Five Ways to Stop Foreclosure

Written by Posted On Thursday, 17 March 2016 17:05
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Stop Foreclosure and Save Your Credit

If you are behind, or in danger of getting behind on your mortgage call The Stadler Group today at (678) 985-1234 discuss your options and stop foreclosure


 A foreclosure happens when you have gotten behind on your mortgage payments. If the situation has changed to where you now have enough money to bring the mortgage balance current and make up all of the back payments, then you can stop foreclosure. Once the mortgage is made current or you pay the loan off, the foreclosure is stopped immediately. If the full amount needed to bring the loan current isn’t available to be paid now you can work out either a repayment plan, by increasing the monthly amount that you pay every month after paying a lump sum to the bank, or you can work out a forbearance plan which is a formal written agreement between you and the bank that may reduce, suspend, or pause some of your monthly payments. When you do this, the bank will set up a specific program for how the arrearage (back payments) is either paid or added to the end of the loan balance and term. The important thing to do throughout this process is to stay in contact with your lender and be honest with them about your situation. Always get any agreements or promises in writing.

Below you will find five powerful strategies to stop foreclosure in 48 hours or less and two additional strategies that take a bit longer.

1.   Bringing The Loan Current a.k.a. Reinstatement

Reinstatement occurs when the loan is brought current by paying the total amount past due. If the mortgage or deed of trust allows, the borrower can stop the foreclosure by paying off the default amount plus applicable costs, but Georgia state law does not automatically give this reinstatement right to the borrower. The borrower can always stop the foreclosure by paying the total loan balance. If you are now able to make your mortgage payments or your income has returned to its former level, you can negotiate with the bank or lender to bring your loan current, by paying off any current arrearage. The servicer may be able to arrange an increase in monthly payments until the loan is brought current. This means that each month you would add an additional amount of money (determined by the bank) to your regular monthly payment until the amount that was overdue has been repaid. If you can show the bank that you are able to resume making payments and can make up the past due balance by either paying a lump sum or paying it off over a short period of time (12 to 24 months), then you can reinstate your mortgage and keep your home. A repayment plan can be agreed to, in order to bring the mortgage current over time. The terms are generally a payment of ½ of the arrearage as a down payment and 1 ½ payments a month until the loan is current. The delinquency may include certain legal fees and costs if the mortgage company has started the foreclosure process. Many loan holders require certified funds for reinstatement.

2.   Work Out A “Forbearance Plan"

If you are unable to make your monthly payment, the mortgage company may extend forbearance by agreeing to suspend payments, or accept partial payments for a limited time until the bank can begin a repayment schedule. Forbearance is a formal, written agreement between you and the bank to reduce or suspend monthly payments for a specific period of time. This means that for a period of time, you would either pay only a portion of your regular mortgage payment or not make any payments at all. At the end of the agreed-upon period, you would be required to resume regular monthly payments as well as pay any additional funds to make up for the past due amount. During the time that the payments are either suspended or reduced, you would have the opportunity to resolve the financial hardship you are facing. This agreement leads to reinstatement of the loan. There is no maximum duration, but the maximum arrearage due may not exceed 12 months of arrearage of principal, interest, taxes and insurance. The bank may consider making this option available to you if you have recently experienced a drop in your income due to unemployment or illness. Lenders can agree to wait before taking legal action against you and let you work out a repayment plan that is affordable for you.

3.   Sell The Home To A Cash Buyer

If the property is worth more than the amount owed on your mortgage, a quick sale to a cash buyer can help you avoid foreclosure and all the hassle involved in a foreclosure. Cash buyers are usually real estate investors who will buy your house in “as is” condition, and you can sometimes negotiate a move out date with such a buyer, giving you time to find a new home. The foreclosure is halted as soon as the title is transferred, which means your credit will not be as severely affected. This is only an option if you have equity available in the property. While selling a property at auction will almost always result in a sale, the price you get is almost always much less than the actual market value. By selling your house to a cash buyer, you get the certainty of knowing when the sale will be and the certainty of knowing exactly how much money you will receive.

