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What can I do if I am facing foreclosure?

On Behalf of | Mar 31, 2022 | Residential Real Estate

For several reasons, the number of mortgage foreclosures nationwide has dropped in recent years. Still, Delaware has seen its share of them.

Delaware’s foreclosure numbers may return to 2019 levels since government programs providing temporary foreclosure relief expired several months ago.

What this means is that every year, some Delaware families are going to face the prospect of losing their home. Of course, this number goes up when the economy is poor.

While people may loosely refer to any situation where a family is behind in house payment as a foreclosure, the process formally begins when the lender sues their borrower, the homeowner, and asks a court to foreclose its mortgage against the home and sell the home to pay off part of the loan.

While it is possible to defend against a mortgage foreclosure, this frankly is often ineffective in the end. The process may take time, but the end result of a foreclosure is that a resident will have to leave the home. Usually, for long-term results, the better option is for a borrower to try to work out an arrangement where he or she can keep the home.

Delaware offers a mandatory mediation program

Like other states, the vast majority of family homeowners are eligible for the Automatic Residential Mortgage Foreclosure Mediation Program.

Basically, Delaware gives homeowners the right to meet with the lender’s representative and discuss a possible way to resolve a foreclosure. A neutral mediator is also involved in order to encourage both the bank and the borrower to reach an agreement.

A person should get familiar with the details of this program as he or she will have to take some steps in order to participate.

Either during the mediation or otherwise, a borrower may be able to pursue a number of options.

If they want to stay in the home, they may be able to convince the bank to grant a loan modification in which, effectively, the borrower agrees to a new loan and gets to start fresh.

They may also be allowed to make catch-up payment over a certain amount of time instead of having to come up with the overdue amount immediately. If a borrower is facing a financial hardship, the bank may offer a few months of forbearance on existing payments.

While it means that they will have to leave their home, arranging for a short sale may also be an option.

A short sale involves the borrower selling a house for less than the balance owed with the bank agreeing to accept the proceeds.

If all else fails, the borrower may give the lender a deed to the property in exchange for the bank agreeing to take it in full satisfaction of the debt.