Five ways to work with your lender to avoid foreclosure

Hard financial times can fall on just about anyone in Towson. Sometimes all it takes is one major unexpected event — a medical bill, a car repair or a job loss — for a person to fall behind on their mortgage payments. Fall behind on too many mortgage payments, however, and your lender might threaten you with foreclosure.

Foreclosure can be a scary topic, as no one in Maryland wants to lose their home. However, the following are some ways homeowners in such situations can work with their lenders to avoid foreclosure.

Debt forgiveness

Sometimes, if a homeowner only misses one or two payments on their mortgage, their lender might agree to simply waive those payments, if the homeowner is able to meet their current mortgage obligations moving forward. This is known as debt forgiveness. Keep in mind, however, that debt forgiveness is generally a rare occurrence.

Obtain a forbearance

In other situations, lenders may agree to wait for a period of time to allow the homeowner to catch up on their missing payments before taking legal action. Known as a forbearance, the lender and homeowner will negotiate a repayment plan that allows the homeowner to pay back what they owe, thus avoiding foreclosure.

Extend the term of the loan

Sometimes lenders are willing to extend the term of the loan, instead of pursuing foreclosure. For example, the lender might allow the homeowner to pay an additional amount each month for a certain period of time, until the homeowner has caught up on what they owe.

Change interest rates

If the homeowner’s loan is adjustable, the homeowner’s lender might freeze the interest rate on the mortgage, meaning it won’t go up. Or, the lender may even change the interest rate to one that the homeowner is able to manage. This could allow the homeowner to afford their mortgage payments and avoid foreclosure.

Refinance the loan

If the homeowner has enough equity in their home, and the lender is agreeable, the lender may permit the homeowner to re-amortize the loan. This means that the loan balance will be increased to include missed payments, allowing the homeowner to catch up on what they owe.

In the end, there are ways homeowners in Towson can negotiate with their lenders to avoid foreclosure. However, if these methods fail, all is not lost. A Chapter 13 bankruptcy can allow homeowners to establish a court-approved repayment plan that allows them to keep their home while becoming current on their debts over three to five years. Whether you are negotiating with lenders, or pursuing Chapter 13 bankruptcy, it is important to work with knowledgeable lawyers in Maryland who can offer personalized and professional advice. Our firm’s webpage on halting foreclosure through bankruptcy provides more information on this important subject.