How to STOP the Foreclosure

Before we go any further, you have a very important decision to make. Foreclosure is a very serious situation that is no doubt affecting your sanity and stress level today, and can affect your credit for years to come. People get into foreclosure for many reasons, but they all fall into one of two categories.

1. A Temporary Setback – such as a health of financial crisis that will soon pass. Your income will soon be restored to previous levels and you will soon be able to make your payments again. You just need a little help getting through the crisis.
2. A Life Change – such as job loss, extended unemployment, permanent health problems, divorce or other family problems, changes in the market etc., that have resulted in you no longer being able to realistically afford your home.

Please, take some time and seriously and realistically consider which one of these scenarios describes your situation.  This is a important decision and you must be realistic. If your situation is a life change, would you be better selling this house and finding more affordable arrangements until you get back on your feet? If so, sell the house!  If you know (not hope, know) your financial situation will soon be back to normal, then using one of the techniques in this manual to keep your house is probably your best bet.
If the foreclosure process reaches the date of the sale in a non-judicial state, or past the date of the court hearing at which the judge orders the sale in a judicial state, the foreclosure will appear on your credit report. Once the foreclosure appears, it will affect your credit for the next seven years.  Obviously, we want to avoid that from happening, and now is the time to act.
 In some states you have more time than others.  Examine the documents you’ve received from the lender or their attorneys, or get a trusted friend or relative to help you if you are having a hard time understanding them. If you don’t understand the timeline, be sure to ask as many questions as needed when you call them to negotiate – which we will be doing in Chapter 6.

What Lies Ahead?
Let’s start with a preview of the rest of the book.  Generally, each section is set up with the most desirable option to the least desirable outcome.
In Chapter 5, we’ll cover the numerous scams that are out there. Sadly, many disreputable people focus on people who are down on their luck. You probably have seen advertisements or received mailings for many programs that seem too good to be true. In this chapter you’ll find out which ones to avoid like the plague!
 In Section Two, we discuss ways to avoid the foreclosure and KEEP your home.  These methods are listed in order of preference – we will start with discussing negotiations with your lender and conclude by discussing bankruptcy, which may not be nearly as bad as you think it is!
 In Chapter 6, you will learn HOW to negotiate with your lender. If you’re not speaking with the right person and department, you’re wasting your time, so I’ll tell you how to bypass all the non-decision makers and get you directly to the person who can help you.  In many cases there are programs and options that the lender will NOT offer you, unless you ask.  I’ll go into detail on these different options that may be available to you, including:
? Reinstatement / Paying the Delinquency
? Repayment Agreements
? Forbearance Agreements
? Payment Assistance Programs
? Re-amortization / Loan Modifications
? Refunding

To wrap the chapter up, I’ll give you the name of several companies that will represent you and negotiate with your lender on your behalf – that’s right, if you can’t or don’t want to do the negotiations with your lender, these companies will do it for you!
In Chapter 7, we’ll discuss Re-financing your home and avoiding the foreclosure.  You may even be able to get a better loan with a lower payment that what you have now!  I’ll show you how to contact the lenders that are chomping at the bit to compete over your business.
In Chapter 8, I’ll reveal several other sources of money from private sources that can help you stop the foreclosure and get back on your feet.  Some of these are right under your nose!
In Chapter 9, you will learn how to use your retirement plan to stop your foreclosure, without paying a cent of income tax or penalties!  You may also be surprised to learn that you can borrow from your retirement, even if you are currently out of a job and cannot access your former employers plan.
In Chapter 10, I’ll spill the beans on the “B” word - Bankruptcy.  We’ll discuss the different types of bankruptcy, how it works, and then I’ll tell you how to USE the bankruptcy process to not only keep your house but IMPROVE your credit.  (You read that correctly – you can IMPROVE your credit by filing Bankruptcy, if you do it right!) 
In Chapter 11 I’ll discuss Seller Lease Back arrangements, whereby you sell your house to an investor and they lease it back to you, often with an option to repurchase it from them at a later date.  We’ll talk about the pros and cons of such a deal.
Section Three discusses how to stop the foreclosure by selling your home.  You may not want to sell your home, but if you are going to lose the house to foreclosure, then selling is a better option.  A sale will keep the foreclosure off your credit record and perhaps allow you to recover some of the equity you have in your house, if any.
In Chapter 12, I’ll discuss selling with the help of a good real estate agent. In some cases this is the best option for you, but in others it might not be possible for you to work with an agent.  I’ll explain why, how to deal with an agent, and what to expect when working with them.
In Chapter 13, I write about selling your home yourself, how to get your house ready for a sale, how to show it and attract buyers, and what all may be necessary to get the deal closed quickly.
In Chapter 14, I’ll reveal how you can sell your house in just a few days to a real estate investor.  The terms will likely not be as good as a private sale, but if you are ready to get it over with, or you’re out of time and the foreclosure is looming, and investor is your best friend.  We’ll discuss the importance of working with an established, professional investor, and I’ll explain the different programs they will likely offer you and what they mean to you.
 

