Top 10 Tips For Negotiating To Avoid Foreclosure
Negotiating to avoid foreclosure can possibly help you save your home, or at least save your credit. Read on for the top 10 tips for negotiating to avoid foreclosure.
- Know the laws in your state: Each state has different rules for how the process of foreclosure will go. In certain states, a bank can get a deficiency judgment against you if they don’t make all the money back you owe from the foreclosure process. If this is the case, the bank may be less willing to negotiate since they will be confident they can recoup their losses.
- Understand debt collection laws: Under the Fair Debt Collection Practices Act, lenders have certain limitations in how they may collect debt. They cannot call you early in the morning or late at night, for example. In addition, if you request to see the original note that proves you owe the mortgage debt, they must produce it and cannot continue the foreclosure until they do. This can slow down the foreclosure process.
- Speak to your lender as soon as possible: Lenders may be able to negotiate to help you avoid foreclosure, especially with government incentives for negotiation made available to deal with the 2009 economic crisis. Lenders can also give you advice on a shot sale or other options to avoid foreclosure. The sooner you speak to them, the more they will be willing to work with you and the more time you will have to find an alternative before getting too deeply into the foreclosure process.
- Document all your communications: If you do negotiate with your lender, keep track of all letters and conversations sent so you will have a record of what is decided. Even if you don’t negotiate or try to stop foreclosure, it is still a good idea to keep copies of all of the court documents and other information from the lender so you will have records in case any problems arise.
- Gather all your financial information: If you want to negotiate with your lender, you may need to provide financial information showing both why you are having a temporary financial setback that renders you unable to pay and/or to prove that you can pay if they negotiate or help you to refinance. Make sure you have pay stubs, tax returns and other such documents. You usually also want to have as much financial information as you can about what you owe on your mortgage, what your current interest rates are, and other such information.
- Do your research about real estate, foreclosures and your equity in your home: Some negotiation programs involving reducing the outstanding balance on your loan so that the debt is more in accordance with the current value of your home. Therefore, you may be better quipped to negotiate if you are aware of what your home is actually worth. Knowing about foreclosures in your area can also be helpful because if there is a glut of foreclosures, your bank may not want to join the group of banks struggling to unload a property and they may be more willing to negotiate. Finally, knowing how much you have paid into your home and home much equity you currently have can be helpful in refinancing.
- Get professional help: There are foreclosure avoidance counselors available who may be able to help you talk to your lender, and programs such as Hope Now and Hope for Homeowners that can also provide you with help renegotiating the terms of your loan. You can find information on these programs on the HUD website.
- Know what you want out of the negotiations: Before you start negotiating, think about whether it is really in your best interests to keep your house. If you owe far more than the house is worth or you truly can’t afford it, renegotiating your loan to stay in the house may just extend your problems.
- Understand what a short sale is: If you decide you don’t want to keep your house, you may still be able to avoid foreclosure by negotiating a short sale. This is a deal in which you agree to find a buyer to buy the house and the bank agrees to take the buyers offer, which is less than the total amount owed on the mortgage, and consider the debt paid. This can be better for you because it is less damaging to your credit and better for your lender who doesn’t have to deal with taking the house and trying to find a buyer.
- Remain calm and polite: When you are negotiating, you may be fraught with emotion or feeling angry at your lender for tricking you into a mortgage you can’t afford. Remember, though, you will get farther in your negotiations by remaining calm and thinking with your head and not your heart.