Foreclosure Alternatives
Because of the current housing market many families are dealing with issues that impact their property and their families. Although Foreclosure can be avoided, some families are so frustrated and overwhelmed that they do not realize they have options. The list below details the options available to you if you find yourself upside down and unable to keep up with your mortgage. The worst think you can do is to ignore the bank. The best thing you can do is to call me for help!
Mortgage Modification
Some banks have plans in place to help certain homeowners by modifying your mortgage. Usually the bank can lower the interest rate, modify the loan terms, and in some cases reduce the balance of the loan. The result would be a lower payment to the homeowner. The homeowner has to qualify for this program by providing financial documentation to the bank. Not all banks participate in mortgage modifications.
Refinance
Sometimes a homeowner is facing difficult financial times but still has sufficient equity in their property and good credit. In this case, they may be able to refinance their mortgage. Depending on the situation, this may reduce their monthly mortgage payments. However, given the economy, the refinance may actually increase the payments because by the time the homeowner tries to refinance, they have already missed payments and damaged their credit.
Forbearance
A forbearance or repayment plan involves occurs when the bank allows the homeowner to pay back payments over time. The homeowner will generally make their entire mortgage payment and make a portion of the past due balance each month until the back payments are caught up. Given the current economy, the homeowner may not be in a financial position to make these extra monthly payments.
Reinstatement
This option can be elected up to the day before the property is sold at a foreclosure sale. In a reinstatement the homeowner pays all the money past due to the mortgage company. The lender does not have to approve the homeowner. The amount owed to the bank inclues back payments and all fines and fees added to the back payments.
Rent the Property
If the homeowner's mortgage payment is lower than the current market rental amount, the homeowner can rent the property and use the rental income to pay the mortgage. Generally this is not the case. With the current market, the rent usually does not cover all the costs of that property for the owner (mortgage, taxes, insurance, maintenance and more).
Sell the Property
If the Homeowners has enough equity in their property but is having trouble meeting the monthly payments, they could list their home with a Realtor that is certified in distressed property sales (so they can manage the sale while the foreclosure process is underway). If there is any equity, the homeowner can benefit from that and avoid foreclosure. As with many of the homeowners, there is little or no equity to sell their property without negotiating a short sale.
Deed in Lieu of Foreclosure
The deed in lieu of foreclosure (DIL) allows the homeowner to give the property back to the lender rather than go through the foreclosure process. The lender has to approve a DIL and the homeowner has to qualify. The homeowner is required vacate the property. Sometimes the lender will forgive deficiency but the homeowner may have to hire an attorney to negotiate this option. The deed in lieu may be reported to credit bureaus as a foreclosure.
Bankruptcy
If the homeowner files for bankruptcy and has a release of debt, the mortgage may also be included in the release. A bankruptcy does not require lender approval. It does not stop the foreclosure process; it just puts it on hold until the bankruptcy is completed. At that time, the homeowner is still faced with the Foreclosure or may opt to Short Sale the property. Bankruptcy can be expensive and may damage the homeowner's credit scores. In addition, a bankruptcy can only be declared once every seven years.
Servicemembers Civil Relief Act (for military personnel)
If a servicemember has financial distress due to their deployment and their debt was accumulated prior to deployment, they may qualify for help under the Servicemembers Civil Relief Act. This option could lower payments on all debt including their mortgage payments. Only active military members qualify for this option.
Short Sale
If a homeowner cannot sell their home because they owe more on their property than it is currently worth, they can hire a Realtor to market and sell their property as a short sale. The property would be listed for sale as a Short Sale. The homeowner has to have a financial hardship (such as change in financial stability including loss of wages, loss of hours, job loss, divorce or death in the family) to qualify. A short sale allows the homeowner to avoid foreclosure and in some cases, reduces the impact on their credit rating. Often, the bank will release the homeowner from the dificiency. Some homeowners are able to purchase another home in as little as 24 months. With a foreclosure, it could take more than 5 years to purchase a home. Short sales are complex negotiations with the bank and there are no guarantees. The best thing the homeowner can do it to speak with a certified short sale specialist.
Please contact me today at 941-773-0668 or [email protected] for a free confidential evaluation of your individual situation.
