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Reprint from the South Side Scoop.
The Educated Consumer
An interview with Derek D. McNeal

How to Avoid Foreclosure

Homeowners who have recently lost a job, are struggling through an illness, or are facing divorce should know about the pitfalls of home foreclosure. Here are some answers. First, let’s define foreclosure. Foreclosure is a court proceeding to extinguish all rights, title, and interest of the owners of property in order for it to be sold to satisfy the mortgage lien against it. Before you act on this information in this column, elicit the services of an attorney or housing counseling service to give you advice for your particular situation.

Temporary Indulgence- When you realize that your mortgage payment will be late (or if you are going to miss a payment), call your lender (mortgage company, bank, or finance company), to explain the circumstances, be I a death in the family, loss of job, etc. The lender will usually give you a month or two to become current.

Deferred Loan Principal-As the borrower, you are allowed to pay only the interest that is due on your monthly payments.

Restructured Loan-Your monthly payments are reduced temporarily; but payment of the delinquent amount will be due within 12 months from the first missed payment.

Forbearance Relief-Per written agreement, the lender reduces or suspends your regular payments for up to 18 months from the first missed payment.

A New Loan-The equity that you have rebuilt up on your home is used to secure new financing, which pays off the delinquent loan, and if managed carefully, can get you back on track.

Redemption Before Sale-In Illinois Homeowners have seven months to redeem a foreclosed property from the date of the court summons or three months after the entry of a judgment of foreclosure-whichever is later.

Chapter 13 Bankruptcy-By filing Chapter 13, you are able to reorganize your debts, including your mortgage. This can stop foreclosure proceedings in its tracks.

Loan Reinstatement-Delinquent borrowers can make back payments and can reinstate the loan up to 90 days after the summons is served.

Speak to a Lawyer of Housing Counseling Service-When speaking with a lawyer, make sure that he or she has experience in real estate finance. Housing counseling services/foreclosure counseling services are offered free of charge by the Chicago Department of housing and the Chicago Urban league.

Deed in Lieu of Foreclosure-The Illinois Mortgage Foreclosure Act allow you, the borrower to transfer title to the lender in exchange for the release of your obligations under the mortgage; related negative information is removed from your credit report.

Sale of Residence-When you realize that you simply cannot manage your property effectively, consider selling the residence and calling in a real estate broker.

Homeowner Education-All homeowners should keep abreast on current information concerning real estate law. Read and understand your mortgage/lender’s statements. Resources
Chicago Sun-Times Homelife section-in the Sunday and Friday editions.
Federal Housing Administration’s (FHA) loan and Default Program 312.353.0716
Chicago Department of Housing, 312.747.9000
“The Homeowner’s Guide to Foreclosure” by James Wiedmer (published by the Real Estate Education Company.