Avoiding Foreclosure:
Are you behind in your mortgage payments, or concerned that you soon might be?
Have you received a pre-foreclosure letter from your lender?
This has happened to millions of us and in so many cases not your fault. A job loss, a serious illness or other circumstances can put you in danger of foreclosure.
The economic downturn has led to many homeowners being late on their loan payments, making it impossible to refinance.
If you've become one of those millions, don't panic. Foreclosure, and its accompanying effect on your credit, is not inevitable. There are options out there, and your circumstances may make one of those options feasible and desirable for you.
One good source is to call the foreclosure hotline to get started. Their number is 1-877-601-4673.
All assistance is provided to homeowners free of charge.
We encourage any borrowers (homeowners) in the following situations to call the hotline:
1) Borrowers who have not yet missed a mortgage payment but are concerned they may miss future payments.
2) Borrowers who are already behind on the payments.
3) Borrowers who have received a notice of foreclosure.
4) Borrowers having trouble communicating with their mortgage lenders.
To keep your options alive, you also need to communicate with your lender. Many homeowners have lost their homes to foreclosure without ever having contacted the bank.
Many lenders would rather not foreclose. They take a large financial hit on a foreclosure. So in many cases, they'll consider alternatives. Some of these options may keep you in your home.
Loan Modification
While only certain homeowners will be able to take advantage of this alternative, it is your best option because it keeps you in your home and preserves your credit rating.
Your lender may be willing to modify the terms of the loan, whether it's reducing the principal, lowering the interest rate or other creative strategies to make the loan affordable for you. As part of the stimulus package, the U.S. government has programs to provide incentives for banks that use this strategy as an alternative to foreclosure.
Mortgage and foreclosure terms defined.
Short Sales
This is the fastest-growing foreclosure alternative. Many banks will allow a short sale, in which the home sells for less than the amount of the loan. This is attractive for lenders because they lose less money than in a foreclosure. Also, short sales generally take less time than foreclosures, so the banks don't have to carry the properties on their books as liabilities.
And it's attractive for homeowners because the impact on their credit is far less than in a foreclosure. It stays on their credit reports for only two years, as opposed to seven years for a foreclosure, and often isn't a barrier to purchasing another home.
Short sales are paperwork-intensive, and there are many, many details involved. If you're considering this option, it's critical to work with a trained real estate agent who knows all the steps required to successfully complete a short sale.
.
An experienced real estate agent like myself can sit down with you and explain some of these options in more detail.
Keep in mind that no matter which option you choose, there may be tax and other financial consequences. You should consult with a tax advisor or legal expert.
Foreclosure (Cash for Keys)
One of the biggest problems in foreclosures is that homeowners sometimes physically damage the property, or even sell some of the fixtures, before leaving. Needless to say, this is not a good idea. It may expose the homeowners to financial and legal liability. It also makes the properties much more difficult to sell.
To prevent this, some lenders offer a program called "Cash for Keys." The homeowners receive a check for vacating the property within a certain time period and leaving it in good condition. If you have no alternative other than foreclosure, you should ask the bank about this option.
Tips From HUD
The U.S. Department of Housing and Urban Development has 10 tips for avoiding foreclosure:
1. Don't ignore the problem.
2. Contact your lender as soon as you realize you have a problem.
3. Open and respond to all mail from your lender.
4. Know your mortgage rights.
5. Understand foreclosure prevention options.
6. Contact a HUD-approved housing counselor.
7. Prioritize your spending.
8. Use your assets.
9. Avoid foreclosure prevention companies.
10. Don't lose your house to foreclosure recovery scams.
Read more from HUD about foreclosure.
Find additional resources to help you avoid foreclosure.
Related Articles
View more articles
Home
