How to Fight Foreclosure

Facing foreclosure can leave you feeling hopeless. But you do have options to fight to keep your home.

These options can vary depending on your state and how far along you are in the foreclosure process. Learn your rights so you can take action before it's too late.

What Is Foreclosure?

Foreclosure is the legal process that happens after you default on your mortgage, during which the lender sells your home. It's the lender's way of recovering the remaining loan amount. Your lender can typically start the foreclosure process after you miss a specific number of payments. When you take out a mortgage, you agree to put the house up as collateral should you fail to keep up your end of the agreement.

The foreclosure process typically starts with a demand letter, often after two consecutive missed payments. Next comes a notice of default, usually after 90 days of no payments. You generally have about 30 days after this to work with the lender and get the loan back on track. If you don't, the lender can pursue taking possession of the house. The specific process, including how long it takes, varies significantly by state but often takes several months or even years.

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Can You Avoid Foreclosure?

You can fight a foreclosure, although it becomes more challenging the longer you wait. The ideal time to correct a foreclosure is before it happens, as soon as you fall behind on payments. Lenders will often work with you to catch up on the payments or help you avoid losing your home.

Can You Negotiate New Terms With the Lender?

If your loan is in default or you're in the pre-foreclosure period, your lender might work with you on an agreement to get caught up on payments. This typically happens by dividing the past-due amount over several payments to help you get caught up over a specified period. However, this can only work if you're able to stay current on the payments going forward. For example, if you had a temporary financial setback but things are back on track, this could be a good option.

You can also apply for a loan modification, which changes the terms of your mortgage. A repayment plan leaves the terms and payments the same, but a modification can make the payments more affordable by extending the term of your mortgage. Giving you more time to pay the loan means your monthly payments are lower. You might also get a lower interest rate as part of the modification, which also helps lower the payments.

What Is Forbearance?

A forbearance is essentially a short break on your mortgage payments. Your lender agrees to pause your monthly payments for a set period to allow you to get your finances organized. Those payments you delayed are due at the end of the forbearance period, either in a lump sum or with a repayment plan arranged with your lender. Before choosing this option, ensure you can resume payments and take care of the missed payments. If your financial situation doesn't improve, you'll be even more behind with no way to catch up.

Can You Sell the House?

You can sell your home to avoid foreclosure, as long as the lender hasn't already taken possession of the house. It's best to sell it before the lender initiates the foreclosure process. However, you can often still sell your home even after the process has started. Selling your home as soon as possible gives you more time to find a qualified buyer who's willing to offer enough money to cover your mortgage.

Homeowners facing foreclosure sometimes choose a short sale, which means you sell the home for less than what you owe. Your lender must agree to a short sale since they'll receive less than your loan balance. A short sale still hurts your credit, although sometimes not as much as a foreclosure.

Could You Declare Bankruptcy?

Filing for bankruptcy initiates an automatic stay stopping creditors from using collection tactics. This includes foreclosure activities by your mortgage lender. You can buy some time by declaring bankruptcy, but you'll still need to get your financial affairs in order quickly to keep your home. Bankruptcy can also cause major damage to your credit rating. Consult with a bankruptcy attorney to understand the impacts of the decision and the type of bankruptcy that's best for your situation if you're trying to keep your home.

What Are Some Other Options to Fight Foreclosure?

Refinancing may be another option if you can qualify. If interest rates have dropped since you bought your home, it can help lower your payments as well. If you have equity in your home, you can cash out the equity to have cash on hand, which can help you get back on your feet financially. You can also leave the equity in the home to lower what you owe.

If you don't want to keep the home, you may be able to avoid foreclosure with a deed in lieu of foreclosure. This means you're transferring ownership of your home to the lender while no longer being obligated to the mortgage. While it won't hurt your credit as much as a foreclosure, a deed in lieu of foreclosure can still drop your score and affect your ability to get another mortgage soon. Lenders sometimes prefer this to foreclosure because it’s cheaper and faster. However, if you have other debts attached to the property, like a tax lien, this probably isn’t an option.

Who Can You Call for Help?

Call your lender if you know you're going to miss a payment or if you've only missed one or two payments. They might be willing to help you if you call early instead of avoiding their collection calls. The Making Home Affordable program through the U.S. Department of Housing and Urban Development offers assistance to people who are struggling to pay their mortgages. You can talk to a HUD-approved housing counselor to learn how to fight foreclosure. You can also hire a foreclosure attorney to help you fight the foreclosure.