Stop Foreclosure: How Foreclosure Can Impact Your Financial Future

By Karen Lawson
Mortgage Credit Problems Columnist

Your mortgage payments have increased, you can barely afford gas to get to work, and food prices are through the roof. You can't choose between caring for your family and making mortgage payments. Home foreclosure has taken a toll on your neighborhood, and you're concerned about property values and crime. What would happen if you walk away from your home and mortgage?

What is Foreclosure?

Foreclosure is the legal process that allows mortgage lenders to take title to your home if you fail to meet your mortgage terms. Homes are primarily foreclosed on when homeowners can't make their mortgage payments as specified in their mortgage documents. Typically, your lender will notify you of its intent to start foreclosure after you've missed a second consecutive payment, but this can vary. Foreclosure proceedings are subject to state law, and the time it takes to start and complete a home foreclosure can vary considerably.

How (Not) to Stop Foreclosure

You may see ads encouraging you to file bankruptcy to stop foreclosure. This will not work indefinitely, as bankruptcy allows secured creditors to sell assets to recover what's owed to them. Your mortgage loan is secured by your home, so filing bankruptcy will not permanently delay a foreclosure. Bankruptcy and foreclosure can appear on your credit report for up to ten years; both should be avoided when possible.

Alternatives to Foreclosure

If you can't make your mortgage payments due to circumstances beyond your control (unemployment and illness are examples), your mortgage lender may have relief programs designed to help you keep your home and make up past due payments. The key here is contacting your mortgage lender as soon as you know you're going to miss a payment. Your lender may extend temporary forbearance, create a repayment plan, or modify the terms of your mortgage to more favorable terms.

If you decide to sell your home, call your lender and ask for temporary forbearance (a period of time free of payments) until you can sell your home. Lenders rarely approve forbearance beyond 30 to 60 days, so it's best to make this request once an offer has been made. If your home is worth less than you owe, ask your lender about a preforeclosure or short sale. If approved, the lender would accept the sale proceeds of a market value offer to pay off your mortgage.

You don't want to risk foreclosure when alternatives are available. Saving your credit is a big step toward a brighter future.

About the Author
Karen Lawson is a freelance writer with more than fifteen years of experience in mortgage banking. She holds an MA degree in English from the University of Nevada, Reno.

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