How To Avoid Foreclosure

by Dean Weber

Times are very tough economically, and they may get worse - especially in the real estate markets nationwide. There are literally millions of foreclosures - families losing their homes. The monetary and emotional toll is huge. Here are a few simple, key ideas that any person can think about and use to help them and their families to fight the foreclosure process. This article assumes that the lawsuit - the legal foreclosure action - has commenced.

1)  Remember that a foreclosure, in most states, can and does take time - often a year or more - especially these days, because there are tons of foreclosures occurring. But, don't rely on that - because it can also take as little as six months from the commencement of the lawsuit to the actual foreclosure auction.

So, first thing to understand is that ACTION is required.

2)  If you have a lot of equity in your home - let's say it's worth 500,000 and you owe 200,000, then a new mortgage may very well be possible. There are many "hard money" lenders out there who might charge 14% and 4 points- but it is worth it to save your home. Since your credit is bad - due to the foreclosure - a hard money lender will lend up to 50% of the value of your home. It's expensive, but it will save the remaining, significant equity.

3)  Of course, most families don't have that much equity - they just need the home to stay in, to raise their family - in short - to live. It's much more than just a money thing. They may only have 10-20% of an equity stake - but still, keeping the home is priceless to many people. To stop the foreclosure, you can file a bankruptcy - either a chapter 7 or a 13 - either one will stop the legal process. But, it is the chapter 13 that will allow you to KEEP your home in the long run – in most cases, the chapter 7 will force you to sell your home. The chapter 13 makes you pay off the mortgage lender slowly - usually over a three to five year plan - to pay the arrears, while also paying the current mortgage payments. But most importantly, the foreclosure process is halted – completely - even if it is the day of the auction!!!

4)  You can hire an attorney to file an "order to show cause" - why the foreclosure should be stopped - that is, you have some reason that the lender should not have foreclosed in the first place - maybe you did make payments, but they weren't credited properly - mistakes do happen. This mechanism uses the intervention of the state courts, whereas bankruptcy is a federal court proceeding. By the way, you can file a chapter 13 (or 7) without an attorney - but an attorney is quite desirable.

5)  One of the emerging areas is that of mortgage fraud - maybe you have a "subprime" mortgage - and maybe you didn't understand the mortgage that was issued to you - it is an increasing area of litigation - something that you may want to check out - and use, as a mechanism to stop the foreclosure - by way of an order to show cause - using the possibly faulty mortgage as an underlying cause to stop the foreclosure - it is something to look into.

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