A stop foreclosure loan modification or refinance can be an effective foreclosure defense strategy to save your home from foreclosure. With a stop foreclosure loan modification or a refinance, you can lower your interest rate and/or extend the loan term so that your monthly payment is more affordable. A mortgage modification or refinance is only a good idea if you have the ability to repay the loan. You must show documentation to your lender verifying that you have enough income to make your new payments. Otherwise, you will not qualify for these loans. For some borrowers, it would only be prolonging a bad situation. Other options for homeowners who cannot afford to keep their homes and make their monthly mortgage payments include:
- Short sale (requires lender approval to sell the home for less than what you owe, and walk away owing nothing to your lender)
- Selling your home (paying off your loan with the equity from the sale proceeds)
- Deed in lieu of foreclosure (signing a deed back to the lender and owing your lending nothing)
It is recommended that you speak with an attorney to determine whether a loan to stop foreclosure is the right solution for you.
Advantages and Disadvantages
Advantages
- You get to keep your home
- Lowering your mortgage payment with a mortgage modification or refinance helps you if you have a temporary financial hardship. It will get you back on track, and keep your payments current.
- You save your credit
Disadvantages
- Statistics show that a large number of borrowers with financial hardships, who have obtained a loan modification or have refinanced, tend to default again within six months
- If you don’t have sufficient income you won’t qualify
- The government programs are only for owner occupied/primary residence properties. If you own investment property, you are not eligible under the government programs. You may be able to work out a refinance or mortgage modification under a different program with your lender.
A better option is to get your lender to reduce your principal. Most lenders have resisted doing this because they are in the business of making money. It’s worth asking your lender though. However, recent government pressure with the new HAFA guidelines gives you an opportunity to get a principal reduction if you are unemployed. Both you and your lender have to participate in the HAFA program, and you must meet the HAFA eligibility guidelines.
Attorney Help
A real estate foreclosure defense attorney can help you negotiate a mortgage modification or refinance, and advise you of other foreclosure prevention alternatives. The attorney is an expert at negotiating a solution with your lender.
