Eleven Alternatives for a Homeowner Facing Foreclosure

1. RE-INSTATEMENT
   All the way up to the day of the court house sale you have the right to catch up all the payments in arrears and stop the foreclosure process. The payment would need to include all missed mortgage payments, late fees and court costs.
2. FORBEARANCE OR REPAYMENT PLAN
   Negotiate a repayment plan with your mortgage company to catch up all the payments in arrears, including late fees and court costs. Forbearance is paid in smaller payments over time, rather than one lump sum.
3. REFINANCE
   If current market rates are lower than your existing mortgage rate, and your credit hasn't been too badly damaged, you can refinance to a lower interest rate and reduce your monthly payments.
4. RENT
   Renting the home so someone else makes your mortgage payment not only reduces your stress, it also gives you a good investment for the future. Our Certified Distressed Property Experts© can show you what homes comparable to yours are currently renting for.
5. SELL
   If you have equity in the property, it is always best to sell the home instead of losing it to foreclosure. Our experts can help you determine the fair market value of your home, and calculate your proceeds after the sale. Click here to submit your information so we can help you decide what the best course of action will be.
6. MORTGAGE MODIFICATION
   Banks are doing mortgage modifications regularly because they don't want to own real estate, which is exactly what happens when there's a foreclosure. After foreclosure, the lender is then responsible for the taxes, insurance, property maintenance, utilities, realtors and attorneys fees... until the property can be sold (usually at a reduced cost). Your mortgage company may be willing to reduce your monthly payment to something more affordable for you.
7. SHORT-REFI
   Also known as the Government’s HOPE Program, this relatively new process displays just how much some mortgage companies and lenders will do to avoid foreclosure. Short-refi involves the refinance of a home with a reduction in the principal balance and often the interest rate also.
8. SERVICE MEMBERS CIVIL RELIEF ACT (SCRA)
   The SCRA is a bill that was signed into law in 2003. It provides certain protection to military personnel and gives service members other protections.
9. DEED IN LIEU OF FORECLOSURE
   This is a volunteer foreclosure where the homeowner essentially gives the deed to the mortgage company. This prevents the banks from having to go through a lengthy foreclosure process. They still report a Deed-in-Lieu as a foreclosure on your credit report, and it will give you the same negative credit consequences as mentioned above. However, they may waive their rights to a deficiency judgment due to your cooperation. You are still subject to taxation and this solution only works in cases where there is one mortgage and there are no liens (or very small liens) on the property. In some cases the first mortgage company will negotiate with the second mortgage company.
10. BANKRUPTCY
    This is where you hire an attorney for a fee to file chapters, 7, 11 or 13, taking all–or part–of your debt to the courts to be dismissed. A bankruptcy delays foreclosure, but in the end you will have a bankruptcy and a foreclosure on your credit report. Many people believe when they file bankruptcy all of their problems go away, but the truth is, creditors can still come back to you for a deficiency judgment and you may have serious tax consequences as well.
11. SHORT SALE
    A homeowner is ‘short’ when they owe an amount on their property, that combined with closing costs and commissions, is higher than current market value.

In today’s economic crisis mortgage companies and banks are welcoming short sales and have created entire divisions to process them. Wells Fargo reports 15,000 short sale package requests a day. However, short sales involve a time-consuming process that takes patience, good communication and organization skills and professionalism. Short sales done correctly will create a win-win for everyone. Our agents with the Certified Distressed Property Expert© designation are best equipped to guide you.

Benefits of a Short Sale to You

It doesn’t matter how many mortgages you have on the property, you can still try to save yourself from foreclosure. You could have a first and second mortgage, and a home equity line of credit on top of that and still be able to negotiate a favorable short sale with all of the lien holders. In a short sale you'll fill out a package to show hardship, and market the home for sale to obtain an offer within the days left before public auction. The offers are then submitted to your mortgage companies for approval. In most cases when an offer is received the foreclosure process will stop immediately. The mortgage company benefits from agreeing to a short sale because it saves them the time and expense associated with foreclosure. Because you, as the homeowner, are cooperating with the sale and using your best efforts to reduce their loss, they view this very favorably and will work with you towards an amicable solution. In many cases they will waive their deficiency judgment rights, and for a limited time, the government has placed a halt on tax liabilities (consult your CPA or accountant for your particular tax liability.) The biggest advantage to successful short sale over foreclosure is your credit report does not show a foreclosure on it. It will show late payments and a “satisfied” debt. Even though late payments and satisfied debt are viewed negatively, the effect is approximately 50 basis points for two years and it could even be less if you are proactive in improving your credit score. This 50 point drop for a short sale is negligable compared to a foreclosure where you will have a basis point drop of approximately 300 points. A foreclosure is the most damaging report of all to your credit. Creditors know that everyone needs a place to live, and if they abandoned their home, how quickly would they walk away from a car payment, student loan, medical loan or credit card payment? Click here to learn more about the negative effects of foreclosure.

Contact our Certified Distressed Property Experts© today at 425.454.4141, or send us more information online and our experts will contact you as soon as possible.