Foreclosure 101: What to Do When Facing Foreclosure

Given the recent news about the federal foreclosure moratorium ending, you might be wondering what – if anything – it means for you. Let’s start with the basics…

What is Foreclosure?

Foreclosures happen when a property owner stops making payments on a loan, so the bank or mortgage lender takes possession of that property, often against the homeowner’s will.

Expiration of Federal Eviction & Mortgage Foreclosure Moratoriums

For millions of people, these federal regulations – which expired on July 31, 2020 – were keeping their households afloat throughout the duration of the COVID-19 pandemic. Although these moratoriums have officially come to an end, borrowers with federally backed loans can still receive pandemic forbearance – permission to temporarily reduce or pause mortgage payments – protections until September 30, 2021.

The Consumer Financial Protection Bureau (CFPB) says that if you received forbearance under the Cares Act and you’re still experiencing financial hardship because of the pandemic, you may be entitled to ask for and receive an extension. It’s important to note that forbearance should end with a payment plan in place, so you’re not required to pay back all skipped payments in one lump sum.

According to the CFPB, most servicers can’t start the foreclosure process before Jan 1, 2022.

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What to do When Facing Foreclosure

There are options available, and the first step is to talk to your lender to create a plan. There are also government agencies that offer counseling and assistance, like Making Home Affordable.

Alternatives to Foreclosure

1. Reinstatement requires you to pay back the full amount owed in a lump sum.

2. Loan modification and other forms of loss mitigation like…

• Forbearance agreement – temporarily reduce or suspend payments.
• Repayment plan – a temporary increase to monthly payments by adding part of the overdue amount to current payments, allowing borrowers to catch up on their loan.
• Loan modification – lower monthly payment and bring the loan up to date by adding any past-due amounts to the balance of the debt.
• Deferral – move missed payments to the back of the loan and resume making payments.

3. Government foreclosure prevention programs like…

• Federal National Mortgage Association (Fannie Mae)
• Federal Home Loan Mortgage Corporation (Freddie Mac)

4. Sell and leave your home through…

• Short sale – homeowners sell their homes for less than the total mortgage debt. This is not currently very common due to increasing home values.
• Deed in lieu of foreclosure – lender holds the deed to the property instead of foreclosing.

5. Sell your home and stay in it…

Until now, selling your home meant you had to leave. Truehold’s new sale-leaseback option allows you to sell your home and remain living there as a renter. Although sale-leasebacks are relatively new to the residential real estate space, they are a tried-and-true financial instrument, and they require taking on no debt.

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Two Simple Transactions: House Sale & Lease Agreement

With Truehold’s sale-leaseback option, you’ll receive 100% of your home’s value in cash, verified by comparable market transactions and a third-party valuation.

We immediately rent your home right back to you for a fair market rate based on similar local rentals.

We’ll take care of your home’s maintenance, taxes and insurance. All you have to do is pay monthly rent and cover your utility bills.

You seamlessly keep living in your home until you decide it’s right to leave—whether that be in a year, twenty years, or even just a few months.

If you’d like to learn more, give us a call at (314) 353-9757 and one of our advisors can help determine if Truehold is the best option for you.