Foreclosure Alternatives - You Have Options
As limited as you may feel, you have options other than foreclosure.
More than 6 in 10 homeowners delinquent in their mortgage payments
are not aware of services that mortgage lenders can offer to
individuals having trouble with their mortgage. It is our job
to seek out and negotiate on your behalf with your lender to
find the best option for you. You do not know how close you may
be to working out an amicable resolution with your lender. We
can help you in many of the areas listed below or even with a
combination of the options listed below. Remember that delaying
matters only makes foreclosure inevitable.
Reduce Your Spending
Scaling down your lifestyle may be enough to solve your problem.
Perhaps you can drive a less expensive car or eat out at less
expensive restaurants. With the economy sliding into a recession,
more and more credit card companies are willing to reduce their
interest rates. This will put more of your dollars to work
for you.
Get A 2nd Job
You can’t expect the lender to offer to you a mortgage modification
if, at the end of the day, even the reduced payment is not
affordable to you. If you want to keep your property, then
obtaining a second job can often cure your problem.
Reinstate Your Mortgage
Pay the Mortgage Company all of the back payments to bring your
mortgage current. This option is rarely attainable - - especially
because the lender will add late fees and any attorney fees
on top of your back payments. The total amount is usually more
than most people are able to come up with.
Refinance
You may be able to pay off some debts and reduce your monthly
payments by refinancing your home or some other property. The
new mortgage may have a much lower interest rate and, because
it’s repayable over many years, it could substantially reduce
the monthly payment.
Refinance Through FHASecure
FHASecure is a refinancing option that gives homeowners with
non-FHA adjustable rate mortgages (ARMs) the ability to refinance
into a FHA-insured mortgage. With FHASecure, the lender will
not automatically disqualify you because you are delinquent
on your loan. In addition, the lender may offer you a second
mortgage to make up the difference between the value of your
property and what you owe. You may be a candidate whether or
not you are current with your mortgage; but if you are delinquent,
the delinquency must be due to the payment shock of an increased
interest rate.
Reverse Mortgage
If you’re over age 62 and have plenty of equity, applying for
a reverse mortgage can certainly solve your problem. A reverse
mortgage does not use credit or income as a basis for approval.
For more information on reverse mortgages, ask a Mortgage Modification
Group Specialist.
Forbearance Agreements
A forbearance agreement is a contract between a homeowner and
a lender where the homeowner agrees to a repayment plan and
the lender agrees to reinstate the loan. Most repayment plans
cannot exceed twelve to eighteen months. Therefore, you will
have to pay your monthly mortgage payment and the monthly repayment
amount until you reach zero balance on your past due amount.
Partial Claim
Your lender may be able to work with you to obtain an interest-free
loan from HUD to bring your mortgage current. You may qualify
if your loan is at least 4 months delinquent but no more than
12 months delinquent; your mortgage is not in foreclosure;
and you are able to begin making full mortgage payments. When
your lender files a Partial Claim, HUD will pay your lender
the amount necessary to bring your mortgage current. You must
execute a promissory note. A lien will be placed on your property
until the promissory note is paid in full. The promissory note
is interest-free and will be due if you sell or leave your
property, refinance or when your mortgage matures.
Mortgage Modification
A mortgage modification comes about when the lender agrees to
start over with a new rate and term. A modification is a permanent
or temporary change in the loan and usually allows you to roll
in all missed payments, penalties and fees into the new loan.
The purpose is to help make your mortgage more affordable.
Legitimate Investor
As soon as your foreclosure becomes a matter of public record,
hard money lenders, investors and other types of “stop foreclosure”
companies will contact you offering help. Many of these people
are simply vultures that want to strip you of your home and
your equity. Distinguishing the cons from the legitimate real
estate investors can be difficult, especially, while you’re
under stress. Should you choose this route, you should retain
your own attorney to review the documents. Below are some common
options legitimate investors will offer you:
* Offer to purchase your property with a lease option or land
contract.
* Give you quick cash to buy your home.
* Make a short sale offer to your lender.
Watch out for the vultures. One of their tactics is require
homeowners to quit claim or transfer the property to them. Their
goal is to make themselves owners so they can refinance out all
of your equity.
Deed In Lieu of Foreclosure
A deed in lieu of foreclosure occurs when the homeowner conveys
all interest in his/her property to the lender to satisfy the
loan. You no longer face foreclosure, but you no longer own
the property. This option is adventageous to both the borrower
and the lender. The lender releases the borrower from most
or all of the personal indebtedness associated with the defaulted
loan. The lender does not incur the time and expense involved
in foreclosure proceedings.
List The Property For Sale
Hiring a top-notch real estate agent is key to getting your house
sold fast. A seasoned agent will help you establish a realistic
list price and help you stage the property. A good place to
find a realtor is in the real estate section of the weekend
paper. This will eliminate 90% of the part-time realtors that
can’t afford to advertise. Interview three realtors and choose
the one you feel is right for the job.
Short Sale
In real estate, a short sale is when a lender allows a homeowner
to sell the mortgaged property for less than the outstanding
balance of the loan. Be careful -- the bank may allow the sale
to go through, but only on the condition that you repay the
deficiency. A short sale is commonly executed to prevent foreclosure.
Often, a bank will choose to allow a short sale if they believe
that it will result in a smaller financial loss than foreclosing.
For the homeowner, the advantages include avoidance of a foreclosure
on their credit history. In addition, new law does not require
the homeowner to pay taxes on the amount written off by the
lender. Finally, a short sale can be faster and less expensive
than a foreclosure.
Bankruptcy
This is a last resort. If you are filing bankruptcy for the sole
purpose of saving your home, the relief will likely be temporarily.
You will probably end facing foreclosure again if you do not
utilize one of the other options discussed herein. To read
about more about bankruptcy, please see our informational section
on Bankruptcy and Foreclosure.
Walk Away
Packing up and leaving before the sheriff arrives is always an
option. Before you walk away, you need to know whether your
lender can sue you for any deficiency still owed after they
sell your property. This depends on the state you live in and
the type of mortgage you have. It’s a good idea to consult
with an attorney before you decide to walk away.
Do Nothing
If you have exhausted every available option and you have no
equity left in the property, you can always choose to wait
until the sheriff shows up to evict you. Although there is
no guarantee when this day will arrive, you do know that it
will happen after the public sale date of your property that
is set by the court (in judicial foreclosure states). If you
choose this alternative, it is imperative to save as much money
as you possibly can for starting fresh while you are living
rent free.
