There are many different ways to stall or stop foreclosure in Texas. Some of the options include loan modification, filing for bankruptcy, selling your house, and forbearance agreements.
Most of these options are aimed at allowing you to continue making modified payments towards your mortgage. Some are more focused on getting rid of the debt in total.
These options are all pretty nuanced, so keep reading to learn more about what options are available to you.
What is Foreclosure
There’s no easy way around it, foreclosure is awful. Whether you lost your job, you’ve become ill or disabled, or something else is keeping you from being able to keep up with mortgage payments, foreclosure is one of the most terrifying and disheartening threats you can face. There are so many things to worry about when you are facing foreclosure: where will your family go? How will this affect my credit score? Can we even afford to move somewhere else? These questions can be overwhelming. Sometimes, all you need is just a little bit more time so that you can get things back to normal. In this article, we hope to show you ways that you can either stall or stop the bank from foreclosing on your house. But first, we need to understand what foreclosure is and why it happens.
How Does Foreclosure Work in Texas
Foreclosure is a legal process in which a lender (whoever you got your mortgage loan through) decides to seize and resell your home after a certain amount of missed payments. There are a few steps in between missing payments and having your home foreclosed.
They are as follows:
1. Missing Payments:
The entire process starts with a missed payment. As soon as you begin missing payments, lenders begin the process of monitoring your account and prepare to take action after a certain period of time. In Texas, lenders cannot begin the foreclosure process until at least 120 days after your first missed payment. If this is not enough time for you to get back on top of your missed payments, the process will continue.
2. Notice of Default:
After the 120 days has passed since your last payment, your lender can now send you a Notice of Default letter. This will be a public notice that is sent through your County Recorder’s Office.
Once you are sent the Notice of Default, you typically have some time to either work something out with your lender (options covered later) or fully payback your missed payments. If you are able to pay back the missed payments, the foreclosure will end and you will continue paying off your house as normal. If you are not able to do either, your foreclosure will proceed.
In Texas, foreclosures tend to happen rather quickly. In fact, most houses are put up for auction just 41 days after a Notice of Default. The lender will set a date for the house to be auctioned on, during which time you still maintain the right of redemption, meaning, if you can bring cash that covers the outstanding balance in your loan, the foreclosure auction will be stopped. If you cannot do this, the house will be sold to the highest bidder with cash payment. Oftentimes, the bank will buy back the house if there are no cash bidders.
If a third-party doesn’t end up buying the house, and the bank or lender now owns the property, they will continue trying to resell it. During this time, if you are still in the house or property, the new owners can have you evicted.
While avoiding the threat of foreclosure altogether is the best decision, it can be hard to stay on top of your payments when life happens. Because of this, we know it’s important to have ways that can help stall or even stop foreclosure from happening. Let’s take a look at some steps you can take to save your home from foreclosure.
Can You Stop Foreclosure From Happening?
We know that the thought of foreclosure can be overwhelming. Luckily, there are a few things you can do to either prevent, stall or stop foreclosure altogether.
Have you begun to notice that mortgage payments are becoming harder and harder to pay in full? Has something significant in your life occurred that is stopping you from being able to make your payments. Before you miss a payment, it may be worth reaching out to your lender to see if they offer or would consider loan modification.
Reinstate Your Loan:
Have you missed payments, but you have enough cash on hand to pay off everything that you’ve missed? Approach your lender with the cash to see if they would take the payment and allow you to continue paying down your loan without any legal action. Typically, if you have the funds available, lenders will eagerly accept this option.
Have you missed a couple of payments, but you are generally still able to make payments? Try seeing if your lender would consider a repayment plan. A repayment plan allows you to slowly pay back the payments you missed while simultaneously continuing to make your normal mortgage payments. This allows you to slowly pay off the missed payments instead of having to pay it upfront. Though lenders may be more hesitant to do this, you can try and come to an agreement on a monthly payment on top of your mortgage that they will accept.
