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Can you Save your Home with a Stop Foreclosure Loan?

by Wayne Wargo (PenWay.org)

A stop foreclosure loan is one that a homeowner can apply for in order to be able to keep his or her house from a dreaded foreclosure. These loans are normally granted when a temporary circumstance exists that lends itself to a temporary solution rather than one where the homeowner is getting deeper into debt. For instance, when someone has been laid off from a job but has prospects for employment soon, a stop foreclosure loan can sometimes be obtained.

Now, a stop foreclosure loan is not something that a person with an "upside down" situation (meaning you owe more than your house is worth) and a recently modified interest rate loan can obtain. In this situation, the homeowner truly cannot afford the property. They should be looking for a solution that either re-sets the mortgage or gets them out of the home.

Instead, a stop foreclosure loan can sometimes be obtained when a homeowner has a temporary setback, but can assume the responsibilities of the loan within six months. Some examples of this include:

1. The homeowner has become unemployed but has reasonable expectations in securing employment in the very near future.

2. The homeowner sustains a temporary disability, which renders him unable to work for a limited period of time.

3. The homeowner has major expenses in another area, usually healthcare, which must be met. Once these expenses are met, the homeowner can resume payments on the loan.

4. Major, unexpected repairs must be made on the home. Major repairs include such things as a pipe break that caused extensive damage and/or flooding, fire, and roof collapse, or can be the result of a natural disaster where a number of homes in the area have been affected.

It may be somewhat easier to get a stop foreclosure loan if there is at least some equity in the house. In this case, you may qualify for a home equity line of credit to help with back payments and current expenses. But, even if you don't have any equity, you may still qualify for such a loan since banks or lending institutions do have an incentive not to let your home fall into foreclosure. They don't want the property on their books.

A stop foreclosure loan can also protect a homeowner's credit. A foreclosure is one of the worst things that can appear on a person's credit report. The loan can also protect the interest rate from being re-adjusted due to late payments.

Banks are increasingly willing to work with homeowners on these kinds of lending solutions. One example of such a loan is where the bank simply will add the back payments due onto the backend of the loan. A 360 month loan then becomes a 366 month loan with a half year grace period.

Banks and financial institutions are also willing to work with homeowners in this situation because they don't want to assume any more homes than they already have had to put back in their inventory. Bank owned homes number in the hundreds of thousands and many cannot be rented or sold. This has left many neighborhoods as virtual ghost towns.

Banks are also willing to utilize a stop foreclosure loan because the federal and state governments may provide them incentives for doing so.

If you have a temporary situation, which leaves you unable to make your mortgage payment, but think that a solution might be found soon, contact your bank to discuss a stop foreclosure loan.

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