Right to reinstate your loan up to 5 days prior to a trustee sale.
Realize that under the terms of your deed of trust and promissory note, as well as California law, you likely have the right to reinstate your loan right up until 5 days prior to a proposed trustee sale. In order to do so, you have to "reinstate the loan" by paying all back owed payments plus any possible fees allowed for in your loan. If you reinstate the loan by making those payments, you are no longer in default under the loan and the lender generally does not have the right move forward with any further foreclosure activity. Of course, many people are not in a position to make a large lump sum payment to reinstate their loan, but even if you can get a loan or funds from a family member or otherwise, it can help your position to stay in your home.
Obtain court order prohibiting sale in superior court.
If the homeowner has legitimate causes of action for certain fraudulent actions or procedural irregularities in the notices or sale procedure, a lawsuit can be filed in the local superior court. After filing, the homeowner can seek a temporary restraining order or preliminary injunction that results in a court order stopping the sale.
Many people feel that their lender was unfair in the way they are treating them; however, often the lender is simply asserting the contractual rights they have under the promissory note and deed of trust. If they can prove a likelihood that they can prevail on the underlying court case, an injunction can be obtained.
This is where your lender agrees to change the terms of your existing loan. It is similar to a refinance, but does not involve a new lender or loan and typically involves a reduction in the interest rate on your existing loan, an extension of the length of the term of the loan, a different type of loan or any combination of the three. A lender might be open to modifying a loan because the cost of doing so is less than the cost of default. The process is similar to applying for a refinance, except you contact your existing lender and submit the required paperwork.
Each lender has its own criteria for eligibility for a loan modification. There is no law that forces them to modify your loan and it is often a lengthy and frustrating process.
They may also agree to enter into a forbearance that stops foreclosure, but you should
A bankruptcy filing puts an automatic court order stopping the sale from taking place. Many homeowners use this as a last ditch effort to stop a sale at the last minute; however, these cases are frequently dismissed within 14 days of filing for failure to follow proper procedure.
There are ways to use the bankruptcy code to save a home from foreclosure, but many complexities are involved and a licensed bankruptcy attorney should be consulted to determine if this is the best option.
Many homeowners may need a bankruptcy filing to avoid possible personal liability on second mortgages or other issues, even if a foreclosure goes through. You cannot always just simply walk away from a property and not face any consequences.
Short Sale of the home
This is where the lender agrees to let you sell your home at a price less than what you owe on your mortgage. The lender will then typically agree to not come after the homeowner for a deficiency judgment for the difference between the sales price and what was owed on the property. The short sale process can take several months to find a willing buyer and get the lender to agree to the sale. The lender will typically report the short sale to the credit agencies, thus negatively impacting the homeowner's credit more than just a couple late payments. It is typically not as bad for credit purposes than a foreclosure since it shows that the homeowner tried to work with the lender; however, it can result in the inability to purchase a home for several years.
Deed in lieu of foreclosure
This is similar to a short sale, but instead of trying to sell the home, the homeowner simply turns over the home to the lender in exchange for the lender not coming after the homeowner for the difference between the current value of the home and the amount owed. The lender takes over the property and will try to sell it later. The homeowner will need to vacate the premises right away. The homeowner's credit will still be affected negatively, but many view this as better than a short sale because the homeowner doesn't stay rent free and is willing to work with the lender right away. Again, this option is viewed more positively than a foreclosure which is viewed as the homeowner staying to the end rent free and not effectively resolving the problem.
Additional resources provided by the author
The federal government provides free information about foreclosure and loan modifications at its websites: http://www.makinghomeaffodable.gov There is also free assistance available through the Department of Housing and Urban Development. http://www.hud.gov