Stop Foreclosure!

1. There are a number of alternatives available to people who are having trouble making their mortgage payment besides simply allowing their home to be foreclosed. While it used to be fairly easy for a homeowner to either sell or refinance their property to stop a foreclosure a couple years ago, it is now much more difficult since many homeowners no longer have any equity remaining in their homes. However, there are still some other options available:

2. Reinstatement:

   One of the quickest and most effective ways to stop a foreclosure is to reinstate the mortgage prior to the Sheriff's Sale. To do this, however, the borrower must pay to the lender the full amount of the delinquency, all late fees, plus any attorney fees and other costs incurred or expended by the lender.

3. Repayment Plan:

   For those borrowers who do not have the ability to come up with a lump sum payment, another alternative would be a repayment plan. A repayment plan consists of a program where the borrower agrees to pay part of the delinquency each month to the lender for a period of time, together with the borrower's regular monthly installment.

4. Forbearance:

   A lender may agree to delay or reduce the payments for a period of time with the understanding that another option will subsequently be used (such as a repayment plan or loan modification) at the end of the time period allowed to bring the borrower's account to a current status.

5. Loan Modification:

   A loan modification is designed for borrowers who cannot afford a repayment plan. The lender may agree to permanently change one or more terms of an already existing mortgage resulting in a new payment the borrower can afford. The lender can extend the length of the time the borrower has to pay the loan back, may lower the interest rate of the mortgage to reduce the monthly payment, change the interest rate from an adjustable rate to a fixed rate, or roll the past due amount into the loan and re-amortize the new balance so the borrower has additional time to pay back the mortgage debt.

6. Partial Claim (for FHA loans only):

   A lender, working together with the Department of Housing and Urban Development (HUD) may be able to assist a borrower with a one-time payment from the FHA insurance fund. Under a partial claim, a borrower will be required to sign a new promissory note in favor of HUD and HUD will place a lien on the borrower's property. The HUD loan will be interest free, will immediately make the borrower's delinquency current, and will be due when the borrower either sells or leaves the property or when the original loan is paid off.

7. Deed-in-Lieu of Foreclosure:

   A deed-in-lieu of foreclosure can be beneficial to both the borrower and the lender. The primary advantage for the borrower is that a deed to the lender will immediately release the borrower from most or all of the personal indebtedness of the loan in default and it may also save the borrower from the shame and humiliation of the foreclosure process. A voluntary conveyance to the lender also allows the lender to take possession of the property right away instead of waiting for the redemption period to end following the foreclosure sale. Most lenders will not accept a deed-in-lieu of foreclosure if there are any other liens on the property besides that of the lender.

8. Bankruptcy:

   While this option may have been popular in the past, the new bankruptcy laws make the process much more difficult in the present. Filing for bankruptcy may not relieve the borrower from the obligation to repay the mortgage and may not prevent the foreclosure from proceeding. Generally, when a borrower files bankruptcy prior to the Sheriff's foreclosure sale the lender must seek relief from the automatic stay. If a borrower files for bankruptcy after the Sheriff's sale and during the redemption period, the right of the borrower to redeem the mortgage is extended for 60 days. Filing for bankruptcy will generally preclude a lender from modifying a mortgage or approving a short sale.

1. Don't get scammed.

   Unfortunately, many people tend to prey on vulnerable individuals who are experiencing financial difficulties. Too often, companies will promise to help you in your situation, ask for money upfront and then never be heard from again. Many of the same people who were responsible for selling risky mortgages in the past are now in the loan modification business. Do not get scammed again. Find out who you are dealing with. What is there background? Are they Local? Will you be able to find them again if problems arise? Are they familiar with Foreclosure Laws and the laws of Minnesota? Do your homework. Find out who will truly protect you.