HOW DO I SAVE MY HOME FROM
FORECLOSURE? If You Are Not Able to Pay Your Mortgage Debts Understand the Different Options to Consider to Save Your Home from Foreclosure
BRIAN LEE
BANKRUPTCY ATTORNEY IN WASHINGTON DC, VIRGINIA AND MARYLAND
Mortgage debts are secured debts and your home acts as collateral for the loan. This means that if you are not able to pay your mortgage bills, the lender could foreclose on your home and take the house. This is a terrible result for many reasons, including both the loss of your house and the damage to your credit. Saving your home from foreclosure is a top priority from most people who are struggling
One of the best options to save your home from foreclosure is to seek help from programs set up to assist struggling homeowners. The Making Home Affordable (MHA) program is a federal program that created a number of different solutions for struggling homeowners that are designed to help prevent foreclosure.
with mortgage debts, and you have a number of different options to consider to try to protect your home.
SAVING YOUR HOME FROM FORECLOSURE One of the best options to save your home from foreclosure is to seek help from programs set up to assist struggling homeowners. The Making Home Affordable (MHA) program is a federal program that created a number of different solutions for struggling homeowners that are designed to help prevent foreclosure. Some of these solutions may allow you to stop your lender from taking your home. The MHA Program included different solutions depending upon your personal financial situations. Some of the options made available by the MHA Program include:
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The Home Affordable Modification Program (HAMP). HAMP lowers the monthly payment on your mortgage down to 31 percent of your verified monthly pre-tax income. This helps to ensure that your payments are affordable based on your salary. As many as 18 percent of HAMP homeowners have had their payments reduced by $1,000 or more and the typical HAMP modification results in a 40 percent decline in your monthly mortgage payment.
The Principle Reduction Alternative: This program is designed to help homeowners whose homes are worth less than they owe. Mortgage lenders are encouraged and rewarded for reducing the principal balance of a mortgage to the fair market value of the home.
The Second Lien Modification Program: If you have a second mortgage on a home that was modified under HAMP, you can apply to also have the second mortgage or home equity loan modified. In some cases, it may be possible to have the principal balance on the loan reduced.
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To participate in these or other programs, you will need to determine what your lender’s policies are on mortgage modification and you will need to speak with your lender to apply. In some cases, it is helpful to have an attorney assisting you in exploring different programs for home mortgage modification as it can sometimes be difficult to meet program requirements.
PREVENTING OR STOPPING FORECLOSURE THROUGH BANKRUPTCY While home mortgage modification programs are designed to help people save their homes, the effectiveness of these programs in stopping foreclosure has been limited. One issue is that it can take a long time to become approved for a program and there are many legal loopholes to jump through. The foreclosure process can proceed more quickly than the mortgage modification process and a home may be lost before you can work something out with your lender.
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Another option that many homeowners consider and that has been proven effective in many cases for stopping foreclosure is to file bankruptcy. When you file bankruptcy under either Chapter 7 or Chapter 13 (the two most common types of consumer bankruptcy), an automatic stay goes into effect. This prevents any type of collection activities from moving forward against you. Lenders,
The foreclosure process can proceed more quickly than the mortgage modification process and a home may be lost before you can work something out with your lender.
therefore, cannot proceed with a foreclosure on your home after a bankruptcy filing until the bankruptcy is resolved or until they petition the court and prove a need to move forward right away (this is called a motion for relief from automatic stay). When you have filed for bankruptcy and the automatic stay goes into effect, you then have time to explore options to save your house from foreclosure. You can, for example, begin negotiating with the mortgage lender at that time to try to work out a modification to your loan that would allow for you to keep the house. Bankruptcy can also help you to keep the home in other ways, although you cannot just eliminate mortgage debt as part of the bankruptcy filing. By filing for bankruptcy, however:
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You can have other debts discharged (forgiven) after a Chapter 7 filing. By eliminating other debt, you may be able to afford your home mortgage payments and this avoid foreclosure. You can have second mortgage debt reclassified as unsecured in a Chapter 13 filing, provided that the home is not worth enough to provide collateral. If the sale of your home would generate only enough money to repay the first mortgage and not the second, then it is possible for the second mortgage debt to be reclassified. This process is called lien stripping and it can permit you to keep your home as long as you can pay your first mortgage. Your second mortgage debt will be repaid, in part, over 3-5 years in a chapter 13 repayment plan.
An experienced bankruptcy attorney can explain your options to you regarding bankruptcy as a method of stopping foreclosure and keeping your home.
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About the Author Brian Lee Serving clients in the Washington DC metropolitan area since 2005, attorney Brian Lee is licensed to practice law in the state and federal courts of Virginia and D.C. and federal courts in Maryland. Brian provides clientoriented legal counsel to individual clients, partnerships, and businesses on a wide variety of complex legal and financial issues. He is a graduate of Rutgers University in New Jersey and George Mason University School of Law.
About Lee Legal With offices in Dupont Circle and Old Town Alexandria, Lee Legal serves bankruptcy and litigation clients in Washington, D.C., Virginia, and Maryland. Lee Legal provides reasoned, comprehensive bankruptcy and litigation representation. Every client gets a free initial consultation. Founding attorney Brian Lee is the District of Columbia Chair for the National Association of Consumer Bankruptcy Attorneys, a national advocacy organization dedicated to the protection of the rights of consumer bankruptcy debtors. If you are facing financial difficulty or litigation, call (202) 448-5136 in for a free consultation.
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