Facing an impending auction on your home can feel overwhelming. The thought of losing your home without not knowing what comes next can understandably be terrifying. Know that if you are in a difficult position with your mortgage, you are not alone. As of the date of this post, more than 50 homes foreclose every month in San Diego county. Everyone faces hard times in their life, and at CalHomeCo we are no exception. Many of us have had family or friends in similar positions, if not mortgage difficulties of our own. Unfortunately it can be difficult to find reliable and trustworthy sources of information about your options to stop foreclosure.
Even a trustworthy agent may just not have experience with other options for how to stop foreclosure beyond just selling. An experienced attorney can tell you about options to delay the auction, but may not know much about other longer term solutions. An investor buyer can quickly pay cash for your home, but may not be knowledgeable about what other options are available to stop foreclosure.
There is also the very real possibility of connecting with a less trustworthy individual or company. You could be pushed toward a sale by a real estate agent when better options are available, or milked for ongoing fees that will never provide a long-term sustainable solution by an attorney.
To stop foreclosure, there are generally a few relatively straightforward options available. A basic summary of each is laid out below, but each option can have nuances and variations that should be discussed with a reputable professional. Learn more about CalHomeCo’s free, no-obligation professional consultations at the bottom of this post.
So, how do you stop a foreclosure?
1. Pay the reinstatement or payoff balance. Generally this is not an option or it would have been addressed sooner, but it is important to discuss it here nevertheless. If you have family, friends, or savings available that could pay off the past due balance on your loan, now is the time to use it. Call in favors and ask for help as needed; every lender has deadlines for when payment needs to be made however, so do not wait until the day before auction.
2. Request a loan modification. Call your lender and ask for options to get your mortgage payments back on track. While some tend to be more helpful than others, every lender has a department available to listen to your specific situation and determine whether a modified repayment plan is realistic. Again time is of the essence here- DO NOT WAIT until a few days before the foreclosure sale as most lenders require at least 30 days to review a modification application. Side note on modifications: California Civil Code 2944.7 makes any attempt to charge for assistance with a modification illegal until if and when the modification is approved. An attorney or other professional can assist with your application, but cannot charge you to do so until and unless your application is approved and active. If you suspect you may have been charged illegally, resources are available to recoup the fees paid.
3. File for bankruptcy. Bankruptcy is one of the few ways to stop foreclosure proceedings in their tracks, even up to a few hours before auction. This is not a cure-all solution, however. While legally a foreclosure can generally not proceed without the intervention of a judge on behalf of the trustee, the purpose of this hold is to allow time to work out a repayment plan or the validity of requests to forgive certain debts. While you can file for bankruptcy yourself at the courthouse, an attorney is highly recommended to assist with the ongoing case as it can be a complex legal process. If you are able to show that you have faced a temporary hardship and have the means to get back on track with a restructured payment plan however, bankruptcy can be a viable long term solution. If the issues preventing payments on your mortgage are ongoing, however, this is likely to not help beyond buying some time before the sale occurs.
4. Sell your property. Whether a sale is the preferred solution or just a backup plan, it is often the best long term solution available to prevent foreclosure. While it may seem to be no better than allowing the property to go to auction, it can actually be very advantageous in several ways. If nothing else, choosing to sell allows a homeowner to take control of the process of relocation and negotiations on sale price, rather than allowing the lender to make all of the decisions. Typically a sale will net a higher price for the property than it will get at auction to a bottom-line big box investor. A reputable and professional investor will also be flexible on moving time-frames and can allow a seller extra time to stay in the home, or even help with moving and credit repair. If the property is well-maintained and in good or better condition, a ‘traditional’ listing with an agent could also be an option to get a higher purchase price and additional relocation funds. Even if the home is worth less than the existing loan, a short sale can be a viable option to control the sales process.
5. Deed-in-lieu. A deed-in-lieu request means that you ask your lender to take conveyance of all interest in the home in order to satisfy the loan and avoid foreclosure. Basically you ask the lender to stop foreclosure proceedings, and in exchange you will sign over title and relocate voluntarily. This is rarely a better solution than a sale, as even if a mortgage is ‘underwater’ (the amount owed is greater than the value of the home), a short sale will often give more time to move out and possibly relocation assistance funds as well, while also satisfying the existing loan.
6. Allow the foreclosure to proceed. One possible option is to just let the auction happen. The way this typically works is that on the scheduled trustee sale date, either a third party will buy the property at a significant discount or ownership will revert to the bank. Within a few days or weeks of this sale, a representative will contact the occupant and give a deadline to vacate the property or face eviction proceedings enforced by the sheriff’s department. This can be a very ugly situation and is almost never the best option available. Unfortunately, exactly this happens anywhere between 40-60 times every month in San Diego county. Often the homeowner has been able to get multiple delays previously to the sale date and may have become complacent, expecting that the auction is still a vague, far-off possibility until it very suddenly occurs and there is no going back.
At CalHomeCo we provide completely free, no obligation, professional consultations to homeowners facing foreclosure. While we are in the business of buying and selling homes, our model allows us to focus first and foremost on what the best solution available to our client may be. If your goal is to stop foreclosure and stay in your home, we are more than happy to help you toward this goal, at no charge, to the best of our ability. We pride ourselves in doing right by our clients, and it is always worthwhile for us to meet a new client and develop a new relationship. Even if you decide not to do business with us going forward, we will hopefully have the opportunity to show our professionalism and integrity to an extent that you will remember us for future referrals or testimonials. Many of our most enthusiastic clients have never earned us a penny. They help us by being our advocates to their family and friends, and by helping get the word out that we are a reliable and trustworthy San Diego institution.
Even if you are already working on a plan or speaking with a professional for assistance, please don’t hesitate to contact us for a second opinion or a backup plan. At CalHomeCo we have decades of combined experience in real estate, construction, investments, and foreclosures. We also have an extensive network of trusted attorneys and CPAs throughout southern California to consult or refer as needed. We are happy to review any purchase offer you have received to ensure it is legal and fair, or to talk about what your existing attorney may or may not be able to do for you. Regardless what plan and what backup plan you decide to pursue, please take action sooner rather than later. Every month we perform outreach to multiple homeowners that are confident they have things under control, who unfortunately then proceed to lose their home at auction. The earlier action is taken and decisions are made, the more options that are generally available to help.