As Illinois homeowners may know, the rate of foreclosures has been high since the economic downturn of 2008. This is a complex situation but often involves a homeowner's loss of employment causing default on mortgage payments. The mortgage lender used the house as collateral when the loan was granted and wants the property. There are steps that might be taken to avoid foreclosure.
Homeowners may be able to avert foreclosure by selling assets or using savings to keep mortgage payments current. If this is not an option, they may benefit from contacting the mortgage lender to see if the mortgage may be modified. A borrower may ask the lender to allow repayment of missed payments by tacking a small amount onto each monthly payment until the late or missed payments are recovered. If the mortgage qualifies as a VA loan, the agency may buy the mortgage and become the new lender. Some lenders will allow a process known as refunding, according to a private mortgage insurer. The homeowner may be able to lengthen the term of the loan or reduce the rate to a more favorable one for a time.
Other ways to modify a mortgage include forbearance, which changes the payment schedule for a limited time. Sometimes missed payments are allowed in cases where natural disaster occurs. Lenders usually will forgo reporting late payments or eliminating late fees and allowing loan modification.
Measures to avoid foreclosure also include a short sale, where the lender accepts less than the original amount. This may have hidden problems associated with it, and consulting with an attorney may be advisable. On occasion, none of the tactics work, and foreclosure may be inevitable. Talking to an attorney about the type of bankruptcy that may save the home may help the homeowner retain the property.
Source: realty Trac, " Stopping a home foreclosure ", December 10, 2014