Mortgage financing can make it easier to buy a home. Home loans are secured by the property so if you fail to repay based on your terms of agreement then the lender can take the home away. Foreclosure is the legal means for the lender to take over the home. If you are facing financial difficulties and aren’t able to repay your loan then there could be different alternatives to foreclosure and ways that you can keep your home.
What Happens if You Miss a Mortgage Payment?
You don’t automatically go into foreclosure if you miss a payment. Instead, you are charged late fees after the grace period expires. Most mortgage companies will give you a grace period of up to 15 days and then you get late charges. If you start to miss a few payments then your loan provider will send you letters and try to collect. Federal laws require that the company contact you or try to contact you by phone in order to discuss foreclosure alternatives no later than 36 days after your missed payment. After 45 days following the missed payment, the company needs to let you know in writing about options that could be there to help you and then assign personnel to help. Many mortgages in Ohio have a provision that says the lender needs to send a breach letter after you fall behind on payments. This letter will tell you that the loan is in default. If you don’t fix it and catch up on payments, the lender can go ahead with the foreclosure process.
When Does Foreclosure Start after Missed Payments?
Federal law requires that the lender wait over 120 days after loan delinquency before officially starting the process of foreclosure. In a few situations, foreclosure can begin sooner. In Ohio, the lender is required to file a lawsuit in the courts to start foreclosure. The lender files suit and then you have 28 days to respond by giving written notice to the court. You can then request a foreclosure mediation if it is available. However, many courts do offer this mediation. The mediators will help the lender and homeowner develop a plan that can avoid foreclosure. If you don’t file an answer then the lender will get a default judgment. The judgment gives the lender permission to hold a foreclosure sale. It’s important to respond to the lawsuit if you want to pursue some of the options to avoid foreclosure. If you do respond then the case goes through the litigation process.
Foreclosure Alternatives to Stay in Your Home
In order to avoid foreclosure and stay in your home, there are some options.
Special Forbearance
Under special forbearance, your lender might be able to arrange a repayment plan that is customized and based on your financial situation. In some cases, it could even provide temporary suspensions of payments or at least a reduction. You may qualify for this if you have experienced an increase in living expenses or income reduction. You will need to give information to the lender to show that you are then able to meet the requirements of a new payment plan. If an agreement is reached and you are able to meet the terms then the lender won’t take foreclosure action.
Mortgage Modification
Instead of foreclosure, you may be able to extend the term of your mortgage loan or refinance the debt. This can help you catch up on your payments by reducing your monthly payments to something that you can afford. You may qualify if you have recovered from financial trouble and can afford your new payment. You may be able to refinance your loan if there is sufficient equity in the property. Missed payments are then calculated into your new loan balance.
Partial Claim
With a partial claim option, your lender works with you to get a one-time payment from the FHA insurance fund to bring your mortgage current. You may qualify for this option if you then start making full mortgage payments.
Forgiving a Payment
It’s rare, but in some extreme cases, a lender may forgive a missing payment if you agree to remain current on your mortgage moving forward. This option may not be as likely as some other options, but it does happen.
Alternatives if You Can’t Stay in the Home
If you aren’t able to remain in the home then you have these options.
Pre-Foreclosure Sale
If you take the option of a pre-foreclosure sale then this allows you to avoid foreclosing by selling your home for an amount less than the necessary amount to pay off the mortgage.
Deed-in-Lieu of Foreclosure
This is typically the last resort to avoid foreclosure. With this option, you are voluntarily giving back your property to the lender. Unfortunately, this won’t save your home but it won’t damage your credit rating the same way a foreclosure would. You may qualify for this option if you are already in default and don’t qualify for other options. You can also qualify if your attempt to sell your home before foreclosure was unsuccessful.
Qualifying for Options
Your lender determines if you qualify for the different alternatives to foreclosure. A housing counseling agency can also help you determine if any of these options work for you and can help you with working with your lender. If you are afraid your only option is foreclosure then you may want to speak with a lawyer to see if it is still possible to stay in your home. Foreclosure laws can be complicated and lenders can sometimes forget steps or make errors. Ohio debt-relief attorneys are here to help you through the process of avoiding foreclosure with some different alternatives.
