In the state of Wisconsin, homeowners that want to stop foreclosure actions on their home need to be aware of all applicable alternatives. The state of Wisconsin utilizes both deeds of trust, as well as mortgages to secure property loans, and in many cases, provisions in these agreements include power of sale clauses. This gives the lender the ability to foreclose on a property outside of the courts, which will typically expedite the process significantly. If uncontested, a foreclosure action against a home can take place in as few as ninety days in Wisconsin. Homeowners facing default, or who may even already be in default, need to act swiftly and coherently, in order to prevent foreclosure.
Contact Your Lender about Foreclosure Alternatives
Contrary to some beliefs, lenders do not benefit from foreclosure as much as they do through homeowners meeting the original mortgage loan obligations for the lifetime of the loan. For this reason, many lenders operate loss mitigation departments, which can assist homeowners in a number of ways, which may help prevent default and foreclosure. The most notable of these lender provided foreclosure alternatives, include:
- Forbearance periods, which will allow a homeowner to miss several months of payments, per the approval of their lender, in order to gain a better financial standing and ideally, be able to make future loan payments without entering into default
- Loan modification, which can adjust an existing home loan agreement in a manner that will allow homeowners to better be able to make current home loan payments, as well as future payments, through rate adjustments and others
- Loan refinancing, which will take a homeowner out of an existing mortgage or deed of trust agreement and place the homeowner in a different home loan, preferably one that offers more stability and lower, fixed interest rates
Contact HUD Counselors about Federal Foreclosure Alternatives
Another great resource and place to look for foreclosure alternatives is with HUD counselors provided by the federal government in all fifty states. These counselors are in place to provide dedicated service and information to homeowners facing default and foreclosure. The information provided will include a litany of foreclosure alternatives, with a special emphasis on what a homeowner’s eligibility may be for federal foreclosure relief programs, as well as their eligibility for any applicable Wisconsin state specific laws. Some notable pieces of legislation passed by the federal government to assist struggling homeowners include:
- The HOPE for Homeowners Act of 2008: This act provides incentives to lenders from the Federal Housing Administration (FHA) to offer homeowners struggling with variable rate mortgages a fixed rate refinancing alternative backed by the FHA
- The Homeowner Affordability and Stability Plan: This act provides incentives to lenders to offer homeowners refinancing on existing home loan agreements that may contain high or variable interest rates
- The Mortgage Forgiveness and Debt Relief Act of 2007: This act, also known as H.R. 3648, prevents previously considered taxable income with IRS from becoming another debt burden for homeowners that have had mortgage debts forgiven in certain cases
Talk with Your Lender and an Attorney about Selling Your Home
Another alternative to foreclosure is found through selling one’s home. While in favorable scenarios, a homeowner can simply sell their home, repay outstanding mortgage loan obligations, and have sufficient money left over to find another residence, this is not often the case in today’s market. Typically, struggling homeowners will not have sufficient equity or value in their home to cover outstanding debt obligations, if a buyer is even found. In these cases, lenders will frequently accept the following pre-arranged deals:
- Short Sale: A homeowner, if they locate an interested third party buyer, can sell their home at a pre-approved price agreed upon by their lender. The proceeds from the sale will go directly to the lender to cover an existing mortgage or deed of trust debt, while any amount of debt left short after the sale will be forgiven by the lender
- Deed in Lieu of Foreclosure: A homeowner can also return the deed or title to their primary residence to the lender, in a pre-arranged transaction, whereby the lender will agree to forgive all outstanding debts attached to a given residence
Consult with a Lawyer about Bankruptcy Filing to Prevent Foreclosure
Another option for homeowners is to use bankruptcy laws to prevent foreclosure. By simply filing for bankruptcy, the courts will place an automatic stay on any creditor collection attempts, which will include foreclosure proceedings. Aside from this temporary injunction, homeowners can garner the following long-term benefits from filing for bankruptcy to prevent foreclosure, including:
- Chapter 7: Under Chapter 7 bankruptcy laws, homeowners will have to liquidate all non-exempt assets, while all remaining debts will be discharged. The state of Wisconsin allows exemptions for asset liquidation, which includes an exemption for homesteads at a value of $40,000 or less
- Chapter 13: Under Chapter 13 bankruptcy law, homeowners can reorganize, consolidate, and ultimately, most likely reduce the amount and number of debts they owe, while retaining their home. Under the supervision of the courts and a bankruptcy trustee, homeowners can retain their home, as long as they meet the monthly payment obligations set forth by their bankruptcy trustee, which will be based on the income earning capacity of the debtor
Getting Legal Help with Foreclosure Alternatives in Wisconsin
Any of methods to prevent foreclosure mentioned above will pose long-term implications for a homeowner, which will most likely require the counsel of an attorney to fully appreciate. In addition, by using legal counsel, homeowners can increase their chances of obtaining a favorable outcome to any foreclosure prevention action.
