A difficult economic climate has left hundreds of people throughout Illinois underwater on their mortgages. In October 2018, the foreclosure rate averaged one for every 1098 homes, with Will County topping the list at one in every 661.
If you are underwater, falling behind, or struggling to make your mortgage payment each month, it may seem like foreclosure is inevitable when this is not necessarily the case. Even if your lender has already sent you a notice, there are alternatives that may allow you to stay in your home or free yourself of the mortgage debt so that you can move on.
- Refinance the Loan
If you have good credit and sufficient equity in your home, you may be able to refinance the mortgage and achieve a lower payment arrangement. While this may not be the best solution if your home has gone down in value or you originally bought the property with little to no money down, a refinance can help you get back on track.
- Get a Loan Modification
If you can keep making payments on your mortgage but are unable to bring your account up to date, approach your lender about a more affordable payment arrangement. For example:
- The missed payments can be added to the back of the existing balance
- A reduced interest rate
- Fixing an adjustable interest rate
- Extending the term of the loan
You must be able to qualify for a new payment arrangement. If you currently have a high debt to income ratio due to car payments, credit cards, medical debt, or student loans, the lender may not be willing to consider a loan modification.
- Forbearance Agreement
With a forbearance agreement, you only pay a percentage of your regular mortgage payment – or pay nothing at all – for a specified period of time. This temporary reprieve allows you to pay off your other debts, find a job, recover from illness, or deal with whatever other situation caused you to become delinquent.
- SCRA Relief
If you or your spouse are active-duty members of the U.S. military, the Servicemembers Civil Relief Act can offer a measure of protection against foreclosure.
- If you took out the mortgage before going on active duty, the lender can’t generally foreclose on you during your period of military service and for an additional 12 months afterward unless they obtain a court order.
- You can ask for a mortgage interest rate reduction to 6% (including fees and service charges) for your entire service period and one year afterward.
- You are protected from default judgments while you are on active duty, so the lender cannot generally proceed against you in court during your absence.
- Chapter 13 Bankruptcy
If you file for Chapter 13 bankruptcy, which allows you to reorganize all of your debts and repay them over time, it stops any foreclosure in process. If you remain current on your mortgage payments and repay the arrears through the Chapter 13 plan, the lender cannot foreclose on you.
Although these five solutions are the most commonly utilized, there are many alternatives to foreclosure. When you start falling behind in your mortgage, it is recommended that you contact a Chicago real estate attorney to discuss your options. The Auricchio Law Offices can help you make the right decision for your financial situation, so please call 312-263-0010 or contact us to schedule a consultation.
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