Home Foreclosures Double in July; Chapter 13 Bankruptcy May Spell Relief

U.S. homes facing foreclosure almost doubled in July as property owners with adjustable-rate mortgages saw their payments rise and were unable to refinance, according to RealtyTrac Inc. What most of these homeowners do not know is that Chapter 13 may be a way for them to stop their foreclosures and potentially even force the lenders to change the terms of their loans.

Most lenders are required to take certain steps prior to filing foreclosure notices against borrowers. These steps are called “loss mitigation,” and are designed to avert foreclosure whenever possible. Options may include conversion of a loan from adjustable-rate to fixed-rate, forbearance, and more.

Many lenders pay only lip service to these loss mitigation options in spite of the fact that they may be required to followed these procedures by their investors. Instead, they seek to move on auto-pilot, foreclosing on homeowner after homeowner.

Why do they do this? Because it’s easier, faster and takes less work on their part to foreclose than to follow the law. That, and foreclosures mean lots of extra fees and charges that lenders can tack onto a loan.

In the end, the homeowner loses even if they are able to refinance before the auctioneer’s gavel falls and the home is lost.

Chapter 13 may offer a way for homeowners to stop the foreclosure and force the lenders to pay attention to their own rules. By fighting back, consumers can work to save their homes and continue to provide for their families without falling prey to the profit motives of greedy mortgage companies.

News source: Bloomberg.

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