e best way to stop a pre-foreclosure in Texas, for example, is to prevent the filling of a Notice of Default. Lenders do not want to pre-foreclosure but will file a Notice of Default to protect their interests, if necessary. If you know you are unlikely to meet your mortgage obligation, the first thing you should do is call your lender.
Don’t put it off, be embarrassed or ignore letters from your lender because those responses will make the situation worse, not better. Depending on your particular situation and hardship circumstances, here are some loan modification options your lender might propose to you:
Time to make up your payments.
Lenders might agree to wait before taking legal action against you and let you work out a repayment plan that is affordable for you. This is called forbearance.
Forgiving a payment.
If you can agree on a way that you will be current after missing a payment or two (without the means to pay it back), the lender might give you a break and waive your obligation. This is called debt forgiveness, and it rarely happens.
Spread out the missed payments over a longer term.
For example, if your payment is, say, $1,200 a month, the lender might let you add $100 a month to each payment for a year until you are caught up. This is called a repayment plan.
Changing the terms of your loan.
If your mortgage is an adjustable loan, the lender might freeze the interest rate before it increases or change the interest rate to a more manageable rate for you. A lender might also extend the amortization period. This is called a note modification.
Add the back payments to your loan balance.
If you have sufficient equity and meet the lender’s lending guidelines, the lender might increase your loan balance to include the back payments and re-amortize the loan. This is called a refinance.
Make a separate loan to you.
Certain government loans contain provisions that let borrowers who meet specific criteria apply for another loan, which will pay back the missed payments. This is called a partial claim.
Other Ways to Avoid Pre‑Foreclosure
When the lender files a Notice of Default, your options are limited. That is why it is better for you to call your lender,the Department of Housing and Urban Development (HUD), or an attorney before falling behind on your payments because lenders are often reluctant to work out repayment schedules after pre-foreclosure proceedings have been commenced.
You will be given a certain time period to bring the payments current, pay the costs of filing the pre-foreclosure and stop the pre‑foreclosure. This is called reinstatement of your loan. If you cannot make up the missed payments and the lender will not work with you.
Here are a few other options to stop pre‑foreclosure:
- Sell Your Home.
- Consider a Short Sale.
- Short Term Rental.
- Consult an Attorney.
This guide, information, and materials are not intended and should not be taken as
legal advice. You should contact an attorney licensed to practice in your applicable
state for advice on specific legal problems. The above information should not be
used as a substitute for legal advice.