The foreclosure related housing crisis has become a reality – something that has to be accepted and faced. Thus foreclosure defense is a major issue – the enemy is snarling and what can be done about it? Dive under the sands like the ostrich? Or turn tail and run? Neither will solve the problem. What will do so is building up a foreclosure defense.

The first thing is to build up is one’s immunity by taking a page out of history and not allowing such a situation to ever happen. To be forewarned is to be forearmed. Here the age old adage comes into play – cut your coat according to your cloth. It alright wants to dream about owning a house but those dreams must not fade with the breaking of harsh light of the dawn. The tree stretches its wings towards the sky but its roots are firmly planted on the ground.

So before aiming to buy a house the first thing is to budget the income – how much one can afford. The income has to be backed by good credit history so as to avail of the best mortgage. For a good credit record one has to do two things – put a check on spending and thus be able to save. Place the good old piggy bank on the mantlepiece will act as a charm to ward off foreclosures.

Foreclosure defense is important for those who hear the wolf knock on the door. Even at this extreme point there are steps that can be taken.

Firstly be ready as soon as one gets to know that personal finances are in a wobbly condition. Immediately the lender should be contacted. It is the bank who is going to feel the pinch when the monthly flow of money dries up. The banks today are far from eager in taking over the house because of the fallen value and are generally ready to negotiate. If the lender does not respond then it is best to contact a counselor and keep record of the fact that efforts have been made to contact the lender. The laws are being made stringent to see that lenders cannot postpone discussions.

The options open to avoid foreclosure are many – short sale, modification of loan and refinancing. While talking with lenders it is best to take help of experts because bankers being what they are will try to wring the best advantage. Often loans are modified but the terms are so contradictory that the borrower has to pay more than before. This leads to re-default and renewed threat of foreclosure.

If foreclosure cannot be avoided then aggression becomes the best form of foreclosure defense. Many banks do not have their papers in order and a sustained pressure asking for the original papers might make the banks turn tail and run!

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While the actual process of foreclosure is lengthy, the impact to your credit will remain for years after you’ve lost your home. Foreclosure, never a good option for homeowners who are falling behind on mortgage payments, is sometimes the only option.

If I Am Foreclosed on, What Happens to my Credit?

Facing foreclosure is a challenge. Rebuilding your credit after foreclosure is an even tougher task. Foreclosure will remain on your credit record for 7 years and will prevent you from obtaining another home loan for at least that long.

Negotiating to Prevent a Foreclosure

Loan modification is also a tool to help you recover from a close call. The loan terms can be adjusted, such as interest rates and monthly payments. You may even have the payments added to the “tail” of the mortgage.

It may be possible to prevent a foreclosure if you are willing to be up front with your bank. You have to let them know exactly where you stand financially when it looks like you’re going to default, or start missing payments.

If foreclosure does happen, you can expect your credit score to drop drastically and just about immediately. Naturally, this creates a major obstacle to rebuilding your credit. Creditors will be hesitant to take on the risk of opening an account with someone who has defaulted on a loan as major as a home mortgage.

Should I Do a Short Sale?

What to Expect with a Foreclosure

The bank will send you a “Notice of Default” shortly after you miss your first payment – usually after 30 days.

Shortly after this (at 60 days post missed payment), the lender will contact you to encourage any payment amount to help keep you current on your loan.

After 90 days, foreclosure begins to look unstoppable as the option for the bank to foreclose on your property opens up.

You may then find that, in as little as 180 days from your first missed payment, your property will go to auction. After that you have the option to either leave voluntarily or wait for eviction, which could take several weeks or several months to happen.

If you find there’s absolutely nothing you can do to prevent foreclosure, then be prepared for the following process to unfold:

Some banks, in the interest of avoiding foreclosures with their properties, will agree to sell a house quickly for less than its market value. This is called a “short sale.” While it can stop foreclosure, it’s probably more beneficial to the bank than it is to you. The results on your credit, while not as severe as foreclosure, still are not good in terms of reducing your credit score. A short sale will mean that you could be eligible to buy a home again sooner than the 7 years after foreclosure.

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The British pop group Modern English had a hit in the 80s which said in part, “I’ll stop the world and melt with you …” There may come a time when you too will want to stop your world and take a breather. You need to call a halt to the debt “harassment” you are receiving and take a time out. Well, that is the kind of relief afforded by a bankruptcy automatic stay. Literally, the law commands all those with actions against you to take a time out.

It does not matter whether you are being sued for child support, past due alimony, debt, or whatever, court proceedings are brought to a halt for 60 days. In addition, all debt collection actions against you are also brought to an abrupt stop. It is as if you have sent all of your creditors to the corner for 60 days.

But be warned. Even though the law calls this a “cooling off period,” you need to take this time to figure out what your next step is. You may want to proceed with a Chapter 7 bankruptcy or you might choose to go forward with a Chapter 13 action. You definitely need to decide what to do with your secured creditors. And here is one very, very important thing you need to keep in mind. You need to make your next scheduled rent or mortgage payment on time. The same is true about your automobile or any other secured debt.

If you fail to do this or to obtain some kind of an agreement with your creditor, the bankruptcy judge could “lift the stay” and allow the creditor to repossess the asset or foreclose on your house or evict you from your rental property. This cooling off period does not mean you can go to sleep! You can stop your world but only for 60 days.

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