If you have fallen on hard times and are facing foreclosure, you are not alone. Over the past two decades, an average of around 1% of homeowners in the US have faced foreclosure every year, with many more getting behind on their payments. Foreclosure rates were higher in the wake of the housing crisis in 2008, and are expected to rise again with the fallout from the COVID-19 pandemic.
Thankfully, there are a number of options available to you to help you stop foreclosure and avoid the loss of your home. It’s important to know your options, and to act quickly to ensure the best chance of success. Here are some tips on how to avoid foreclosure in Brenham or other areas of Texas, ranked roughly from the best to the less desirable options.
The number one thing to remember is don’t give up! A foreclosure will have a huge negative impact on your credit score, making it very difficult for you to purchase a home for years to come and also making it more challenging to qualify for rentals. And since Texas is a trustee state, the lender could request to have your home sold without any court intervention due to repeated missed payments. It is very much in your best interest to pursue all of your options for stopping foreclosure, and remember that you are not alone and that there are many people and organizations who can help you!
Ways to avoid or stop foreclosure in Brenham and other areas of Texas:
Do everything you can to catch up on loan payments during the preforeclosure period. Preforeclosure is the first step of the foreclosure process when you have missed payments and the lender issues a “notice of default.” If you are able to bring the loan current during this time, the foreclosure process will be halted.
Negotiate with your lender. Especially if you haven’t missed any payments yet, your lender is likely to be open to new terms to help you avoid foreclosure. Foreclosing on homes is a lot of work, and banks don’t like doing it – they’d much rather help you stay in your home and figure out how they can ultimately continue just collecting checks from you. Options you could ask your lender for include:
- Forbearance – this allows you to pay a reduced amount for a given period during which you are facing a temporary hardship. Be aware that at the conclusion of the agreed upon period, you will probably have to pay more than your original payment to make up for the reduced payments, unless your lender then agrees to a loan modification.
- Loan modification – you can apply to modify the terms of your loan, such as the interest rate, length of the loan, or type of loan. Not everyone will qualify for a loan modification, but if you get your application in early and are careful to thoroughly respond to all requests for paperwork etc in a timely manner, you will at least be considered for a modification. Further, having an active application for a loan modification can prevent the bank from proceeding with foreclosure. You can read more about loan modifications here.
Get help from the government. To help keep Americans in their homes, the US government has a few programs and resources to help. For example, you can talk to a foreclosure counselor. Visit the US government’s Making Home Affordable website or HUD’s information page on avoiding foreclosure in Texas to learn more.
Sell and rent back. If you are unable to find a way to keep your mortgage that works for you, or if you find that you no longer wish to be a homeowner, you may still be able to stay in your home and avoid moving. You can often find a professional home buyer or rental property investor who would be willing to come to an agreement with you where you sell the house to them and then rent it back from them. They will take over the mortgage payments. If you have some equity in the house, then the sale could really help with being able to make the rent payments. If you are looking for a homebuyer in Brenham, contact Oak Hill Home Solutions to see if we might be able to help you!
Deed in Lieu of Foreclosure / Cash for Keys. If you decide not to try and keep your home, sometimes you can come to an agreement with the bank where you hand over the deed to the house peacefully without them taking any legal action against you. In some situations, the bank may even agree to help you with moving expenses or provide you with some amount of cash in exchange for moving out and leaving the house in excellent, clean condition – this is called “Cash for Keys.” Not all states have the Cash for Keys program, but Texas does, and some cities (such as Houston) may even have specific programs.
Sell your house on the traditional market. If you plan ahead, you may be able to hire a realtor to sell your house on the traditional market before it is foreclosed on. This way you get to choose who will be the next owner of your home, rather than letting it go to the highest bidder at a foreclosure option. If you go this route, make sure you understand the process and the costs associated with selling a home. Another thing to be aware of is that if your loan balance is more than the current market value of your home (e.g., due to changes in market conditions), you may still be able to sell your home and have your loan forgiven through a process called a “short sale.” You will need to work with your bank to see if this is an option for you.
File a temporary restraining order. You may be able to delay a foreclosure proceeding by getting a judge to issue a temporary restraining order (this will not stop the foreclosure, however). To get an order, you will need to have a compelling argument to present to the judge – this strategy generally only works part of the time. This as well as the fact that lawyers often charge at least $2,000 to file a temporary restraining order make this one of the less favorable options for avoiding foreclosure.
File bankruptcy under chapter 13. While not an ideal option, filing for chapter 13 bankruptcy can allow you to keep your home by immediately stopping a foreclosure sale from occurring. When you file for bankruptcy, an “automatic stay” takes effect immediately and prohibits the bank from foreclosing on your home. If you are facing foreclosure very soon, this might be one of your best options. The next step is consulting with an attorney to develop a plan to catch up with the missed payments over a period of usually 3 to 5 years. As long as you remain in good standing under the chapter 13 plan, your home will be protected from foreclosure.
This is not an exhaustive list of options but hopefully gives you some ideas and hope for being able to keep your home! You should also strongly consider talking to an attorney to learn more about what might be the best thing to do in your specific situation.