonly employed methods lenders use to prevent foreclosure on homeowners:
- Loan modification, which allows a homeowner to adjust the terms, rates, life, and other aspects of their existing home loan agreement in a manner that ultimately makes meeting monthly payment obligations more manageable for them
- Loan refinancing, which takes a homeowner out of an existing home loan agreement and places them into a new home loan, which will ideally offer better terms and other provisions for the homeowner in both the short and long term
- Forbearance periods, which if approved by one’s lender, will allow a homeowner to miss or make partial payment on an outstanding loan obligation temporarily in order for the homeowner to retain financial stability in the interim period
Using Government Counselors and Federal Relief Laws
The HUD and the FHA both offer local counselors that specialize in assisting troubled homeowners address their impending default and foreclosure issues. These federally sponsored counselors offer free assistance to homeowners and provide an in-depth knowledge of all applicable federal and state specific statutes and laws that may assist a struggling homeowner. The most notable pieces of federal foreclosure relief legislation, which can assist eligible homeowners, include:
- The 2007 Mortgage Forgiveness and Debt Relief Act, which prevents forgiven debts related to mortgage or trust deed loans from becoming taxable income under IRS code. This act was extended to the year 2012 with the passage of the Emergency Economic Stabilization Act in 2008
- The Homeowner Affordability and Stability Plan is an additional piece of federal legislation that offers lenders incentives to provide homeowners with alternatives to their existing mortgage loans through offering refinancing on high, variable interest rate loans and changing them to lower, fixed interest rate agreements
- The HOPE for Homeowners Act is another notable piece of federal law that provides incentives to participating lenders to offer homeowners struggling under variable rate mortgage loans the option to refinance into a fixed rate, long term mortgage backed by the FHA
Using Home Sale Transactions to Prevent Foreclosure
Another method to prevent foreclosure, but one that will not allow a homeowner to retain their primary residence is through transactions involving selling a home.
- Putting the house on the market is one option, which if sufficient equity is built into a home and the sale price is high enough, a homeowner can use to pay off an existing mortgage debt and use the proceeds to purchase another residence
- If there is not sufficient equity in a home, but an interested buyer has made an offer, a homeowner can consult their lender about doing a short sale. In a short sale transaction, a homeowner will sell their home at a given price, and any debt left unpaid or short following the transaction will be forgiven by their lender
- If a third party buyer does not exist, a homeowner may inquire with their lender about doing a deed in lieu of foreclosure transaction, whereby a homeowner turns over the deed or title to their property in exchange for the lender cancelling out all existing mortgage debts
Using Chapter 13 and Chapter 7 Bankruptcy to Prevent Foreclosure
Another set of options available to homeowners to prevent foreclosure is through bankruptcy filing. By filing for any chapter of bankruptcy, a homeowner will be granted an automatic stay on all debt collection attempts made by creditors, which will include lenders involved in foreclosure proceedings. This temporary reprieve may be sufficient in some cases, while in others, actually going through with the bankruptcy process will offer homeowners the following benefits:
- Chapter 7 bankruptcy can facilitate the liquidation of all outstanding debts, while also selling all assets that are not exempt, which will include most homes. The state of Vermont has a Chapter 7 homestead exemption up to $75,000, which may prove beneficial to certain homeowners eligible to file under Chapter 7
- Chapter 13 bankruptcy also offers homeowners the ability to reorganize all debt obligations into one manageable monthly payment made under the supervision of a court-appointed bankruptcy trustee. This process may allow a homeowner to reduce all outstanding debts drastically before entering into an overall payment agreement with the courts, which will allow a homeowner to retain their home in most cases
Getting Legal Help with Foreclosure Prevention in Vermont
As seen above, homeowners in default or facing foreclosure have a number of options at their disposal to prevent foreclosure on their home. Most of these options, however, will benefit if not require the intervention of an attorney with experience in foreclosure in the state of Vermont. Having dedicated legal counsel available is truly an important asset in any attempt to prevent foreclosure in the most favorable manner possible for a homeowner.
