So you accepted forbearance from your lender, and now you’re facing foreclosure. What do you do?
First and foremost, don’t panic. You’re not alone in this situation, and there are steps you can take to protect yourself and your home.
Next Steps When You’re Facing Foreclosure After Forbearance
This post discusses what to do if you face foreclosure after enjoying forbearance. We’ll start by explaining what forbearance is and how it can help you avoid foreclosure. Then go through the steps to take if you’re already in foreclosure.
Finally, we’ll give you some tips to avoid foreclosure in the future.
What Is Forbearance?
Let’s say you’re struggling to make your mortgage payments and reach out to your lender for help. They may offer you forbearance, which is a temporary suspension of your payments.
Remember, you’ll still be responsible for making your monthly payments during forbearance, but they may be reduced or deferred. This is a way for the lender to help you get back on track before foreclosing on your property.
If you’re in this situation, it’s crucial to remember that forbearance is not a permanent solution. You need to work on a plan to get back on track and start making regular payments again. But if you can’t do this, foreclosure may be the next step.
What Is Foreclosure?
It is the legal process by which a lender recovers money owed to them by a borrower who has failed to repay a loan. In other words, if you accepted forbearance and are now facing foreclosure, the lender is taking legal action to recoup the amount you owe them.
There are different types of foreclosure, but the most common is judicial foreclosure. This happens when the lender files a lawsuit against the borrower to recover the money owed. A judge will then rule on the case, and if the borrower loses, the lender will be granted a judgment of foreclosure.
Luckily, there are ways to avoid foreclosure, and we’ll talk about those in a bit.
What to Do if You’ve Accepted Forbearance and Are Now Facing Foreclosure
You agreed to forbearance with your lender, but you are now facing foreclosure. What do you do?
1. Don’t Panic
Indeed, this is a difficult situation, but there are a few ways to resolve it. Speak with your lender to see if there is any way to avoid foreclosure. Maybe you can reinstate your loan or work out a new payment plan.
2. Don’t Bury Your Head in the Sand
This is not the time to ignore your mail or put off talking to your lender. You need to be proactive and stay on top of your situation.
3. Research Your Options
There are likely programs available to help you keep your home, and it’s crucial to find out what they are and how to apply for them.
4. Contact a Lawyer
If you’re feeling overwhelmed or don’t know where to start, it might be helpful to discuss it with a lawyer specializing in foreclosure prevention.
5. Create a Budget and Stick To It
Surviving on a new budget may not be easy, but it’s crucial if you want to prevent foreclosure.
6. Reach Out for Help
Plenty of well-wishers want to help you through this tough time. Try seeking help from family members, friends, or community organizations interested in helping homeowners.
7. Stay Positive
A looming foreclosure can take a toll on your mental health. But you can still save your home if you plan carefully and maintain a positive attitude.
What Are Your Options if You’re up for Foreclosure After Forbearance?
1. Discussing a New Payment Plan
If you’re granted forbearance, it is crucial to understand the consequences. If you do not pay (as agreed) for three consecutive months, the lender may start filing for foreclosure.
The best way to avoid this is to come up with an alternative payment plan. The lender will be more likely to accept an alternate payment plan if the homeowner has made timely payments for no less than two years before being granted a forbearance.
2. Negotiating a Settlement
You might want to try negotiating new terms with your lender. Some are willing to collaborate with you under certain conditions. You should also consider repurchasing the house from them at a price less than what they owe on the mortgage.
In some cases, there might be a short sale option where they sell the house for less than the amount owed but still get some money back from the bank. You could also look into renting out your home or looking for a new tenant.
3. Finding a New Mortgage
The majority of people have difficulty finding a mortgage after a foreclosure, but it is not impossible. Several lenders will offer mortgages even after foreclosure.
The first move is to call your lender. They may be able to work out an agreement with the new lender on your behalf. If they’re unable to assist, they may be able to help you find someone in the area who will.
It’s worth reaching out because there is always the chance they’ll know of something that isn’t advertised, like a personal connection at another bank or someone looking for business referrals.
4. Reinstating Your Loan
Renewing your loan is a good idea if your financial situation improves. You may be able to get a better interest rate or even work out something with the lender so that your monthly payments are more manageable.
You must contact the lender promptly if you want to reinstate your loan. If they haven’t received any payment on the loan for three months, they will initiate a process called acceleration. This means the entire balance of the loan becomes due immediately.
The best thing to do is contact them before this happens so that you have a chance to avoid losing all of your equity in the home.
If these options don’t work, there are still other things you can do. You could try to sell your home or consider government programs that may be able to help you.
What Are Your Rights if You’re Facing Foreclosure?
When you enter into a forbearance agreement with your lender, you probably don’t think you’re signing up for a possible foreclosure. But that may happen if you can’t make monthly payments even after the forbearance period.
So what are your legal rights if this happens? Here’s a quick breakdown:
- Your lender cannot start the foreclosure process while you’re in forbearance.
- You have the right to request a loan modification at any time.
- You have the right to request a repayment plan at any time.
- You have the right to challenge your lender’s attempt to foreclose.
- You have the right to consult with an attorney.
You may feel like you’re the only person going through a foreclosure, but you’re not! In fact, according to ATTOM Data Solutions, one in every 137 U.S. housing units received a foreclosure filing in 2018’s first half.
Fortunately, you can take steps to try and save your home. Perhaps the most important thing is to reach out to your lender to see if they’re willing to restructure the loan.
If that’s not an option, get in touch with Vilt Law, P.C. Our legal team can advise you on steps that can be taken. Reach out online for your free consultation or call (713) 840-7570 for tips on other ways to retain your home.