Help with Foreclosure – The Role of the Obama Foreclosure Program
November 6th, 2009 | by admin |Help with foreclosure can be obtained through the foreclosure initiative of the President if foreclosure proceedings have not yet been started by the bank or lender. The program of President Barack Obama offers incentives to the lending institutions if they approve a refinancing or a loan modification. What the refinancing or loan modification is expected to do is to bring down the amount that is paid for the mortgage every month to a level that is easier on the budget of the borrower.
This program that offers help with foreclosure is supported by the Helping Families Save Their Homes Act that officially became a law in May 2009. This law is expected to offer more help when compared to the older Hope for Homeowners Act that was previously created to aid borrowers with mortgages that were underwater. The primary strategy of the Obama initiative is to stimulate the approval of a loan modification or refinancing to lower the monthly costs of the mortgage. This will reduce the possibility of the borrower going into foreclosure because of the lower monthly payments. In fact, a rule that is followed in the loan modification and refinancing is to make sure that the monthly installment is not more than 31 percent of the monthly pay of the borrower.
However, if foreclosure proceedings have already been started, help with foreclosure is possible through the filing of a bankruptcy petition. This should be the last option for the homeowner because of the drastic effects of a bankruptcy on the financial situation of the borrower. The homeowner should first try to negotiate with the lender to find a way to resolve the default and thus stop the foreclosure process. It should be remembered that the lender also does not favor a foreclosure because of the expenses involved and the difficulties in auctioning the property.
It is, therefore, advisable to consider other possible avenues first before filing for bankruptcy. Help with foreclosure may also be provided by a short sale, a deed in lieu of foreclosure, or a loan forbearance. Each of these strategies have their own advantages and disadvantages and it is up to the borrower to decide which of these techniques is acceptable to him. It should be noted that the foreclosure process may take a bit of time to complete. Thus, the debtor has some breathing space when it comes to finding a solution to his situation.
As a possible ultimate strategy for getting help with foreclosure, a Chapter 13 or Chapter 7 bankruptcy filing will result into the court issuing an automatic stay. This orders the creditor to stop all collection attempts, such as the foreclosure auction, until the bankruptcy petition has been resolved. Therefore, this has the effect of postponing the foreclosure sale by three to four months. However, it should be noted that there are two ways in which the automatic stay will not be effective. First of all, the bank may file for a petition to proceed with the foreclosure sale. Also, the automatic stay may not work if the bank has already filed a notice of foreclosure before you have filed a bankruptcy petition.