4.   Selling Through A Short Sale

A short sale is when a bank or mortgage lender agrees to discount a loan balance due to an economic or financial hardship on the part of the borrower. This negotiation is all done through communication with the lender’s loss mitigation department. You sell your property for less than the outstanding balance of the loan and turn over the proceeds of the sale to the lender in full satisfaction of your debt. The lender has the right to approve or disapprove a proposed sale. There are a lot of circumstances that will influence whether or not banks will discount a loan balance. These circumstances are usually related to the current real estate market climate and your financial situation. A short sale is typically executed to prevent a home from foreclosure. Often a bank will choose to allow a short sale if they believe that it will result in a smaller financial loss than foreclosing. This typically requires the property be listed on the market with a qualified real estate agent. For the homeowner, the advantages of a short sale include avoidance of a foreclosure on their credit history, and in many cases, will allow the homeowner to avoid a deficiency judgment. Additionally, a short sale is typically faster and less expensive than foreclosure. A short sale is nothing more than negotiating with the lien holders, a payoff for less that than what they are owed or rather a sale of a debt, generally on a piece of real estate.

5.   File For Bankruptcy

The bankruptcy reform act of 2005 changed the entire bankruptcy landscape as we used to know it. Today most bankruptcy attorneys need at least three weeks before any significant event, such as a foreclosure auction date, to adequately prepare a bankruptcy petition and file the same with the court. Homeowners who have waited too long to deal with foreclosure often find out that there is little that can be done to help them by bankruptcy lawyers. The law still permits individuals to file their own bankruptcy petition on a pro-se basis (representing themselves). Unrepresented individuals should NEVER file Chapter 7 bankruptcy without the assistance of a competent attorney. Bankruptcy is a temporary solution and should always be a last resort option. Most homeowners have the possibility of filing two different types of bankruptcy, a Chapter 13 bankruptcy which is merely a reorganization of the debts, and a Chapter 7, which is a discharge of the debts. Bankruptcies can usually only prolong the situation. In rare instances, a homeowner may be able to successfully use a Chapter 13 bankruptcy as a way of restructuring all of their debts, where they can free up enough cash to make their payments, such as their house payment. Less than 10% of all people who file a Chapter 13 bankruptcy successfully make it through to the end of bankruptcy. Filing bankruptcy is the only adverse event that lasts longer on an individual’s credit report than a foreclosure auction. In order to file bankruptcy a homeowner is going to have to engage the services of a lawyer, as well as attend various debt counseling classes, all before being able to file Bankruptcy. In instances where a homeowner knows that they will be unable to make their mortgage payments because their financial situation has changed for the worse, they would be wise to wait to file a Chapter 7 Bankruptcy until after the foreclosure process has come to a final conclusion.


The 2005 reform legislation has made Chapter 13 the most common type of bankruptcy. Essentially, Chapter 13 is a Court-supervised and Court-monitored repayment plan where the debtor provides the Court with a listing of all their debts and a budget for their monthly needs. Any extra money left over each month is applied to pay the arrearage owed on the debts. One of the benefits of a Chapter13 repayment program is that a lot of the outrageous late fees, interest rates and other charges, can no longer apply to these kinds of debts. The typical repayment program usually lasts between 48 and 60 months. The vast majority of Chapter 13 repayment plans falter and eventually fail. Plans can falter even where the debtor gets a “grace period” from the Court for additional time to try and catch up on missed payments to the trustee. The typical Chapter 13 plan sends the debtor wages to the court-appointed trustee who pays all of the creditors according to a plan presented by the debtor and agreed to by the creditors. After the bankruptcy reform act of 2005, Chapter 13 repayment plans also include partial repayments in what used to be a complete discharge. Chapter 13 bankruptcies can be filed again within a shorter period of time after the last plan either failed or was terminated. However, to prevent abuse, if a Chapter 13 plan is dismissed by the court, due to the debtor’s noncompliance, the debtor cannot file a new Chapter 13 for at least one year. Several new rules exist about automatic stays and refiling; they are:

  1. Automatic stay is terminated 30 days after petition in case filed by individual under Chapters 7, 11 or 13 if the case pending within one year preceding was dismissed, other than that refiled under dismissal under 7078; may be continued if Court finds refiling in good faith.
  2. No automatic stay is in effect in cases filed by individual under Chapter 7, 11 or 13 if two or more cases pending in 1 year preceding were dismissed other than that refiled under dismissal under 70; Court may impose stay is established later filing in good faith.
  3. Stay automatically terminated 60 days after sec. 362(d) motion filed in case filed by individual under 7, 11 or 13 unless there is final decision or extension reached.

