Just because your lender has begun foreclosure proceedings, it does not mean you are going to lose the house. Often, banks would rather work with you to renegotiate your mortgage rather than go through the time, expense and risk of foreclosing on your home and selling it at auction.
With some creativity, renegotiation of your mortgage can take many forms. Here are a few examples of things your lender may be willing to change about your mortgage to help you keep your home and avoid (or stop) foreclosure:
- The interest rate
- The amount of remaining principal
- The amount you owe each month
- Any existing late fees or penalties for non-payment
- Forbearance to temporarily halt payments, or extend the length of time between payments
You and your attorney may be able to negotiate with your bank to make changes like these so that your mortgage is more manageable, you are able to keep up on payments again, and you get to keep your home. However, much of the time, the bank will not respond to a homeowner’s offer to work out a settlement. It will proceed with foreclosure instead.
Other ways to take on foreclosure
An attorney who practices foreclosure defense has several methods for helping homeowners. If your lender will not consider loan modification, bankruptcy is another option that can pause foreclosure for several months and give you leverage against it. A deal may be possible during that time.
Otherwise, your lawyer may be able to convince it to agree to a short sale. While a short sale will not allow you to keep your house, homeowners underwater on their mortgage often prefer it to foreclosure because it has less impact on their credit scores, and they can walk away owing nothing on the mortgage.
Your attorney should go over these and any other potential options for dealing with foreclosure before you make your decision.