Foreclosure is when the bank or mortgage lender repossesses your home and sells it, because you have failed to repay your mortgage as agreed. Sounds scary, huh? Well it is, but it doesn’t have to get to this point. Anyone can find themself in a dire situation that was beyond their control. Job loss, illness, death in the family, and divorce are all events that can have a huge negative impact on your ability to make your monthly payments. When it comes to your mortgage and your home, this is especially serious as the mortgage lender has the legal right to foreclose on the morgage and repossess your home. However there are things you can do along the way that can help you stop foreclosure now or avoid foreclosure altogether.

With lenders and bill collectors calling you can feel overwhelmed, embarrassed or scared and you may even be tempted to avoid answering the phone at all. Don’t do this! Your first line of defense in avoiding foreclosure or stopping foreclosure is to maintain open and honest communication with your mortgage lender. Be honest; tell them what is going on. Be frank about the payments you will not be able to make. The more straightforward you are, the better the lender can propose solutions for you that are realistic.

If you avoid having this conversation with your mortgage lender they will be forced to make assumptions (such as you are going to default on the loan and not make any more payments). They will proceed according to their predefined lending policies and yes, this includes initiating forclosure. The bank does not want to foreclose on properties it is expensive for them and not why they gave you the loan to begin with. They would much rather come to a mutually satisfactory agreement with you that would see your payments resume and get caught up. Of course this allows them to continue to collect their interest as well.

So what are some of those options? One option is a mortgage refinance or a second mortgage. This can give you the cash you need to catch up on any missed payments.
You may have accumulated a significant amount of unsecured or credit card debt during this difficult period. Consolidating these balances can reduce the total amount you have to pay each month to something more affordable. If you have bad credit now because you missed a few monthly payments, you can still qualify for a mortgage refinance or second mortgage. You may have to settle for higher interest rates because of your low credit rating, but you will be able to keep your home.

After you explain your circumstances they may permit a forbearance mortgage allowing you to postpone your monthly mortgage payments for a period of time. This is generally permitted when the financial difficulty is understood as temporary. Again it is critical to engage in this conversation with your lender as soon as possible. The sooner you do the more options you will have available to you.

If your income reduction is more permanent due to perhaps a death in the family or marital breakdown, the lender may grant you a loan modification. Under this plan they will adjust the terms of your mortgage to make it more affordable.

Regardless of what arrangement you make with your financial institution is it very important that you live up to your end of the new agreement. Be realistic with what you accept and then stick to it. Remember the key is coming together on a plan that is satisfactory to both of you. By taking action as soon as possible and giving your morgage lender a chance to help, you can stop foreclosure now or avoid foreclosure altogether.