Today more than ever consumers need help making decisions on what is the best option to fighting a foreclosure action and saving their home. Below are some of these options so that you can educate yourself on the best solution for your financial situation. You may also want to seek professional help from an attorney or home counselor.
1. Reinstatement. Ask the lender to reinstate the loan.
Alternative. Ask for payment arrangements with regular mortgage payment. Example. Behind $500 on $1,500 a month mortgage. Ask the lender if you can pay $1,750 first month and $1,750 the second month until you get caught up on the third month.
The result is the notice of default is cancelled. Your credit is slightly damaged, but you have saved your home from foreclosure.
2. Forbearance Agreement. Ask the lender to forgive the debt.
It doesn’t hurt to ask. Banks and lenders want to work with their customers. Especially in today’s market, with all the attention on foreclosures, the last thing the bank wants is for you to default on your loan and have to foreclose on your property.
3. Refinance. Lender gives you a new loan and includes any late payments and fees in the new loan so everything is “wrapped” into one mortgage. The problem many homeowners are having today is they have over leveraged and do not have equity. Their home is worth less than what they owe on the mortgage. This is one reason why there are so many short sales and foreclosures right now. In order to refinance, you must meet the following criteria:
4. Sell your home.
Try and sell your home by owner or list your home with a Realtor. In today’s market, most professionals recommend listing your home with a Realtor since the Realtor will be able to market your home and expose it to more buyers.
If you have equity, then you will not need to do a short sale.
5. Short Sale. Ask lender to take a lesser amount to pay off the mortgage.
Short Sale Steps:
Submit your hardship letter explaining why you can no longer afford to make the mortgage payments, the fact that the value of the home has decreased as a result of market conditions, and submit an authorization letter allowing your Realtor and/or attorney to negotiate on your behalf.
List Property for sale with a Realtor.
Submit Buyer’s Offer to lender when you find a buyer, together with copy of the Realtor’s commission agreement for lender’s approval.
Have your attorney or Realtor call the lender every day to find out if they are going to approve the short sale. The process takes 30 to 60 days or longer. There is no guarantee that the lender will approve the sale. If the sale is approved, then the lender will write off the balance of the loan and the transaction is done. There is a possibility of the lender trying to collect the deficiency amount later by obtaining a deficiency judgment against you, which is the difference between what you owe on the mortgage and what the home sold for. Some jurisdictions do not allow deficiency judgments. But even in jurisdictions where lenders can pursue deficiency collections against the homeowner for the balance due after foreclosure, most of the time it is not routinely done. Check your local laws or consult with your attorney.
6. LLoan modification. Restructuring of your current loan to lower your mortgage payments. The lender agrees to take the amount you are in arrears and either lowers your interest rate for a set period of time and applies the arrears and other fees to the back end of your loan or extends the term of your loan.
Steps to loan modification.
Call lender. Explain hardship and request a mortgage modification.
Send hardship letter and authorization letter if you have a third party negotiating for you such as an attorney, home counselor or mitigator. Typically, you need to be in default on your mortgage, but today many lenders are willing to discuss a mortgage modification even if you are not in default.
Submit last two paycheck stubs, last two years tax returns, W’2 or 1099’s and borrower’s financial statement. You must show that you have income to make the new mortgage payment. If you do not have any income, then you will not qualify for a mortgage modification.
Call lender every day until you get an answer.
The process can take approximately 30 to 60 days or longer. Be persistent and patient. It can be quite frustrating.
7. Deed in Lieu of Foreclosure. Give home back to lender.
Deed in Lieu of Foreclosure Steps:
8. Rescission of loan. Rescind loan based upon predatory lending violations.
9. Bankruptcy. A foreclosure sale is immediately stopped by filing a bankruptcy case. You should only file bankruptcy as a last resort. Consult with your attorney first.
Because homeowners are overwhelmed by the possibility of facing foreclosure, sometimes they panic when they receive a default notice and even abandon their homes prematurely. Without proper legal advice, homeowners are risking losing their homes. Now that you are aware of some of your options, you can fight foreclosure.