5 Forms of Foreclosure Assistance

Depending on the reason why you need foreclosure assistance, you will have different options available. For example, if you were the victim of predatory lending, there may be federal options to assist you in avoiding foreclosure. If you have lost your job or suffered other hardships, your lender may be willing to work with you. If you simply mismanaged your money, though, you will need to take more drastic steps to avoid foreclosure.

#1 Loan Modification

The first step any borrower should take if he or she cannot continue to make loan payments is to speak directly with the lender. Do not ignore notices or delinquency or attempts to collect. By ignoring these contacts, you are telling your lender you do not intend on resolving the situation. If you have had a recent personal hardship, speak with your lender about the situation. Loss of job, medical emergency or family expense may all be reasons to consider a modification. Your lender may be willing to modify your loan to keep you in the home during your difficult times.

#2 FHA Refinancing Loan

The Federal Housing Authority will assist some borrowers who are victim to predatory lending. These refinancing loans are only available to people whose loans meet the following criteria: one, originally agreed to sub-prime loans with adjustable rates; two, made the mortgage payments before the rates adjusted higher; three, could afford the mortgage if the interest rate was lower. Basically, this option is only possible if you had a bad lender, not if you made a bad decision and took a loan you could not afford.

#3 Private Refinancing Loan

When you cannot make your payments through your own means, you may seek another private lender to refinance the loan for you. This option will cost you more than modifying with your lender or through the government. However, it is perhaps the easiest form of external loan modification to accomplish. Through a straight refinance, your new lender pays off your existing mortgage. You then start making payments to the new lender, ideally at a lower interest rate with lower monthly payments.

#4 High Risk Personal Loan

Borrowers who need assistance to cover a few mortgage payments while they recover financially may consider a high risk personal loan. These loans are made without collateral, and they have very high interest rates. Going into this form of debt is only a good option if there is an immediate reason you cannot make a few month's worth of payments, but you will be able to make payments easily in the future. You will have to pay off both this loan and your mortgage ultimately, making the cost of financing much higher.

#5 Debt Consolidation Loan

If you have multiple debt obligations you are having difficulty meeting, you can attempt to consolidate your debt. A consolidation loan is like a refinancing loan for multiple different debts at once. You will, hopefully, have a single monthly payment that is lower than the sum of your previous payments. Your new lender will assume the lien on your home and other items, however, so this is very risky if you default.


Transfer of Mortgage

A seller may look into a transfer of mortgage to sell a home quickly and relieve himself or herself of the burden of foreclosure. A transfer can occur on an assumable loan where the bank agrees to transfer the debt to a qualified borrower. Each bank can set its own definition for "qualified borrower," but typically the individual must have credit equal to or better than that of the original borrower. The buyer takes over the remaining mortgage debt on the home and pays the seller the equity he or she has already acquired in the property. 

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