Has something recently happened that is stopping you from making your payments? Did you lose your job, get sick, go through a divorce, or something else that would impact your financial situation? Your lender may be willing to enter into a forbearance agreement. This agreement typically means the lender is giving you permission to make lower payments (or even no payments) for a period of time. In most cases, if you are able to prove that the reason you are struggling to make payments is not a long-term hindrance, your lender may be willing to give you a short period of time as a sort of ‘grace period.’
Interest rates have recently plummeted, making refinancing a decent option to consider, especially if you are just barely missing the full payment. This also allows you to start fresh with a new lender, meaning the lender may be more willing to work with you if you need a little more assistance later on.
I know it’s a difficult thing to think about, but sometimes, the best option is to sell your home. If you would make money, or even break even, if you sell your house, it’s a really good option to consider. Perhaps you could even purchase a house that is more in your price range, or even rent a house while you get back on top of your finances. Either way, selling your home allows you to not have to go through foreclosure, something that can drastically change your credit and reputation.
Deed in Lieu of Foreclosure:
If you are unable to do any of the previous options, your lender may agree to a deed in lieu of foreclosure. All this means is that you would hand over the deed of your property to the lender, canceling any debt you may owe them. The lender would then own your property, and you would have to vacate the home. Again, this allows you to walk away without too much damage.
Short selling your home means selling your home for less than what you currently owe on the house. Because a lot of houses that go to auction aren’t sold for their appraised price, some banks and lenders will agree to a short sell of your home.
While this option does not fully guarantee that your house will be saved from foreclosure, it can, at the very least delay the foreclosure. When you file for bankruptcy (typically Chapter 7 or 13), the court will put an automatic stay on your estate (everything you own). This means that, if a lender is pursuing foreclosure, they will be ordered to stop, giving you time to get on top of your finances. This can be a little tricky, however, as filing for Chapter 7 bankruptcy could very well guarantee that your house gets sold by your bankruptcy trustee. Filing for Chapter 13 bankruptcy typically means that you get to work out a repayment plan, so you will still be paying off your house.
Other Foreclosure Tips and Options
While these options are all viable and something you should look into if you are facing foreclosure, there are some other tips that are important to keep in mind:
Responding to Correspondence
DON’T ignore the calls, letters, and emails from your lender after you miss a payment. Almost all of the options for delaying or working around foreclosure involve working closely with your lender. This means that having an open and honest line of communication will almost always be better than ignoring their attempts to reach out.
The only thing that happens when you ignore your lender is moving closer and closer to foreclosure. Instead, immediately respond to your lender, let them know your situation, and see if they have anything that can help you. Lenders know it is typically more cost-effective for them to allow you to pay off your loan in unique ways than it is for them to go through the foreclosure process. But they can’t help you if you are avoiding talking to them at all.
Your Foreclosure Priorities
Figure out your priorities. If you are falling behind on multiple payments and are looking at various repossessions, foreclosures, and potentially bankruptcy, it may be a good time to evaluate what you value the most. Is your car more important to your livelihood than a house? Then perhaps you sell the house and either purchase a more modest home or rent something. Is it more important to you that your family has a house you own? Then consider allowing your car to be repossessed or even selling it to ensure you can continue making payments on your house. Whatever your priorities are, make sure to really focus on those payments, even if that means cutting back payments somewhere else.
Foreclosure Legal Representation
Consider working with legal representation. Even if the process doesn’t involve going to court, it’s good to have someone who knows the ins and outs of foreclosure law to make sure your lender isn’t abusing the system in any way. If you are about to go into foreclosure, it might be worth scheduling a consultation to make sure everything is done right.
Ultimately, the best way to stop foreclosure is to either catch up on payments, or sell your house. Other options may stall the foreclosure, but if it’s inevitable, you won’t be able to stop it for long. Make sure you communicate with your lender as best you can, lay out your priorities, and then decide your best course of action. If you would like to talk to someone about your options, please reach out! We would love to help you figure out your next step.