How to Prevent Foreclosure

Throughout the United States, many American home owners are facing greater difficulties with their mortgage payments.  Month after month the number of late payments and mortgage delinquencies are on the rise.  

Many home owners do not realize that a lender can begin the foreclosure process when a person misses a payment.  Foreclosure is the legal process by which a mortgage company can gain legal title and ownership due to a borrower's failure to make the monthly mortgage payments.  In other words, foreclosure is legal home repossession where the owner losses all legal interest in the home, despite any work completed on the home, equity applied toward the mortgage, or appreciation accrued in the home.

As the rate of home ownership tops 65% in the United States, a home owner facing foreclosure must look at all available options in order to prevent foreclosure upon his or her home.  The steps listed below are basic dos and don'ts designed to help prevent foreclosure on a home.

1)  Stay calm.  Before doing anything, a person should take a deep breath, exhale and realize that in order to resolve this situation, it will take a little time and a lot of patience.  Going overboard, threatening suicide or threatening another person (such as a customer service agent from the mortgage company) will not help the situation.  

2)  Analyze the situation.  Before a person contacts the lender, it is critical that a person knows where he or she is financially.  In addition, the home owner should have a "plan of action" that helps to outline every step of the way.  For assistance in this analysis, click here.

3)  Call the lender.  Communication is critical to in a lender's determination of any alternatives and options it offers a home owner.  To learn more about how a lender determines a person's options and alternatives, click here. 

4)  If the lender is unwilling to work with a person, he or she should look for ways to reinstate or payoff the loan.  In order to save the home, a person should explore very avenue of finding sufficient money to reinstate the loan including: 

1. selling a major asset such as a car or a boat, 

2. cutting expenses (like the cable bill) to save enough money, 

3. pull money out of a retirement account, 

4. borrow against another asset (like a car), 

5. borrow from family or friends, 

6. visit a pawn shop.  

Most importantly, a person should stay away from debt consolidation companies offering to "save" the person from foreclosure.  Often times these companies are merely a front for loan sharking, siphon off any limited resources a person has, and rarely help a person out of foreclosure and other financial woes. 

If a person knows that he or she will be unable to continue making the mortgage payments (due to the death of the primary wage earner, divorce, or other similar problems), the sale of the home may be the only option available.  Selling the home allows a person to save his or her credit, prevent foreclosure, and salvage any equity and appreciation built in the home.  Meanwhile, the person is able to downsize to more affordable housing within his or her means.

5)  If the home owner is in the military, he or she may have special rights under the Soldier's and Sailors Civil Relief Act.  For more information, click here.

6)  Don't file for bankruptcy unless it is the only option available.  Though bankruptcy may temporarily stop the foreclosure proceedings, it leads to the destruction of one's credit, the inability to borrow money in the future, and may result in losing the home in the end.  For more information on bankruptcy and foreclosure, click here.

There is free help and assistance for home owners facing the possibility of foreclosure.  If you would like to talk with someone about your situation, click here.