If you are unable to sell your house and foreclosure is imminent, a “Deed in Lieu” may be a good option.  We’ll discuss these in Chapter 15.
Section Four begins with Chapter 16 and a discussion of what happens if you do nothing and the foreclosure goes through.  I’ll reveal what the process is for you to move out, how long you’ll have, and why this is a terrible idea.
Chapter 17 will leave you with some positive thoughts to move forward.

What is Foreclosure?

Many people who are in Foreclosure don’t understand exactly what the process is.  Even if you do think you understand it, this article may teach you something new. (Note: Please understand this is a very general discussion and laws vary by state.  The purpose of this chapter is to give you an understanding of what is happening to you in this process, not to teach you every legal detail of the foreclosure process.)
You may not have realized what you were signing in that big stack of papers when you bought your house, but there were two main documents – a promissory note and a security instrument (either a mortgage or a deed of trust).  The promissory note says you promise to pay for the house, and spells out the terms such as sale price, interest rate, payment amount, when payments are due, etc.  The security instrument says you agree that if you don’t make your payments, they can sell your house to satisfy the debt.
Generally speaking, there are two types of foreclosure, judicial and non-judicial. It is much easier to foreclose in a non-judicial state, because as the term implies, no judge need get involved.  In a judicial state, the lender must file papers, wait for a hearing to be set, and then wait days or weeks for the hearing to be scheduled.  In a non-judicial state the foreclosure proceeds on a well-defined timetable, which is often much shorter in duration that a judicial foreclosure.  If you are in a non-judicial state, you need to act quickly!

Judicial Foreclosure
In judicial foreclosure states, the security instrument is usually a mortgage, which is an agreement between you and the lender.  If they foreclose, you both have to appear before a judge.  The judge will order the house sold at the Sheriff’s sale unless you convince him or her that you have a good reason for not making your payments, which is highly unlikely.
Generally speaking, foreclosure is slower and more difficult for the lender in judicial states, because to a certain degree they are at the mercy of the court system and scheduling. However, do not assume anything regarding how long the process will take – verify this with your local county clerk or other public official, or better yet, a local attorney.

Non-Judicial Foreclosure
In non-judicial foreclosure states, the security instrument is usually a deed of trust, which is an agreement between three parties – the trustor (or borrower, that’s you), the trustee (a third party the bank chooses to look after the lender’s interests, this is usually an attorney), and the beneficiary (the lender).  Foreclosure is much easier in non-judicial states due to the fact that no court hearing is required.  The trustee handles the entire process of the foreclosure including the actual sale.  In reality, you will often see a “substitute trustee” handling the case on the local level if the actual trustee is geographically distant from the courthouse where the sale is being held.  The actual trustee simply hires another, local law firm to handle the case for them.

Redemption
In a handful of states, the homeowner can redeem the property even AFTER the foreclosure sale within a specified number of days, known as the redemption period.  To do so, specific legal procedures have to be followed, and you must pay all back payments, interest (usually 10% and up), penalties, legal fees, redemption fees, and for any improvements made to the home since the sale.  In some states, parties other than the homeowners have the opportunity to redeem the property once the homeowner’s opportunity has expired.  These may include persons who hold or have obtained junior liens such as mechanic’s liens, judgments, second or third mortgages, etc.  Redemption periods are more likely to exist in judicial foreclosure states. See Appendix One to determine if your state offers a redemption period.

Deficiency Judgements
If the foreclosure sale fails to generate sufficient funds to pay off the loan balance, then the lender may sue for a deficiency within a period of time after the foreclosure sale. A judge may find you still owe more money to the lender, and enter a judgment for that amount. The lender will then file the judgment as public record in your county.  Your ability to buy or sell other real estate will be impaired until the judgment is satisfied.

Sheriff’s Sale
In all cases there is some point at the end of the procedure that we will refer to as the Sheriff’s sale.  Whether it is simply the final stage of a well-defined process (in a non-judicial state), a court hearing where the judge orders the sale (in a judicial state), or some other tipping point, at some point there is a day when you lose ownership of the house and will be essentially evicted.  Our goal in this book is to never get to that day.
Appendix One contains a table listing the foreclosure laws by state and links to websites that spell out the process in detail on a state-by-state basis.  Be sure you understand how the foreclosure process works in your state, and verify it with your local county clerk’s office to be sure the law hasn’t changed.