If you have incurred too much debt and can’t find any way to pay those off, you are in deep financial trouble and your lenders may take legal action against you and drive you to foreclosure. So, you need to take some steps for prevention of foreclosure and save your home.

What is foreclosure?

If you are regularly defaulting on your mortgage monthly payments, your lenders can take some legal action against you. One of those ways is the foreclosure. It is a legal way, using which your lender can repossess your home. If the court issues an order of foreclosure, you have to move out of your home.

If the home equity is less than the outstanding amount you owe to the lender, a deficiency judgment could also be pursued. In that case, you will also need to pay an additional amount to the HUD, along with your home.

What are the inadvertent reasons for defaulting on mortgage payments?

After the US mortgage crisis of 2007, the number of foreclosure is on the rise. If you are not intentionally avoiding mortgage payments, you can take necessary steps for prevention of foreclosure and save your home.

Unintentional late payments can be attributed due to the following causes-

Medical emergency
Sudden unemployment
Divorce
Child support
A family member’s demise
Inability to adapt to new adjustable rate mortgage
Sudden inflation
Expenses related to emergency home renovation etc.

How can you avoid foreclosure?

In order to prevent foreclosure, you should follow the steps mentioned below:

1. Contact a counseling agency: You need to contact a HUD approved housing counseling agency. If you are unable to pay the consultation fees, you should tell them prior to the consultation and they may offer you credit counseling free of cost.

2. Contact your lenders: The lenders usually file a notice of default in order to protect their interests. However, you should not let them do so and contact them before they file any such notice, as soon as you have some problems in making the payments.

3. Think of some alternatives: In order to stop foreclosure, you can think of some alternatives, like,

o Mortgage modification: You can negotiate with your lender to restructure the terms of your current mortgage, by lowering the interest rate and cutting down payments related to the principal amount.
o Short refinance: In order to prevent foreclosure, you can get your home refinanced. With the new refinance loan, you will have lower interest rate and your monthly payments will get reduced.

Other than the options mentioned above, you can also think of some other alternatives like,

o Pre-foreclosure sale
o Partial claim
o Special forbearance
o Deed-in-lieu of foreclosure

You need to be aware of fraudulent foreclosure companies. Some scam companies pose themselves as foreclosure consultants. So, you should check the company’s authenticity and credibility with the
US Department of Housing and Urban Development.