Foreclosure and You: How to Tackle a Bad Situation
Why is it that life's little surprises can be the good kind--things like winning the lottery
, etc. If you've ever gotten laid-off from work, or lost your job then you know how scary it can be to be looking at a pile of bills, asking yourself just how you will make ends meet. Even sudden, unexpected expenses, such as major auto repairs can zap your ability to pay other, more pressing bills such as your mortgage. Regretfully, many distressed homeowners just are not aware of the many alternatives to foreclosure that are readily available when they find themselves in such serious circumstances. Depending on your personal situation, one or more of the following alternatives or pre-emptive strategies may work for you.
Mortgage Loan Repayment Plan
Since your loan servicer is responsible for receiving payments you must make contact with them and ask whether a repayment arrangement is permissible. A repayment plan is good because it brings your out of a state of default. The only side-effect is that you are going to have to make larger mortgage payments until the arrearage has been paid. Once ther past due amount has been repaid your credit may then start to recover. Even while the credit scoring algorhythms differ from one credit reporting organization to the next, you will nonetheless see that your scores for all 3 bureaus will improve as the repayment plan becomes more a thing of the past.
Loan Modification
A loan modification allows for beneficial changes in the terms of your loan. For example, if an adjustable rate has made it hard to make your payments and keep financial balance then your lender may perhaps be prepared to give you a fixed rate. Or maybe you could benefit by having your fixed rate lowered. This may also be possible. You may also be able to get caught up on any delinquent payments by having the past due amount added to your loan balance. But if your lender does not see that your loan terms are causing you harship then you may not qualify.
Forbearance
A forebearance is nice because you don't have to make any payments at all for a period last from just a few to several months. Once the grace period has ended you will most likely be asked to make payment that are higher than normal. If your loan is FHA-insurred youy may qualify for an FHA special forebearance. You may be able to go 12 months without a payment under this program.
Deed-in-Lieu of Foreclosure
If you're willing to turn over the property to your lender then you can avoid a foreclosure with this option. Assuming you qualify, you will simply turn over your deed to your lender. At least this option comes with the possibility of cash-out for such expenses as moving trucks, moving crews, deposits, etc. If you are in fact capable of making your payment, but simply want to be done with it, then you should understand that you most likely will not qualify for this option.
Cash Sale
With a cash sale, a 3rd party will buy your home, leaving you enough time to pay the outstanding balance. You might be n a position to preserve your credit history if the sale can be made quickly enough. If you know you'll be in the near future defaulting on your mortgage as a result of lack of funds then this is an option to really give consideration to. No one wishes to sell below market value, but unfortunately, you might have to do pecisely this in order to sell in a hurry. Real estate investors may demand that you give them all equity in exchange for their paying off your mortgage balance.
Short Sale
With this option, the borrower avoids foreclosure by paying the lender an agreed upon sum that is less that the full mortgage loan balance. You can't sell the home for less than what the lender requires in the short sale agreement. Your credit score won't be hurt as much as it would had you gotten foreclosed upon.
Refinance
Refinancing can be an option for those who qualify, assuming sufficient equity. Fortunately for mortgagors of of FHA loans, even a lack of equity may not matter. Under the FHA Streamline Refinance program only a borrower's recent mortgage payment history is taken into account. Therefore, factors such as appraised value, income, assets, etc are not counted.
In closing, as we have shown, foreclosure isn't an inevitable outcome when you are unable to make your mortgage loan payment. Waiting passively when faced with foreclosure is the least effective course of action.
Foreclosure and You: How to Tackle a Bad Situation
By: Ansel McGovern
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