Like in any other crisis situation, when facing foreclosure the key is to not panic. Understanding your rights and the solutions available to you can make a huge difference during this time.
For any homeowner or small business owner, falling behind on mortgage payments can be incredibly stressful. The fear of losing your home or business space to foreclosure can feel overwhelming and isolating.
But here’s the truth: foreclosure doesn’t happen overnight, and more importantly, you have options. Over the years I’ve been able to help many homeowners preserve their most valuable asset, and in some instances even obtain a complete discharge of the mortgage.
FIRST, TAKE A DEEP BREATH—YOU HAVE TIME
One of the biggest misconceptions about foreclosure is that the process happens quickly. In reality, foreclosure is a legal procedure that takes time.
Lenders are required to notify you, and there are opportunities along the way to work things out before losing your property.
In New York, after commencing a lawsuit, the parties are required to go through settlement conferences before any foreclosure litigation can continue. The Courts and even the lenders usually prefer to see the homeowner work it out. The key is taking action sooner rather than later.
COMMON REASONS PEOPLE FALL BEHIND
Whether it’s due to a temporary job loss, medical expenses, or a slowdown in business, many people fall behind for reasons outside of their control.
The important thing is to acknowledge the issue early and explore the steps you can take to protect your investment.
KNOW YOUR OPTIONS
Lenders typically prefer to avoid foreclosure too. It’s time-consuming, expensive, and doesn’t always recover the loan value.
That’s why there are multiple alternatives that can help you stay in your home or exit the situation with dignity:
1. REINSTATEMENT
If your financial hardship was temporary, and you can catch up on missed payments (including any late fees or penalties), reinstatement allows you to bring your loan current (back into good standing).
Once you're up to date, foreclosure proceedings can be stopped entirely. This can be a great option to preserve a low interest rate.
Occasionally, a lender is willing to forgo or reduce interest and/or penalties to help the borrower return to good standing and resume paying.
2. LOAN MODIFICATION
In a loan modification, your lender agrees to change the terms of your loan—usually by extending the loan term, changing the interest rate, or adding missed payments to the back end.
This lowers your monthly payment and can make your mortgage more manageable over time.
3. REPAYMENT PLAN
If you've only missed a few payments, your lender may offer a repayment plan. This spreads the past-due amount out over several months, allowing you to pay it back gradually along with your regular monthly payment.
4. DEED IN LIEU OF FORECLOSURE
If keeping the property is no longer feasible, a deed in lieu can be a graceful way to walk away.
You voluntarily transfer ownership of the property back to the lender to avoid foreclosure. In some cases, lenders may offer relocation assistance as part of the agreement. It could also help you get out of personal guaranties.
WHAT TO DO NEXT
- Contact your lender as soon as possible. Ignoring the situation will only make things worse. Lenders often have dedicated departments to help homeowners explore alternatives to foreclosure.
- Get professional advice. Speak with a HUD-approved housing counselor or a local attorney who specializes in foreclosure prevention.
- Stay organized. Keep records of all communication, copies of letters, and details of any agreements made.
- Beware of scams. If someone promises to “save your home” for an upfront fee, it’s likely a scam. Always deal directly with your lender or a certified housing counselor.
For any questions or assistance, contact us.