Many times people will not include their house payment in the Chapter 13 plan. This is frequently the result of individual preferences of the attorneys that they hire to represent them, as well as the characteristics of the trustees appointed by the Probate Court to administer Chapter 13 plans. Even if a house is not included in any Chapter 13 bankruptcy, the bankruptcy does protect the house by filing a stay on the foreclosure action and that stay remains in effect as long as the homeowner then gets and remains current on the house payments.


Chapter 7 bankruptcies provide for the total discharge and liquidation of debts. Because of this powerful debt relief tool, individuals are only able to file a Chapter 7 bankruptcy once every eight years. In a Chapter 7 bankruptcy, people may list their home and mortgage as one of the debts that they are seeking to discharge. If this is the case, and it is clear intention that they have abandoned all hopes of saving the property and continuing to live in the property. If an individual chooses not to include their house in a Chapter 7 bankruptcy, then they still intend to keep the house, and they must stay current on the house payments while other debts are being discharged. Many people think that if they can discharge their other debts, then they will have enough cash to get caught up on their house payments and stay current. More often than not, they are wrong. Even if the house is not included in a chapter 7 bankruptcy, the stay granted by the filing of the bankruptcy will apply to the mortgage and the foreclosure action. If the homeowner can then bring the mortgage current, then the foreclosure action goes away. Most of the time, unfortunately, the homeowner is unable to bring or keep the mortgage current and the bank then files a motion for relief of stay. Chapter 7 is a valuable tool and a homeowner who realizes that they are going to lose their house may be best served by waiting until after the foreclosure action is completed or until after the short sale is done, and then using Chapter 7 bankruptcy to wipe out any deficiency judgment that may remain.


The Making Home Affordable Program, which is a government program, includes the Home Affordable Modification Program (HAMP) and the Home Affordable Foreclosure Alternatives Program (HAFA). These programs were developed to help homeowners avoid foreclosure, stabilize the housing market, and improve the overall economy. The HAMP program helps homeowners avoid foreclosure by modifying first lien mortgages and HAFA permits borrowers to exit the property gracefully by way of a short sale or deed-in-lieu of foreclosure.

What is HAMP?

The Home Affordable Modification Program (HAMP) is designed to lower your monthly mortgage payments, making them more affordable and sustainable for the long-term.

Features and Benefits

  • HAMP achieves a more affordable payment by adjusting your interest rate, extending your term, and reducing or forbearing your principal
  • HAMP homeowners typically save about $500 per month
  • Through HAMP, you can get help with your primary residence or rental property
  • If you owe significantly more than your home is worth (>115 Loan-To-Value), you’re automatically evaluated for principal reduction
  • Just for making timely payments, you could earn up to $10,000, which would be used to reduce your principal balance

You may be eligible for HAMP if you meet the following basic criteria:

  • You are struggling to make your mortgage payments due to financial hardship
  • You are delinquent or in danger of falling behind on your mortgage
  • You obtained your mortgage on or before January 1, 2009
  • Your property has not been condemned
  • You owe up to $729,750 on your primary residence or one-to-four unit rental property (loan limits are higher for two- to four-unit properties)

If you qualify for HAMP and you have a second mortgage, you may also qualify for Making Home Affordable's Second Lien Modification Program (2MP) If homeownership is just not affordable right now, even with a modification, MHA's Home Affordable Foreclosure Alternatives Program (HAFA) could be right for you. With relocation assistance and relief from your remaining mortgage debt, HAFA could help give you a fresh start.

What is HAFA?

Home Affordable Foreclosure Alternatives (HAFA), is the government’s newest program put in place to benefit homeowners who do not qualify for HAMP assistance. Released in April 2010, this program is designed to expedite foreclosure avoidance options for homeowners in need. By promoting the swift execution of a short sale or deed-in-lieu, HAFA can potentially save millions of homeowners from the financially devastating event of foreclosure.


Before you are approved to for the HAFA program, you will be evaluated for the Home Affordable Modification Program (HAMP) to see if you are eligible for a modification that will lower your monthly payments and allow you to remain in your home. You may be eligible for HAFA if you meet the following basic criteria:

  • Be struggling to make your mortgage payments due to financial hardship
  • Be delinquent on your mortgage or face imminent risk of default
  • Have obtained your mortgage on or before January 1, 2009
  • Have an unpaid principal balance no greater than $729,750 for a one-unit property
  • Your property has not been condemned.

