When a home goes into foreclosure for non-payment, a spiral of negative outcomes can occur. After a borrower misses three mortgage payments, a notice of default is filed. The borrower then has 30 days to reply or show up in court to cure the default. If the payments aren’t caught up at the time, the lender can proceed to sell the home. This can damage the borrower’s credit, cost additional fees and the end result may be the permanent loss of the home. It can be difficult to stop a foreclosure and retain the home once the process has been initiated, but it is not impossible. Loan modification, bankruptcy and loss mitigation are all options, depending on the financial circumstances of the borrower.

How to Use Loan Modification to Stop a Foreclosure
Loan modification is one way to put a halt on foreclosure action. This is possibly the best course of action because it allows the borrower to keep the home by reworking the terms of the loan with the current lender. Doing so lets the borrower catch up on missed payments to put the loan back in good standing. Loan modifications can include a lowered interest rate for a period of time to temporarily lessen the payments or give an extension of time that draws the loan out, but also makes the monthly payment more affordable. As a preventative method to halt a foreclosure, loan modifications are approved even if the mortgage payments are not behind.

How to Stop a Foreclosure by Filing for Bankruptcy
Although Chapter 7 bankruptcy would likely result in the sale of the house to pay off a home loan that is in default or foreclosure, Chapter 13 bankruptcy can offer solution. I provides a viable way to reorganize personal debt and create a repayment plan that is more manageable. Although it will have a negative impact on a borrower’s credit, Chapter 13 bankruptcy doesn’t necessarily result in the loss of the home. It won’t completely wipe out the debt either. The key factor is being able to create a payment plan that makes catching up with the payment doable. The good thing is that once the document is filed with the court, the lender can no longer proceed with the foreclosure.

How to Stop a Foreclosure with a Loss Mitigation
There are two options for borrowers who want an option other than staying in the current mortgage. The first of these options is a short sale. Essentially, a short sale is a way for the borrower to sell the home and get out of the existing loan altogether. Often times, however, there is a still a balance due on the loan since the home can’t sell for the full amount owed on the loan. When a short sale isn’t feasible, the other option is a deed in lieu. This is a process by which the borrower turns the home back over to the bank and walks away. Once the deed in lieu is processed, the bank stops the foreclosure. The down side of this arrangement is that the borrower loses the home, but it may give them the fresh start that they need.

Ultimately, the borrower must look at the big picture to see which option is best for their particular situation. They need to be able to make a modified payment and not only stop the foreclosure, but also keep it from defaulting again. If a long-term hardship will prevent this, they may need to get out of the loan and give up the home to stop a foreclosure from happening.