Thursday, June 2, 2011

9 Options Facing Foreclosure

 If you’re facing foreclosure, then you are probably under stress. You don’t know what is going to happen. How long will it take before the bank kicks us out on the street? Will I owe my lender any? Will I ever get my life back? That’s why I put this blog together. You need to know what your options are. So, let’s go thru them here.
Option #1: Do nothing and the lender forecloses on the house. Your credit report will show this damaging information for years to come. Please be aware that the foreclosure process can take some time. I’ve seen it take some lenders up to a year to foreclose on a house. Some banks have better and faster process and can get a foreclosure done in 3-4 months. This is certainly not the best option!
Option #2: Deed-In-Lieu of Foreclosure. A “Deed-in-Lieu” is disposition option in which you voluntarily deed your home to the lender in exchange for a release from all obligations under the mortgage. It has certain eligibility requirements and may not be accepted from homeowners who can financially make their mortgage payments. What benefit does it give you? None. Do not consider this option unless the lender gives you something in return
Option #3: Loan Modification to reduce your mortgage payment. If you want to keep your home, then it is a good option. Many lenders will reduce your interest rate, or extend the term of the loan. To qualify, you often have to send your lender all of your pay stubs, bank statements, and other financial documentation. If you need loan modification kit, let me know.
Option #4: Reinstatement. This is when you pay the lender entire default amount plus interest, attorney’s fees, late fees, taxes. After that you start making normal monthly payments. This restores your account to its former current status. The only problem is that it requires you to come up with all the back payments and other fees.
Option #5: Payoff or Refinance is completely pay off your old loan plus any default amount and fees. However, the new loan may have a higher interest rate and there may be a pre-payment penalty because of the recent default, plus your credit history and score. If you owe more than your home is worth, then it will be impossible to find a lender willing to pay everyone off. This is a good option if you still have equity in your home.
Option #6:
Forbearance is an agreement made between you and your bank in which your bank agrees not to exercise its legal right to foreclose on your home and in which you agree to a payment plan that will bring you loan current over a certain short time period. Information will be required from your bank to show that you are able to meet the new payment plan requirements.
Option #7: Rent the property. This is a good way to earn some extra money. However, many mortgages are written with legal clauses that force you to forward any rent proceeds to the lender. In addition, governments have recently written laws forbidding you form renting a property unless the mortgage is current.
Option #8: Bankruptcy is an option that can liquidate debt and/ or allow some time to stay in your home This could be a great option for a fresh start. There are several types of bankruptcy and you would need to consult a qualified Bankruptcy attorney for more information…
Chapter 7- [Liquidation]: Completely settles personal debt.
Chapter 13- [Wage Earner Plan]: Payments are made toward a plan to pay off debts in 3-5 years. Many people find themselves stuck under the same burden of debt that caused the problem in the first place. Only this time, they have to pay all the extra costs associated with the bankruptcy.
Chapter 11- [Business Reorganization]: A business debt solution.
Option #9: Sale.
Sell with Equity: If your home has equity (money left over after all loans and monetary encumbrances are paid), you may sell your home without lender approval through a conventional home sale. In this case, you could get cash from the sale proceeds.
 Short Sale. If you can’t afford your house anymore or your property value is upside down, then this is a good option to consider. A short sale is when you owe more than your home is worth. You sell it with the assistance of a licensed real estate agent. It costs you nothing. The agent gets paid by your lender. It is well known that a lender will net more money on a short sale than taking a home back thru foreclosure. Why? A lender saves money on interest, attorney fees, and other related foreclosure costs.
If you have any specific questions or need help to evaluate your situation to see which options you qualify for and which one will most benefit you and your family give me a call at (323) 316-3300. Remember I’m here to help you in any way that I can.