Seven Options to Avoid Foreclosure

There are ways of avoiding foreclosure, but be aware not all methods are for everyone.
Depending on your unique situation, you will find only 1 or 2 of the options suited to your needs.
And unfortunately, the majority will not allow you to keep your home, but may secure your credibility.

1. Reinstate the Loan – Bringing your payments current will usually stop the foreclosure. Can you ask a friend or family to barrow several thousand dollars? If they will, can you even pay them back? Can you sell something of value, such as a car or boat? Will you be able to make future payments? Or will you end up back in foreclosure?

2. Renegotiate With the Bank – If your income has change, your lender may show you some mercy and renegotiate your loan terms. They may extend your term length to lower your monthly costs to something more affordable. You must prove to them your documented hardship. If you cant pay anything, there’s no negotiating.

3. Seek A Legal Delay – If you can prove a significant and temporary hardship, the courts may be able to delay your foreclosure. But more often than not, you can simply request the delay directly with your lender (see #2).

4. Refinance – If you have a lot of equity, you may be able to refinance your home to pay off your original mortgage. But more often than not, you will not be approved to refinance with hurt credit and permanent financial difficulties. Even if you could, do you really want to be in even more mortgage debt than you are now? Probably not.

5. Sell The Property – Put your home up for sale at a price to completely payoff your lender. If you have equity in your home, you may get away with some cash in your pocket as well. This is almost always the best option. If you can’t afford the home, you have no right being there. Let it go, and give the bank their money. Even if you owe more than the home is worth, the bank may take your highest offer and forgive you for the remaining amount owed. Be aware this is called a ‘short sale’.

6. Deed in Lou of Foreclosure – In this situation you give the property back to the bank without a fight. If you hand over the title and leave the property so they can resell it, you will be relieved from the loan and a 'Foreclosure' will not be on your credit. It may still show something similar to 'late payment .. late payment .. late payment .. Deed in Lou', which is a little better than a full foreclosure. Think of a Foreclosure like an Eviction. If you cant pay your rent, and your land lord asks you to leave, then you wont suffer the consequences of a forced Eviction. You will often also be responsible for any remaining balance owed if the sale does not cover the full loan amount.

7. File Bankruptcy – If you are in debt deeper than just your mortgage, such as credit card debt and/or medical bills, filing bankruptcy may lower those bills or eliminate them completely. But it will NOT prevent the bank from foreclosing on your home. Your foreclosure will simply be postponed from the day the bankruptcy is filed, until the first court date in several weeks. The lender will either work to lower your monthly payments to something you can afford, or simply request (and be granted) to continue with the foreclosure.

Judicial Foreclosure Available: Yes

Non-Judicial Foreclosure Available: No

Primary Security Instruments: Mortgage

Timeline: Typically 60 days

Right of Redemption: No

In Connecticut, lenders may foreclose on a mortgage in default by using the judicial foreclosure process. The judicial foreclosure process in Connecticut is carried out by either strict foreclosure or a decree of sale.

With strict foreclosure, no actual foreclosure sale is held. Instead, the lender goes to court to try and obtain a court order demonstrating the borrower is in default of the mortgage. If successful, the title transfers to the lender immediately.

However, the court sets an established amount of time in which the borrower may redeem the property, but if they fail to do so, the title becomes absolute to the lender and the borrower has no longer has any claim to the property. The lender then has thirty (30) days to record a certificate of foreclosure, which must contain a description of the property, the foreclosure proceedings, the mortgage and the date the title became absolute.

With a decree of sale, the court: 1) establishes the time and manner of the sale; 2) appoints a committee to sell the property; and 3) appoints three appraisers to determine the value of the property.

The borrower may stop the foreclosure proceedings at any time before the sale by paying the balance due on the mortgage. If no such payment is made, the committee will go forward with the sale.

The lender may sue to obtain a deficiency judgment in Connecticut.