Homeowners wishing to stop foreclosure on their primary residence in the state of Washington should be aware of all available options before going forward with a given decision about a home loan in or facing default. Lenders in the state of Washington utilize both mortgages and trust deeds to secure property loan agreements, which usually contain power of sale provisions allowing a lender to pursue non-judicial, power of sale foreclosure if a loan enters default. In the state of Washington, this means that an uncontested foreclosure can commence and finish in as little as one-hundred and twenty days. Homeowners need to be aware that once most home loans enter into the default, a lender will automatically begin the foreclosure process, which may limit their ability to prevent this from coming to fruition. By considering their options before default, which should include consulting with an attorney, homeowners can make the right choice to prevent foreclosure.
Contact Your Home Loan Lender before Default Occurs
Most lenders are willing to work with homeowners facing default for the simple reason that it is more beneficial for a lender to have a home loan repaid in full than to foreclosure on a home loan in default. Through your lender’s loss mitigation department, you may be able to gain approval to use one or more of the following options to reduce monthly payments and make meeting future home loan obligations more manageable, including:
- Loan refinancing, which can remove a homeowner from an existing home loan agreement into one with more favorable terms, include better interest rates, trading variable rates for fixed rates, reducing the principle loan amount, and adjusting the life of the loan
- Loan modifications, which can adjust an existing home loan in a manner that makes meeting monthly payment obligations more manageable for a homeowner, both in the short term as well as throughout the life of the loan
- Forbearance periods, which if approved by your lender, will offer a homeowner a brief period of several months where they only have to make partial or no payments on an existing home loan agreement, which can allow them to regain their financial stability and continue making future payments throughout the life of the loan
Federal Assistance Programs and Personnel
In response to a wave of default and foreclosure across the country, the federal government, through the HUD and FHA, offers free counseling for homeowners facing default and foreclosure. These informed counselors can direct homeowners on their eligibility for relief under federal laws and programs, as well as applicable statutes in the state of Washington. The most notable and effective laws relevant to foreclosure passed by the federal government thus far, include:
- The HOPE for Homeowners Act, which gives incentives to home loan lenders to offer struggling homeowners loan modifications that transition existing high interest rate, variable rate mortgages and deeds of trust into more manageable terms for the homeowner
- The Homeowner Affordability and Stability Plan, which gives lenders incentives to provide refinancing programs to eligible homeowners that allow them to get out from under high interest, variable rate mortgage loans and into fixed, lower interest rate thirty-year mortgages backed by the FHA
- The Mortgage Forgiveness and Debt Relief Act of 2007 and the Emergency Economic Stabilization Act of 2008, which provides federal income tax breaks to homeowners discharging debts related to mortgages that normally would have been deemed taxable income under previous IRS codes
Consider the Feasibility of Selling Your Home to Prevent Foreclosure
Another option to prevent foreclosure involves a homeowner selling their home and getting out from under existing mortgage loan debts. Any one of the following options, if applicable, is a feasible method of preventing foreclosure, while discharging the deed of trust or mortgage debt that is overwhelming a homeowner currently.
- A homeowner may wish to sell their house on the market, and if a buyer is found, the homeowner will use the proceeds of the sale to pay off an existing mortgage debt, while retaining the remainder to locate another residence. This option is obviously ideal, but requires some equity being built into a home or home loan, as well as finding a buyer willing to make an offer comparable to market value
- The second option for a homeowner wishing to unload a property entails what is known as a short sale. In a prearranged deal with their lender, a homeowner will locate a third party buyer, who will purchase the home at a set price. The homeowner will then use the proceeds from this sale to pay off existing home loan debts. In a short sale, the lender will agree to forgive any debts left short following the sale of the home, which is often the case in today’s real estate market
- A third option, known as deed in lieu of foreclosure, entails a homeowner turning over the deed or title to their home to their lender in exchange for the lender agreeing to forgive all outstanding debts related to a property
Look into the Benefits a Bankruptcy Filing May Provide
Aside from the aforementioned options, filing for bankruptcy may provide an outlet for homeowners seeking to stop a foreclosure. For starters, simply filing for any chapter of bankruptcy establishes an automatic stay on collections attempts by creditors, which will temporarily stop any foreclosure proceedings taken by a lender. Furthermore, bankruptcy filings may offer homeowners the following forms of relief from their current mortgage loan debts, including:
- Chapter 7 will liquidate the home assets in question most likely, unless deemed exempt, but the debts attached to a given property will also be discharged. The Washington state exemptions for Chapter 7 filings include a homestead exemption of $30,000
- Chapter 13 will allow a homeowner to reduce and consolidate all debts, include mortgage or deed of trust secured debts, and repay these amounts under the court’s supervision on a monthly basis based of the ability to pay of the homeowner, as determined by a court-appointed bankruptcy trustee
Getting Legal Help to Stop Foreclosure in Washington
Of all the aforementioned strategies to stop foreclosure, having an attorney will prove instrumental in each. Not only can an attorney directly and accurately determine the eligibility of homeowner’s for certain applicable foreclosure relief methods, but also, an attorney with experience in foreclosure prevention cases will understand and gauge the willingness of lenders to negotiate foreclosure prevention methods, as well.
