Facing Foreclosure? Here’s How to Take Control of Your Options

No one plans on researching foreclosure options—it happens when life takes an unexpected turn. Job loss, divorce, the death of a loved one, or illness can lead to missed mortgage payments, and before long, the bank may begin foreclosure proceedings.

Foreclosure introduces several factors you should be aware of. You could lose the equity you’ve built in your home, and your credit score may be affected for up to seven years. In rare cases, you might still owe the lender money after foreclosure. Additionally, unpaid mortgage debt can sometimes be considered income by the IRS, which means you could be liable for taxes on it.

The intention here isn’t to scare you but to encourage action. Finding yourself in this situation doesn’t mean everything is lost. However, time is critical, and it’s essential to start working on a solution as soon as possible.

What To Do If You Miss a Mortgage Payment

Whether it's your first or third missed mortgage payment, now is the time to take action. Neither you nor your lender wants to go through the foreclosure process, and there may be options to help you regain stability. One of the best steps you can take is to contact your bank early and explore your options before the situation escalates.

Taking Action Early

I know calling your bank as soon as you realize you can’t make a payment can feel intimidating. However, it's important to remember that they’ve likely seen situations like yours before. Their goal is to help you repay the loan, and they may work with you to find a solution that meets both parties' needs. The key is to be honest about your circumstances and proactive in finding a way forward.

When you prepare to speak with your lender, gathering the necessary documentation beforehand will help them understand your situation. As with any non-traditional foreclosure avoidance, proper underwriting is required. Typically, you'll need to provide:

• A letter explaining your situation
• A list of monthly expenses and copies of bills
• Pay stubs and any other sources of income (last two months)
• Tax returns (last two years)
• Bank statements (last two months)
• A copy of your property insurance policy

If this list looks familiar, it’s because you prepared similar documents when you initially qualified for the loan.

Foreclosure Prevention Programs

If your mortgage is through Freddie Mac or Fannie Mae, you may qualify for the Home Affordable Foreclosure Alternatives (HAFA) program. If you’re not eligible, your lender might offer other internal programs or options such as:

• Forbearance
• Loan Modification
• Deed-in-Lieu of Foreclosure

Keep in mind that while these alternatives may help, approval can take time.

Additionally, the Department of Housing and Urban Development (HUD) offers a housing counseling program that provides free or low-cost advice. The Consumer Financial Protection Bureau (CFPB) also offers foreclosure assistance to help you develop a personalized action plan and work with your lender. Be cautious when considering private companies that offer similar services—working with trusted professionals is essential.

When Selling Your Home is the Best Option

If you’re unable to secure a new payment plan with your lender and your financial situation doesn’t improve, selling your home might be the next best option. Even with a Notice of Default or Notice of Trustee Sale pending, you can still list your home for sale—but you’ll need to act fast. Whether you choose to sell your home on your own (FSBO) or with an experienced agent, it's crucial to make quick decisions on pricing, marketing, and preparing your home for sale.

Here’s How I Can Support You

As a trusted real estate professional, I’ve worked with many homeowners facing foreclosure and other financial challenges. I understand the stress of navigating these situations, and my goal is to provide solutions that align with your unique needs. I’ve built a team of specialists who work with homeowners and their banks to explore all available options. With over 34 years of collective experience, we’re ready to support you every step of the way, whether it's finding an alternative to foreclosure or selling your home in a way that protects your financial future.

You don’t have to face this situation alone. Together, we can find the best way forward.