||Facing Foreclosure - You Have Options
I can help you, no matter how bad your situation might be, foreclosure may be avoided if you take prompt action. Together, we may be able to resolve your situation. Here are a few options.
1) Forbearance and/or Loan Modification
2) Short Sale
3) Reduce Expenses
4) Deed in Lieu of Foreclosure (voluntary foreclosure)
1) FOREBEARANCE or LOAN MODIFICATION. For a loan modification, you may ask am I able to refinance my mortgage(s)? In most cases these days refinancing is not an option since there is no equity in the porperty. However, you may be eligible for a loan modification or forebearance.
Are you having difficulty covering your monthly expenses?
Has your life changed due to hardship - job loss, medical expenses, incarceration, payment increases, reduced income, etc.
Have you fallen behind on payments?
Is the property in foreclosure or default?
Are you running out of options financially?
If you answered yes, you will be able to prove a financial hardship and qualify for a modification or a Short Sale.
2) SHORT SALE. A "Short Sale" occurs when a homeowner is upside down on their home and sells their property for less than what is owed on the mortgage. The lender agrees to accept the lesser payment as satisfying the loan amount. The seller receives no money from the sale of the home and the lender does not report a foreclosure to the credit bureau. A short sale can be reported a number of ways, but typically, it is reported as 'paid".
A Short Sale can be one of the best options for homeowners behind on their mortgage and facing foreclosure. A homeowner who decides to Short Sale their property typically experiences less impact to his/her credit. There are no out of pocket, up-front fees or costs associated with the Short Sale for the seller. The lender pays fees including closing costs, your attorney fees, escrow fees and realtor commissions. A Short Sale provides struggling homeowners with an opportunity to get a fresh start.
Short Sale Vs Foreclosure - Benefits to the Seller
1. The seller (who obviously is in a stressful situation) can take comfort in knowing that they tried to "do the right thing" for the lender, community and the house. They did not just walk away.
2. Most of the short sale homes are in good shape compared to foreclosed homes. Many times the homeowner is still in the property - which helps avoid vandalism and neglect. Why is this important? Homes in good shape attract higher priced offers. This has a stabilizing effect on the market.
3. In a foreclosure, the homeowner is not eligible for a Fannie Mae backed loan for 3 or 4 years. With a short sale, they are eligible for a Fannie Mae backed mortgage after two years.
4. After foreclosure you will have to disclose 'yes' to the question, "Have you had property foreclosed on or given title or deed in lieu thereof in the last seven years" on future loan applications and job applications. This can impact the interest rate you are charged. With a short sale there are no similar questions.
5. A foreclosure will have a much more negative impact on your credit score than a short sale. A foreclosure can remain on your credit report for 10 or more years. A short sale can be reported a number of ways, but typically, it is reported as paid in full.
6. A foreclosure can cause you to lose a security clearance in certain jobs. A short sale does not typically have an impact on security clearances.
How Do I Qualify For A Short Sale?
A homeowner considering a Short Sale must be able to show the lender they have a "hardship" and as a result are unable to continue making the payments on their mortgage. A hardship situation is one that is the result of circumstances that forced the borrower into a position where they can no longer afford their mortgage payments. While every situation is unique and must be evaluated individually, some common examples of hardship include:
Adjustment in Mortgage Rate
Unemployment or Loss of or Decrease in Income
Divorce or Separation
Mounting Medical Expenses /Illness
Death of a Spouse or Significant Other
For a successful short sale, homeowners must prove a willingness to cooperate with the process. Your lender will talk with us about your property (this takes some of the burden of communication with your lender off of your shoulders). Banks are starting to realize the benefits of short sales. It costs the lender on $20 to $30,000 dollars to foreclose. Then they have to sell the property - which in many cases is in poor condition from neglect or vandalism. In most cases a short sale reduces the bank's loss.
3) REDUCE EXPENSES. In hard times we need to get creative in cutting corners to meet expenses. Some distressed homeowners have found they can get through a difficult time by considering taking in a roommate or family members to share the household expenses. Another option to consider is to rent the home, if the area rental rates are sufficient to cover the mortgage/taxes and other expenses. The homeowner then finds a cheaper rental for their own family.
4) DEED IN LIEU. A Deed in lieu of foreclosure is a deed instrument in which the borrower conveys all interest in a real property to the lender to satisfy a loan that is in default and avoid foreclosure proceedings. The deed in lieu offers advantages to both the borrower and the lender. The principal advantage to the borrower is that it immediately releases him/her from most or all of the personal indebtedness associated with the defaulted loan. The borrower also avoids the public notoriety of a foreclosure proceeding and may receive more generous terms than in a formal foreclosure. Another benefit to the borrower is that it hurts their credit less than a foreclosure does. Advantages to a lender include a reduction in the time and cost of a repossession, lower risk of borrower revenge (theft and vandalism of the property before sheriff eviction).
In order to be considered a deed in lieu of foreclosure, the indebtedness must be secured by the real estate being transferred. Both sides must enter into the transaction voluntarily and in good faith. Sometimes, the lender will not proceed with a deed in lieu of foreclosure if the outstanding indebtedness of the borrower exceeds the current fair value of the property. Other times, lenders will agree since they will end up with the property anyway and the foreclosure process is costly to the lender.
Please don't panic just because you have received a Notice of Default or a Lis Pendens - options remain. However, time is of essence. The sooner you begin the process, the greater the chances of a successful resolution. Please contact me for more information or with any questions.