When foreclosure proceedings are initiated, the first thing that should be understood is that there is help available. It is not a moment to panic; it is a moment to take immediate action. Foreclosures happen every day, but they’re also prevented every day too. The second thing that should be understood is that empowerment comes with learning the facts and eliminating fears of uncertainty. Foreclosure can be used as an opportunity to restructure finances amidst a challenging situation, if the right solutions are chosen.
Foreclosure Explained
Foreclosure is the legal term for the action that a mortgage lender, bank or lienholder takes when mortgage payments aren’t being made per the contract, which typically results in defaulting on the loan. A Notice of Default (NOD) is sent to the borrower when this occurs. In rare instances, foreclosure can be initiated because of unpaid dues or assessment fees owed to a homeowner association or because of overdue taxes. Foreclosure takes possession of the property from the borrower and protects the lenders’ investment. It is usually a lengthy and extremely complicated process.
When we sign loan documents at the closing, we agree to allow the lender to obtain a security interest in the property. Because the property was used as an asset to secure the loan, the lender then seeks to terminate the equitable right of redemption by the courts of equity. The borrower must repay the debt and be granted an equitable right of redemption by the courts, or sell the property, if not, the foreclosure usually results in a judgment in the lenders’ favor. To avoid foreclosure and prevent being evicted from the home, the borrower should seek immediate assistance.
Once an NOD is received and foreclosure proceedings begin, it’s important to do the following:
- Keep all foreclosure documents organized
- Do not discard any foreclosure documents until the proceedings have ended
- Maintain a record of all lender contacts incoming and outgoing
- Remain in the home and maintain all necessary maintenance and upkeep
- Continue to pay the homeowner association dues, if applicable
Borrowers’ Rights and Options
As borrowers, we have legal rights that are available to avoid foreclosure. Although it is a serious and final step taken by a lender, it is not something that is unresolvable and can certainly be turned into a pivoting moment to become more solvent than before being faced with foreclosure. Accepting the fact that it is not a hopeless situation should be our mindset and then, we should begin taking precise actions. The truth of the matter is, the lender does not want the house and that’s where we have the most power.
How do we prevent foreclosure proceedings, to begin with?
The simple answer is – by paying on time. However, there are usually extenuating financial circumstances, and the courts understand this side of the story as well. A borrower, therefore, is provided every possible opportunity to save the home and come to an equitable resolution. There are several ways to prevent foreclosure, even once the process has been set into motion.
First, contact the lender to discuss any options that are available for extending the payments that are in default. Remember, the lender does not want to take our home. They are in the business of making money and not interested in the home-buying business. Be open and honest with the lender and explain the financial situation that is hindering your timely payments.
Options that a lender may offer to prevent foreclosure include:
- Payment Deferral
- Interest-Only Payments for a Short Period
- Short-Term Loan for Past-Due Payments
- Lender/Borrower Mediation
- Loan Modification
- Hardship Payment Forgiveness
Traditional Options to Prevent Foreclosure
Taking a legal action of your own may be necessary. Filing for chapter 13 bankruptcy in Illinois is often the last course of action taken by borrowers who want to save their home while restructuring other debts. Although the thought of filing for bankruptcy is usually unsettling and worrisome to many borrowers, it does not have the stigma that it once had.
When someone files for chapter 13 bankruptcy in Illinois, it can often be the solution that is needed to resolve many financial burdens while remaining in the home. Filing for chapter 13 bankruptcy in Illinois puts an immediate halt on all foreclosure proceedings, which is known as a “stay.” It’s an opportunity for the courts to review the situation and an opportunity for the homeowner to raise the cash needed to end the foreclosure proceedings altogether.
Another option to saving the home, and an action to prevent foreclosure without long-term negative effects, is a second mortgage or home equity line of credit (HELOC). A second mortgage is most often used for accessing the equity in the home to complete repairs or remodeling, consolidate bills, or reduce expenses that have gone way beyond our financial means. It is also a reasonable option that can be used to prevent foreclosure if a borrower can be approved. Unfortunately, a borrower may not qualify for prime rates due to late payments with a first mortgage and other creditors, and higher rates may not be a feasible alternative, even if approval is possible. Bad credit and foreclosure proceedings are generally red flags to companies that offer second mortgages.
Innovative Solution to Become Financially Empowered
While finding an alternative to home refinancing in Chicago is an option, working with a traditional lender is sometimes difficult, if not impossible. Being creative and assertive with foreclosure is exactly what’s needed to become financially stable and empowered. An innovative solution and great alternative to home refinancing in Chicago is a buyback program like the one offered by Skydan Equity Partners. There aren’t any credit score requirements, and in fact, a credit check isn’t required at all. Skydan Equity Partners is not a bank or mortgage company; therefore, we qualify homeowners based on criteria that are unrelated to traditional bank lending guidelines. Unlike a traditional second mortgage, or HELOC, the buy back program allows immediate access to equity without the restrictions that are typically related to getting approved.
Skydan Equity Partners uses equity in the home to determine eligibility for its unique buyback program. The qualification process is easy, quick and efficient in providing homeowners peace of mind.
Other benefits of the program include:
- Deferred rent payments up to two years
- Right to buy back the home for the agreed purchase price
- Flexibility to sell the home above the agreed purchase price
- Access to up to $250,000 home equity
Foreclosure is rarely taken by a lender unless they believe all attempts to receive the payments in default have been exhausted or ignored. Because of that, time is of the utmost importance. Foreclosure can reduce a credit score by as much as 100 points and it takes years to recover. Skydan Equity Partners ensures that homeowners can avoid foreclosure in a timely manner, and we offer a much better home equity loan alternative.