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Options for Homeowners:
There are several options in this situation. You may want to begin by asking yourself, do you want to stay in the house and catch up on payments or modify the loan to make payments manageable? Or, would you rather sell the house and move on? Once you have an idea of what you would like to do, start exploring the options for your particular situation.
>> Get advice from a foreclosure counselor or preforeclosure specialist
>> Explore loan workout solutions with your lender
>> Consider a short sale to prevent the foreclosure
>> Consider a deed in lieu of foreclosure
>> If possible, cure the property
1. Speak to a HUD approved Foreclosure Counselor, call the HOPE hotline. 888-995-HOPE (4673) ™ or www.hopenow.com. They can help you analyze your current financial situation and begin to explore your options. It is a good idea to speak to more than one advisor to cross check your options. We would be glad to talk with you and walk together through the options, giving you a second opinion on the options available.
2. Contact your lender to find out loan workout solutions.
If your current financial situation is temporary they may be able to arrange a reinstatement, forbearance, or customized repayment plans.
- A reinstatement takes the amount you are past due and adds it to the total amount due on the loan to allow you a fresh start on payments. In this scenario the payment amount remains the same.
- Forbearance means the bank will agree to delay their right to charge late fees and start a foreclosure. This works best when the hardship is temporary and the setback on payments is minor and can be caught up in the foreseeable future.
If your financial situation is long term or will permanently affect your ability to bring your account current, they may be able to arrange a loan modification. However, each bank works differently and has different requirements for their loan modification options.
- A loan modification takes place when the lender agrees to lower your interest rate or the total amount of the loan to reduce monthly payments.
When you contact your lender you will need:
- Your account number
- A brief explanation of your circumstances
- Recent income documentation such as your paystubs, Social Security benefits statements, disability, unemployment, retirement, or public assistance. If you are self-employed, have your tax returns or a year-to-date profit and loss statement from your business available for reference)
- List of household expenses and monthly financial obligations
Your lender will collect your information and send it to the appropriate department for review to see if you qualify for a loan modification. It could take several months for them to process the loan modification. Make sure you take good notes when communicating with the lender. Each time you speak with someone write down their name, their extension (if possible) and what you talked about.
Some companies will charge a hefty fee to do a loan modification for you; however, you can do it for free! You have the right to speak directly to the lender. If you have questions about loan modifications, please let us know and we can guide you through the process for free.
3. Consider a Short Sale: A short sale is where the net proceeds from the sale will not cover the borrowers total mortgage obligation and closing costs and the borrower doesn’t have other sources of funds to cover the deficiency. In order to sell the house for less than what is owed, a packet of information must be submitted to the lender to approve the short sale. Since the bank will be receiving less than what they were promised, they have to approve the sale. Often banks will approve short sales because it is less expensive for them than completing the foreclosure process, eventhough they will lose money in the end.
- A short sale benefits you by avoiding the foreclosure. It is significantly less damaging to your credit and shows future creditors that in dire situations you do all that you can rather than just walking away.
The short sale package includes:
a. An offer to purchase the home for the current market value
b. A hardship letter explaining why the borrower has fallen behind on payment
c. Tax statements of the past two years
d. Pay stubs of the past two months or if unemployed a letter explaining why there is no income
e. Bank statements from the past two months of all bank accounts
f. A financial worksheet outlining your monthly income, debt obligations and living expenses
g. If you do not have any of the items above, depending on the situation, a letter of explanation can suffice
The lender will evaluate your financial situation and either approve or decline a short sale. If you chose to sell your home as a short sale, make sure you use a real estate agent with extensive short sale experience. Short sales are much more indepth than regular real estate transactions. Using an inexperience agent could jeporodize your financial future and leave you with outstanding debt. Over the past several years, we have sucessfully negotiated countless short sales, relieving families of the financial burden of an overleveraged home. Experience matters.
4. Deed-In-Lieu of foreclosure: A Deed-In-Lieu is when the homeowner gives the property back to the lender and in return is fully released from future obligations with the property. This option must be arranged directly with the lender and if there is more than one lender such as a first and second mortgage with two separate banks, this option will not work. Often, sophisticated lenders are unwilling to take a deed-in-lieu due to the risk of fraudulent transfer of the property. Also, there is a risk that other liens on the property exist, preventing the lender from receiving the property free and clear of other debts. Borrowers need to speak directly to their lender to find out if Deed-In-Lieu is an option.
5. Cure the property: During the pre-foreclosure “Cure Period,” homeowners have the right to pay off all past due amounts plus fees incurred to bring the loan current and “cure” the default.
The Notice of Intent to Cure must be filed at least 15 days before the foreclosure public auction sale and funds must be paid by 12 o’clock noon on the day before the schedule sale.
We hope that all homeowners will be able to cure the default on their property to stop the foreclosure, but we understand that this is difficult and in fact, quite rare. However, it is not always impossible. Some outrageous ways of acquiring the funds would include winning the lottery or receiving an unexpected inheritance from a long lost relative. However, curing the default might be worth thinking about. Do you have a second car you could live without? Or a whole life insurance policy you could cash in to save your house?Are there other resources you could tap into?
THE BIG PICTURE:
Remember, if you are struggling with mortgage payments and end up selling your house, it does not define you. You are not alone. One in seven homeowners are behind on payments and need assistance. Try to take a step back and look at the big picture. What is your financial goal in the next five years? Is it really worth cashing in your retirement account to save the house? Would it be better to keep the savings you have built up, sell the house and purchase a house that has positive, rather than negative, equity in three years? In the long run, what is the best investment for your family? Or, maybe the house has been in your family for generations and it is worth using savings and retirement accounts to save the house? Each situation is unique and often includes several influencing factors, making it a difficult situation to weigh.
We are here to walk you through the options to find the most beneficial answer for you, for both the short term and long term.
All consultations are held in the strictest of confidence. Your information will never be shared.
The Federal Trade Commission issued the Mortgage Assistance Relief Services Rule 16 CFR 322 (MARS). MARS defines “mortgage assistance relief service” to include: “negotiating, obtaining or arranging a short sale of a dwelling.” You may stop doing business with us at any time. You may accept or reject the offer of mortgage assistance we obtain from your lender (or services). If you reject the offer, you do not have to pay us. If you accept the offer, you will have to pay us the amount agreed in our listing agreement for our services. Your Castle Real Estate and Monica Perez are not associated with the government and our service is not approved by the government or your mortgage lender. Even if you accept this offer and use our service, your lender may not agree to change your loan. If you stop paying your mortgage, you could lose your home and damage your credit rating.