Facing Foreclosure? Know Your Rights and Options

For most homeowners, their house is their biggest investment. So, facing foreclosure can be very frightening. You not only worry about losing your home, but also about losing much of your life savings. Learning more information about foreclosure can help you ensure that you know your state and federal rights. You may be able to delay it or even avoid it altogether. For example, a certain type of bankruptcy allows you to avoid foreclosure. There are other potential defenses against it, such as short sales or deeds in lieu of foreclosure, which may be available. The earlier you learn about these alternatives, the more choices you have.

The process to avoid foreclosure is called loss mitigation. It involves working with your lender or loan servicer to avoid foreclosure. Depending on the loan servicer, you may be able to get a forbearance agreement, structure a new repayment plan, or work on a loan modification. The earlier in the process you contact your lender, the more options you may have available. For example, if you have equity in your home, but a sudden change in financial circumstances, you may be able to avoid problems all together by refinancing for lower payments.

Even if your lender will not work with you, you may be able to fight a foreclosure in court. There are some legal defenses against it. Servicer mistakes, excessive fees, statute of limitations defenses, and failure to comply with due process are all things that may help you defeat a foreclosure. If you do plan on fighting it in court, you will need an attorney. Hiring an attorney can seem like an extravagant expense when you are facing foreclosure, but an attorney may be able to help you preserve your largest asset.

Avoiding foreclosure is important for another reason. Many people believe that foreclosure will end their financial problems. However, that depends on the amount of your loan and the value of the house. In some instances, you may owe the bank more money than the value of the house. So, you could end up losing your home and still owing money to the bank. Exploring alternative solutions, such as bankruptcy, may not let you keep an unaffordable home, but they can at least end your financial obligations to your mortgage servicer.