How to Stop Foreclosure

Foreclosure is one of the most stressful and terrifying experiences a person can go through. For most people, their home is the biggest investment they’ll ever make and having it auctioned off by the sheriff at a discount creates many years of financial ruin.  The loss of a home can completely upend your life.  Luckily, when foreclosure is looming over you, you are not out of options. There are a few avenues available to you which can stop the foreclosure process, allowing you to save your home.  

When Are You at Risk of Foreclosure?

The first step in stopping a foreclosure is knowing when you’re at risk of one.  The most common way for this to happen is through missed mortgage payments. Once a mortgage payment is 30 days late, it is considered delinquent. At this point, you are technically at risk of foreclosure. However, each state has its own rules regarding when the foreclosure process can begin. In Pennsylvania, when you are 90 days delinquent, the lender is required to send an Act 91 notice, informing you of their intent to foreclose on your payments. This is sent by certified mail.  Once you are 120 days late on your mortgage payment, the lender can officially begin the foreclosure process. 

Late mortgage payments are not the only way to find yourself in foreclosure. Some other situations that may put you at risk of foreclosure include:

• Failure to Pay Taxes: In this situation, it will be the city or state foreclosing on your property. 

• Lapsed Insurance: As part of most mortgage contracts, the borrower is required to have homeowner’s insurance. Failure to do so constitutes a breach of contract and can result in the lender foreclosing on your home. 
• Property Deterioration: Failure to upkeep your property will not directly lead to a foreclosure. However, it does lower property value, which can cause you to have negative equity in the property. This increases the risk of foreclosure, as there is no way to sell your home for enough to pay back your mortgage loan. 

As you can see, there are many routes that lead to foreclosure. Knowing when you are at risk can help you stop a foreclosure before it happens. 

Know Your Pennsylvania Foreclosure Rights

Every state handles the foreclosure process differently and provides homeowners with various rights. Pennsylvania has statutory protections for homeowners being foreclosed on. We’ve already mentioned that the foreclosure process cannot begin until you’re 120 days delinquent on your mortgage and that the lender must send you a certified notice of their intention to foreclose. However, when it comes to stopping foreclosure the first right to know is the right to reinstate.

Right to Reinstate

When a property is foreclosed on, the lender usually holds a foreclosure sale. This is when they sell the property in order to recoup the balance on the loan. In Pennsylvania, the right of reinstatement allows the homeowner to stop foreclosure by paying off all missed payments, late fees, and legal fees on their mortgage loan.  This must be done before the foreclosure sale takes place and it must be completed with certified funds or a wire.  It is important to ask the lender for a “reinstatement quote” if you intend to reinstate the loan. 

Contact Your Lender

It is also possible to stop a foreclosure by simply contacting your lender. You can explain your situation to them and make it clear that you would like to work with them to ensure they are paid. There are a few options they may give you, including:

• Loan Modification: This is when the lender agrees to change the terms of the loan to make monthly payments more affordable. This is done by adjusting the interest rate, extending the loan term, or sometimes even reducing the principal amount.

• Forbearance: This is a temporary pause or reduction in mortgage payments. A forbearance will usually only be granted if you can demonstrate financial hardship.
  
• Repayment Plan: This is when an agreed upon amount is added to your monthly mortgage payments. The added amount it used to repay the payments you have missed.

Your lender usually does not want to foreclose on you. Most lenders will be willing to use one of these options, as long as you contact them in a timely manner after missing payments. 

FHA Loss Mitigation Options

The Federal Housing Administration (FHA) offers a number of loss mitigation options for those facing foreclosure. To take advantage of these programs, your loans must be FHA-insured. You will have to contact your lender to discuss the available options, including forbearance, loan modification, and specialized programs for those facing unemployment or other hardships. As long as your loan is FHA-insured, your lender is obligated to provide these options to you. FHA loss mitigation can help you keep your home and avoid foreclosure. 

Chapter 13 Bankruptcy

In most cases, the filing of a Chapter 13 bankruptcy will cease any foreclosure activity and provide up to five years for the owner of the property to cure the loan.   This is a critical tool for homeowners.  Most people do not have the lump sum available to reinstate a loan in a matter of a few weeks.   They need time to repay the missed payments.   Or they may need time to sell the property at fair market value and avoid a sheriff sale that would sell the property at a deep discount.   

Seek Legal Advice

The foreclosure process, and the strategies to avoid it, can be very complicated.  Every situation is unique.  When you are at risk of foreclosure, the best thing you can do is seek advice from an experienced law firm like RQP law. We can examine your case and find which option will work best for your specific situation.