Foreclosure is a stressful event. If you feel confused and scared, it is understandable. Remember that many families are in the same boat. Our economy is still going downhill. The unemployment rate is skyrocketing. However, if you take action, the chances to save your home increase dramatically. The only problems you might encounter will come from your state of mind. Do not despair. Keep a positive attitude and bond stronger with your family and loved ones. However, there are some actions to be taken. Just being positive won't do the job.
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Doing nothing will bring the same result - nothing. The following steps, performed in this exact order, will help you avoid confusion and fear.
1. Contact your lender even before the first payment is missed. This way they will know what to expect and you will feel better. Comply with your lender's guidelines and send the paperwork requested in a timely manner.
2. During the first three months of delinquency your lender will not take any legal action. It is time to reorganize your finances, look for another job or find any other financial solution.
3. The next step is forbearance agreement. This means to postpone or reduce the payments due for a certain period of time (usually three to six months). There is a way you can go through the forbearance agreement payment free.
4. If the financial hardship is still present, then it is time for the short sale process. You can check my other articles for more information on how to do it. This step alone can postpone the foreclosure for more than one year, may be two. And it is payment free.
5. At any time you can apply for loan modification. My opinion is that this home affordable program failed. The lenders do not know what to do and how to do it. The process is slow and does not stop foreclosure.
6. At any time look for errors and omissions in your mortgage agreement. I know that nobody reads this thirty-page document. But in this case you can sacrifice one hour to actually read it. If something is not clear to you, consult an attorney. I always talk to the county court house - civil division. They are very knowledgeable and the consultation is free.
7. Consider a bankruptcy. This time consult a bankruptcy attorney about your options. Always talk to at least two attorneys before making the choice. In some states the foreclosure sale can be prevented one hour prior to the scheduled sale.
While in foreclosure it is of crucial importance to know and follow your payments priorities. Never pay on your credit cards if you cannot pay your mortgage. Know the difference between secured and unsecured loan. Focus on the utility bills and other first hand expenses. Try to put aside some money. But do not call it emergency fund (what you focus on extends). Call it vacation fund. Being in the middle of the foreclosure does not have to stop you from having fun. It does not have to be expensive. Even having a lollipop can bring happiness into your day.
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