Options for homeowners facing foreclosure
Are you a homeowner that is in distress? Are you behind on your mortgage payments? Did you lose your job and soon will no longer be able to make mortgage payments? Have you already received a call or letter from your lender that they have started the foreclosure process on your home?
Despite what you may heard a bank does not want to foreclose on your home but the bank absolutely will foreclosure on you if you did not seek foreclosure prevention options right away.
Below is a list of options for homeowners in foreclosure:
In order to reinstate a mortgage, you must pay all missed payments, late fees, and legal fees that are due up until the date that the loan is reinstated
Forbearance or Re-Payment Plan
If you do not have the means to repay all of the missed payments and legal fees, then this is another option that also reinstates the mortgage. The lender allows the homeowner to pay the missed amount over a period of time or they place the missed payments at the end of the amortization of the loan
Sell the Property
If you have equity in your house, you can sell it and cure the foreclosure A licensed real estate agent experienced in the foreclosure process can help a homeowner harvest from the home sale as much of your hard-earned equity as possible. When choosing a Realtor make sure to choose a Certified Distressed Property Expert (CDPE) who understands the foreclosure process and is aware of the foreclosure timeline and pricesyour property accordingly.
Rent the Property
In some cases, a homeowner facing foreclosure that has mortgage payments low enough to allow him to rent the property and keep up the mortgage payments. This is usually a short-term solution since when taxes and insurance payments come due, many homeowners cannot afford them.
If the homeowner has sufficient equity and income and their credit has not been too badly damaged, you may be able to refinance. This is also typically a short-term solution since payments on the property usually go up considerably due to the refinance.
In some cases where homeowners do have the means to afford their mortgage payments or very close to their mortgage payments, the bank may qualify them for a mortgage modification.
This relatively new phenomenon shows just how far some mortgage companies and lenders are going to avoid foreclosing on properties. This process involves the refinance of a home with a reduction in the principal balance and often the interest rate as well. The homeowner will have to apply for this process both in showing a hardship as well as demonstrating the ability to pay the new mortgage through a fully documented qualification process.
Deed-in-Lieu of Foreclosure
This option is sometimes referred to as a “friendly foreclosure” since you essentially give the deed to your property back to the bank. If owner has equity in the house, this is not a good option since they give up any right to the property and any equity when using Deed-in-Lieu as a solution
A bankruptcy may stop a foreclosure and allow a homeowner to reorganize his debt and keep his property. The reality however, is that most of the time this is not the case and the bankruptcy only stalls the foreclosure. If the homeowner is not able to make payments after bankruptcy, the house will foreclose anyway. The other major drawback to bankruptcy is that it makes it very difficult for the homeowner to sell his property once he enter the process.
Servicemembers Civil Relief Act (SCRA)
Signed into law on December 19, 2003, the SCRA provides certain protection to military personnel that are in foreclosure in specific situations. The law also provides Servicemembers other protections
It is important to note that this relief is only temporary and in many cases the most prudent course of action for a Servicemember is to sell their property.
* Short Sale * - quite possibly the most popular solution to short sale and maybe even the most effective! Learn more about short sales here: Short Sale Process