Foreclosure Options
Due to current economic conditions, many homeowners are finding themselves struggling to keep up
with their mortgage payments. Many are facing foreclosure and believe that foreclosure is their only
solution to mounting mortgage problems, but there are other options.
Below is a brief overview of each of the options.
Option 1 - Refinance
Homeowners who are current with their mortgage payments may be able to take advantage of today’s mortgage rates and keep their homes by refinancing to a 30- or 15-year fixed rate loan via Home Affordable Refinance,
a component of the Making Home Affordable initiative launched in 2009.
www.MakingHomeAffordable.gov
Option 2 – Sell and Bring Cash to Closing
Although many homeowners today may not have the necessary cash to cure deficiencies at closing, they may have to liquidate assets such as retirement accounts or US Treasury bonds, to do so. By curing deficiencies at closing, homeowners can avoid the credit damage that a short sale or foreclosure can cause. Homeowners are strongly encouraged to counsel with their finance and tax professionals before bringing liquid assets to closing.
Option 3 – Lender Workout
Contact your lender to see what options they have available to help with your situation.
Many times, lenders are willing to work with distressed homeowners to help them keep their homes by reducing or rolling back interest rates, forgiving payments, adding them to the loan,
or possibly recasting the whole loan and wrapping all fees into a fixed-rate mortgage.
These options can come in the form of forbearances, reinstatements, repayment plans,
or loan modifications.
Option 4 – Short Sale
A short sale is a situation in which the seller (1) owes more money on the loan than the sale of the property will likely produce on the market and (2) is unable or unwilling to bring money to the closing to make up for any deficiencies. In a short sale, the lender has not yet foreclosed on the property, which provides a window of opportunity for the owner to sell the property in order to at least partially satisfy the amount owed to the lender.
Short sales are considered preferable to foreclosure because it won’t damage the seller’s credit as much as a foreclosure would. Usually lowering the seller’s credit score by only 50 points as compared to 200 points
if a foreclosure were to take place.
Option 5 – Deed In Lieu of foreclosure
This occurs when the homeowner agrees to trade the property to the lender in exchange for the cancellation of the promissory note. Unfortunately, this option will show up as a foreclosure on the borrower’s credit history
and will lower their score accordingly.
Option 6 – Do Nothing or Walk Away
If homeowners are simply unhappy that the value of the property is less than what they paid or owe, they need to contact an attorney for advice. Simply walking away from the loan or asking the lender to proceed with a short sale because the value went down may not be a viable option and if it is,
there often will be additional financial consequences.
If you would like more information on any of these options,
please contact me as soon as possible.
Rest assured that I have been trained and certified to explain these options and strategies to you,
so that you can make the best decision for your future.