Features and Benefits

  • Through HAFA, you can get help with your primary residence or rental property.
  • If a HAFA short sale doesn’t work, you may be able to give the title back to your mortgage company in a HAFA deed-in-lieu of foreclosure
  • Once you complete a HAFA short sale or Deed-in-lieu, there is a waiver of deficiency, meaning you are released from any remaining mortgage debt
  • HAFA offers $10,000 in relocation assistance for you or your tenant
  • In some cases, HAFA has a less negative effect on your credit score than a foreclosure, which allows for a faster financial recovery.

If you meet the above criteria, but a mortgage modification still leaves you with an unaffordable mortgage, HAFA becomes your primary solution to avoid foreclosure, salvage your credit score, and move on with dignity through a short sale or deed-in-lieu. How can HAFA help me? HAFA can potentially save you a lot of grief and heartache by creating standardized processes and setting limits on how long a lender can wait to respond to short sale requests. Currently short sales can be lengthy transactions, making it difficult for potential buyers of your home to remain in the process. Eligible homeowners can lower their monthly mortgage payments and get into more stable loans at today's low-interest rates. And for those homeowners for whom ownership is no longer affordable or desirable, the program can provide a way out that avoids foreclosure. There are also options for unemployed homeowners and homeowners who owe more than their homes are worth.



The Deed-In-Lieu of Foreclosure allows a mortgagor in default, who does not qualify for any other HUD Loss Mitigation option, to sign the house back over to the mortgage company. A homeowner is sometimes better off signing a deed-in-lieu rather than letting the lender start foreclosure proceedings. That’s because, with the signing of a deed-in-lieu, the borrower is voluntarily giving the home back to the bank. Although the loan default would be entered on your credit record, it may not do as much damage as a full foreclosure would. Foreclosures usually stay on your credit file for 5-10 years. You can also avoid the time and stress involved in fighting a foreclosure battle that the lender is sure to win. Any compensation must be applied to any junior lien(s) placed on the mortgaged property. The loan servicer may determine that a “current’ mortgagor is eligible for the Deed-in-Lieu of foreclosure option. A Deed-in-Lieu must be completed or foreclosure initiated within six (6) months of the date of default unless the mortgagee qualified for an extension of time by first trying a different loss mitigation option or an extension of time was approved by HUD prior to the expiration of the time requirement. If the Deed-In-Lieu follows a failed special forbearance agreement or the pre-foreclosure sale program, then the Deed-In-Lieu must be completed, or foreclosure will be initiated within 90 days of the failure. A Deed-In-Lieu can only be done when you have one mortgage on the property. If you have a first and second, you cannot do a Deed-In-Lieu. There may be income tax consequences as a result of the Deed-In-Lieu of Foreclosure.


The Loan Modification includes changing the original terms of the mortgage through several methods. This option provides for either a permanent change in one or more of the terms of your loan, which allows a loan to be reinstated and results in a payment you can afford. If your mortgage is an adjustable rate loan, the lender might freeze the interest rate before it increases or change the interest rate to a more manageable rate for you. A lender might also extend the amortization period. This is called a loan modification. Loan modifications are rare.

A Loan modification can consist of any of these things:

  1. A permanent change in the interest rate
  2. Capitalization of delinquent principal, interest or escrow items
  3. Possible extension of the loan term

The use of any of these three above items will result in the re-amortization of the loan. Maximum interest rate adjustment to current market rate plus 150 basis points, although at mortgagee’s discretion, note interest rates may be reduced below market. All or a portion of the PITI arrearage (Principal, Interest, Taxes, Insurance) may be added to the mortgage balance. Foreclosure costs, late fees, and other administrative expenses may not be capitalized. The mortgagee may collect the legal and administrative fees (resulting from the canceled foreclosure action), from you to the extent not reimbursed by HUD, either through a lump sum payment or a repayment plan separate from, and subordinate to, the modification agreement. No administrative fees for completing the Loan Modification documents can be passed on to you. The modified principal balance may exceed the principal balance at origination, and the modified principal balance may exceed 100% loan-to-value. The following conditions will apply:

  • All Loan Modifications must result in a fixed rate loan
  • The Loan Modification must fully reinstate the loan
  • Subsequent defaults are to be treated as a new default

If you are behind, or in danger of getting behind on your mortgage call The Stadler Group today at (678) 985-1234 discuss your options and stop foreclosure

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Lance Stadler

The Stadler Group

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