3-Step Plan

Foreclosure Basics

Foreclosure procedures are established by state governments and vary from state to state. A number of states allow both judicial and non-judicial foreclosures.

If you do not contest foreclosure, a judgment will be entered in favor of the lender/creditor and your property will be sold under court supervision.

A non-judicial foreclosure does not involve the court unless you protest. The lender is entitled to advertise your home for sale by posting a notice in the newspaper. Once a notice is posted you may be required to post a bond to stop the foreclosure.

Strategies and Tactics for Combating Foreclosure

Step 1 - Contact a Lawyer

When you are threatened with foreclosure, consult a lawyer immediately. There are numerous low cost ways of obtaining legal advice, which includes contacting your local bar association for pro bono information and/or your neighborhood legal aid office.

We recommend that you avoid attorneys that contact you first, only because many suggest bankruptcy prematurely without properly evaluating your individual situation. A lawyer that finds your name on a foreclosure list is usually too "efficient" when it comes to exploring all of the available options.

Step 2 - Contact Your Lender

Avoiding contact with your lender may provide temporary relief but will cause long lasting pain for you. Paying your mortgage should be your first objective. If you miss one or two mortgage payments, you may lose your home. Skipping payments on lower priority items may be a more pragmatic move for you that allows you to apply for various public assistance programs that suit your needs.

Creditors are beginning to see the logic in negotiating with borrowers in trouble. Examples of compromises that can be reached between creditors and debtors include:

*Accepting reduced payments for a period of 1-18 months.

*Allowing a debtor to skip a month's payment.

*Agreeing to a restructuring of the loan for a lower interest rate.

*Extending the grace period for payments past due.

It is up to you to be proactive and you must save all correspondence with the creditor for your records. Multiple telephone calls and letters via certified mail are often required to obtain a compromise with a lender.

Remember that foreclosure is expensive for a bank and they may see the benefit in simply letting you stay in the home for a reduced rate.

Step 3 - Contact a Real Estate Agent

You may want to contact a real estate agent to list your home for sale or get an appraisal.

Contacting a real estate agent lets you know your home's marketability without an obligation to sell.

Selling your home may hurt but is a better move than letting the bank sell your home via a foreclosure sale.