How to Stop a Foreclosure Sale and Save Your Home

During the pandemic in the US, many have fallen into financial hardship. With 9.6 million workers in our country losing their jobs, paying for vital loans like mortgages is becoming increasingly difficult. Because of this, knowing how to stop a foreclosure auction immediately is more important than ever.

A fundamental understanding of this will reduce the negative impact on your credit score, make the process less stressful, and guarantee an exit plan in a frightening situation. Here’s what you need to know:

How To Stop A Foreclosure Sale: (4 methods)

When applying for a mortgage, the home itself is used as collateral to reimburse the lender if payments aren’t made. In Rhode Island, lenders can initiate a foreclosure process once the loan is 120 days delinquent, which doesn’t leave a substantial amount of time to restore, manage, and repay the debt. Therefore, you’ll want to consider the below methods of how to stop a foreclosure sale.

1.    File for bankruptcy

The most common tactic of stopping or prolonging a foreclosure sale is filing for bankruptcy, and it’s a method that works best for those coming close to the initiation period (one or two days before). By doing this, you’ll automatically halt the process and be transferred into an “automatic stay”.

An automatic stay will immediately go into effect and prohibit the bank from collecting any debt. However, you must note this isn’t permanent. The likelihood of the bank getting these restrictions lifted is high, but it’ll delay foreclosure until a bankruptcy court permits them to proceed.

Many aren’t familiar with bankruptcy, but there are six different chapters: 7, 9, 11, 12, 13, and 15. In this circumstance, the two primary chapters are 7 and 13. Whichever you choose highly depends on your situation, so here’s how we recommend them:

• Chapter 7 bankruptcy – If you’re already in the foreclosure process, filing a chapter 7 bankruptcy isn’t the most effective. It’s unlikely to save your house, but it will postpone the process for several months (or until the restrictions have been lifted). Usually, this is recommended by those that cannot afford their loan repayments far into the foreseeable.

• Chapter 13 bankruptcy – Unlike the above, a Chapter 13 bankruptcy has a high possibility of saving your home. It’ll allow you to keep the property and restructure debts over a three- or five-year repayment plan. However, a realistic proposal must be created to file this, meaning reoccurring income must be stable.

Filing for bankruptcy is one method of stopping a foreclosure sale, but it might not be the most effective in your situation. Therefore, become familiar with the rest of the methods:

2.    Apply for a loan modification

In addition, it’s possible to apply for a loan modification to stop a foreclosure from occurring. By consulting the lender, it’s possible to revise your current loan term and negotiate a repayment plan. The modifications available include:

• Change of interest rate
• Time extension to repay your balance
• Loan type

By re-evaluating these loan terms, it’s possible to structure the debt differently to make it more affordable. Although this is considered “Dual Tracking”, Rhode Island still allows this to proceed, as usually, it isn’t possible in states like California, Minnesota, Nevada, and Colorado because of governed laws.

Including the benefits of having the option to re-think your loan agreement and make it more affordable, it can help halt the foreclosure process until:

• The servicer informs the borrower they’re not eligible for a loan modification
• When the borrower rejects all modification offers
• If the borrower fails to abide by the terms of mitigation options (such as trial modification, etc.)

Be aware that the lender isn’t required to review more than one of your modification requests. However, they must consider at least one.

3.    Request a mortgage forbearance or deferment

Another method of how to stop a foreclosure auction immediately is by requesting forbearance or deferment. These mortgage relief tools commonly get merged in a discussion, but they’re different from one another. The two primary differences are:

With forbearance, you’ll receive a temporary break from the mortgage payment, but interest will still accrue. Undoubtedly, having this time off can reduce the possibility of a foreclosure occurring in the first place.

Unlike forbearance, a deferment doesn’t include a break. Instead, it’s a mortgage relief plan that allows you to transfer the missed payments to the end of the mortgage term, which requires repayment in a lump sum. Therefore, it’ll provide you the opportunity to accumulate the funds and pay the lender towards the end of the borrowing period.

4.    Sell a house fast for cash

Including the above methods, there’s an option to sell a house fast for cash. Although this wants to be avoided by many, it has the possibility of putting you in the driver’s seat for the foreclosure process. If you can successfully sell your property for more than what you owe, it’s possible to avoid foreclosure, a drop in credit score, and any other negative repercussions.

When choosing this option, finding an experienced home buyer is essential. Therefore, consider ri home buyers to receive a free, no-obligation offer for your property in Rhode Island. The process is fast and straightforward, allowing you to obtain the cash within as little as ten working days.

Conclusion

After reading the above, you should have a more comprehensive insight into stopping a foreclosure auction immediately. Undoubtedly, the various methods you can select between will benefit you more depending on the circumstance.

Including these, there’s currently a Homeowner Assistance Fund for Rhode Island (HAF-RI) for residences within this area. It was created to provide homeowners within this state with assistance with financial hardship caused by the pandemic. Those that apply and fulfill the requirements will receive a maximum of $50,000 per household from a $50 million allocated fund.