Alternatives To Foreclosure

Look at the situation without attaching your emotions. From a strictly business viewpoint, you can successfully analyze which option might best suit your needs and move toward resolving your financial difficulty. One very important thing to remember: Time is of the essence, so take quick action now to allow yourself time to complete the chosen process!

Your Choices

Do Nothing  If a homeowner does nothing, they most likely will lose their home at foreclosure auction. Loan applications generally ask if the applicant has ever been foreclosed upon. A foreclosure can hinder your future in many different ways.  This may affect employment, much higher interest rates, auto purchases, insurance, and needs of everyday living that require credit.

Payoff/Refinance  Completely paying off the entire loan amount plus any default amount and fees. Usually accomplished through a refinance of the debt. New debt is at a normally higher interest rate and there may be a prepayment penalty because of the recent default. With this option, there should be equity in the home.  Obtaining a new mortgage may be difficult due to lates and past dues established with present lender.

Reinstatement Paying the entire default amount plus interest, attorney fees, late fees, taxes, missed payments and fees.

Loan Modification Utilizing the existing mortgage company to refinance the debt or extend the terms of the loan. This may allow the homeowner to catch up at a more affordable level if you qualify.

Converting your ARM to a Fixed Rate – Millions of adjustable rate mortgages that were initiated in 2004 and 2005 are adjusting at higher interest rates, causing increased mortgage payments that can significantly affect family budgets. Many lenders will convert homeowner rates to a fixed schedule.

Forbearance Lender may be able to arrange a repayment plan based on the homeowner’s financial situation. The lender may even be able to provide a temporary payment reduction or suspension of payments. Information will be required from the lender to show that you are able to meet the new payment plan requirements.

Deed in Lieu of Foreclosure Give the property back to the bank instead of the bank foreclosing. Banks generally require the home be well maintained, all mortgage payments and taxes must be current. Most loan applications ask if this has ever happened.

Bankruptcy  This option can liquidate debt and/or allow more time. Recent legislature has made bankruptcy much harder to obtain than in the past.  Check with a qualified attorney for your specific options.

Chapter 7 (Liquidation) To completely settle personal debt.

Chapter 13 (Wage Earner Plan) Payments are made toward a plan to pay off debts in 3 – 5 years.

Conventional Sale Is where a homeowner may sell the home without lender approval for a conventional home sale. If the property has equity (money left over after all loans and monetary encumbrances are paid), the homeowner will get cash from the sale.

Short Sale-OUR EXPERTISE! A short sale, also known as a pre-foreclosure sale, can be negotiated with your lender by your real estate professional if what is owed and costs to sell are more than the property’s value.