Homeowners in the state of Virginia, who wish to stop foreclosure proceedings on their home, should be aware of all their legal options before making any definitive decisions. For most homeowners, this means consulting with an attorney that has experience in dealing with foreclosure prevention cases in the state of Virginia. Lenders in the state of Virginia have the option of securing property loans with either a deed of trust or mortgage, and in most cases, lenders will include power of sale provisions in either. With the power of sale provision in place, lenders can effectuate an uncontested power of sale, otherwise known as non-judicial foreclosure, in less than sixty days. This relatively short timeframe from default to foreclosure requires homeowners to act proactively before
Contact Your Lender about Foreclosure Prevention Options
The reality of foreclosure and lenders is that lenders do not benefit from foreclosure sales as much as they would in the event a homeowner repaid a mortgage or deed of trust agreement in entirety over time. This means that many lenders, through their loss mitigation departments, are willing to work with homeowners on preventing default, at least on a short-term basis. The following options are commonly offered by lenders to homeowners struggling to meet existing payments, including:
- Forbearance periods, which allow a homeowner to miss or make partial payments on an outstanding home loan agreement for several months, in order to regain some form of financial stability.
- Loan modifications, which allow a homeowner to adjust their existing home loan agreement in one or more ways that make meeting future payment obligations more manageable, such as lowering interest rates, changing variable rates into fixed rates, or lengthening the life of the loan
- Loan refinancing, which entails a homeowner entering into an entirely new loan agreement with a lender, preferably with more favorable terms for the homeowner in both the short and long term
Consult with Federal Foreclosure Crisis Counselors on Federal Aid Laws
The federal government has also provided struggling homeowners with a number of resources to help prevent foreclosure. Each local office of the HUD and FHA have staffed helpful and informed foreclosure crisis counselors in every state to assist homeowners that are currently in default or facing default. These counselors can determine if a homeowner may be eligible for assistance under several notable foreclosure preventions laws passed by Congress, as well as if any state specific statutes in Virginia apply to their circumstances. A few of the most influential foreclosure prevention laws effective currently include:
- The Homeowner Affordability and Stability Plan, which provides incentives to lenders from the FHA to offer struggling homeowners trapped in variable rate home loans the ability to refinance their existing loan into a lower interest, fixed rate mortgage backed by the FHA
- The HOPE for Homeowners Act, which also offers incentives to lenders to offer struggling homeowners the ability to modify an existing home loan agreement in a manner that reduces high interest rates and prevents future fluctuations by transition variable rates into fixed rates
- The Mortgage Forgiveness and Debt Relief Act of 2007, which prevents the IRS from deeming forgiven debts related to mortgages as taxable income, which it previously was prior to the passage of the act. These benefits to homeowners were extended until 2012 with the passage of the Emergency Economic Stabilization Act of 2008
Options for Selling One’s Home to Prevent Foreclosure
Some homeowners may opt to simply get rid of an existing home and get out from under an unfavorable mortgage or deed of trust agreement. The following options are available to homeowners that wish to prevent foreclosure in this manner:
- A homeowner, if sufficient equity is built into a home or home loan, may be able to sell their home on the market and use the proceeds from the sale to pay off all outstanding mortgage or deed of trust debts, while generating some income to put towards another residence
- In other cases, a homeowner may be able to sell a home on the market, but a value less than the total amount owed on an existing mortgage or deed of trust home loan. In a prearranged deal, lenders may agree to what is known as a short sale, which involves the lender taking the proceeds from the sale and forgiving the amount of debt left unpaid following the sale
- The final option for homeowners does not require finding a third party buyer, but rather, a homeowner can simply turn over the deed or title to their home to their lender in a transaction known as deed in lieu of foreclosure. The lender, once the property rights are transferred, will then forgive all outstanding debts related to a given mortgage or deed of trust agreement
Using Chapter 13 and Chapter 7 Bankruptcy to Prevent Foreclosure
Another set of options available to homeowners is filing for bankruptcy, any bankruptcy filing will provide a temporary reprieve from creditor collection attempts, which will include lenders involved in the foreclosure process, through what is known as an “automatic stay”. If eligible for the following chapters of bankruptcy, homeowners in Virginia may use the following methods to prevent foreclosure, including:
- Chapter 7, which will involve liquidating all assets (include one’s home potentially) and discharging all debts (including mortgage debts). The federal government and each state has specific lists of exemptions allowed under Chapter 7, which may allow a homeowner to retain their primary residence. The federal homestead exemptions for Chapter 7 is $18,450, while the state of Virginia exemptions list contains homestead exemptions that vary based on the number of dependents, joint fillings, and other considerations.
- Chapter 13, which will allow a homeowner to reorganize debts under the care of a bankruptcy trustee, can actually reduce the total amount owed on a given mortgage, while renegotiating repayment terms that fit into a homeowner’s budget, per the determination of a bankruptcy trustee overseeing their case
Getting Legal Help with Stopping a Foreclosure in Virginia
In all the aforementioned methods to prevent foreclosure, a homeowner will most likely need the assistance of an attorney to ensure a favorable outcome. In many instances, an attorney will not only be able provide frank advice on the eligibility of a homeowner for certain foreclosure prevention methods, but also, give insight as to how the process works and what homeowners must do. Before taking any action to prevent default or foreclosure, consult with a lawyer that specializes in foreclosure prevention cases in the state of Virginia.
