How to Stop Mortgage Foreclosure - Yes, You Have Options

Right now, thousands of homeowners in this country are researching ways to stop mortgage foreclosure. For one reason or another, these homeowners have fallen behind on their mortgage payments. Many can no longer afford to make their payments each month. Many of these homeowners are all asking the question: How can I stop a mortgage foreclosure from happening?

In this article, we will look at some of the ways you can avoid having your home foreclosed on. It's an important topic for a lot of homeowners, so we will do our best to cover the bases here.

Most homeowners don't even realize they have options available to either (A) get caught up on their payments or (B) sell the home before the bank forecloses it. In fact, those are two primary paths we will discuss in this article. When discussing how to stop a mortgage foreclosure from taking place, all of the techniques fall under two categories:

• Category 1 -- Techniques to help you get caught up on your mortgage payments, and thus avoid being foreclosed on.
• Category 2 -- Techniques to help you sell the home in lieu of foreclosure.

Let's start by covering category 1, the "workout" options that are available to homeowners. Most lenders will try to avoid foreclosing on a home, if at all possible. The process can be time-consuming and expensive for the bank. They have to go through a legal process that can take months, maintain the property in the meantime, sell it through an auction, etc. All the while, they have a non-performing loan on the books that is costing them money.

So whenever somebody emails me asking how to stop foreclosure on their home, my first question is always the same: "Have you spoken to your lender about it? Have you asked about workout options to get back on track with your payments?"

Of course, this assumes that the homeowner has only suffered a temporary financial setback, and that he or she feels confident that they can get back on track with their payments. In this type of scenario, many lenders will offer the borrower what they collectively refer to as "workout options" -- ways of getting caught up on the past-due payments.

In most cases, lenders will offer one of two ways to get caught up on past-due mortgage payments. The first option is to pay the owed amount as a single lump-sum payment. This option is known as reinstatement. Because a lot of homeowners cannot afford this option, most lenders offer a second option through which you amount owed is spread out over the future payments. This is the gradual, more affordable approach, and it's usually referred to as a repayment plan.

Both of these methods -- reinstatement and repayment -- can help you stop mortgage foreclosure from happening by getting caught up with your missed payments. Ask your lender what kind of options they offer.

But what if you simply cannot afford the payments anymore, and you don't foresee that changing in the future? In this case, your best option might be selling the home before the bank forecloses on it. In fact, many lenders will allow homeowners to sell for a reduced price (below market value) in order to make a quick sale. This is known as the short sale technique and it's worth considering as well.

How you stop mortgage foreclosure on your home will depend on the financial situation you are in. The main thing is to do everything you can to avoid being foreclosed on, because it will damage your credit and make future homeownership difficult.