Foreclosure Options and Solutions
 

You are not alone! There are solutions - I've been doing this a long time successfully and can tell you that it is not nearly as bad as you might now think or feel.

Perhaps you are taking the first step toward finding answers. I appreciate what it has taken for you to come here, and commend your efforts to get the facts about your situation. The current real estate environment can be frustrating, with misinformation and conflicting plans for how to proceed.

As an experienced Realtor®, I often find troubled homeowners who believe that they are alone with their challenges. Regrettably, over 70% of homeowners in foreclosure proceed without ANY visible assistance. This is not acceptable for the communities I serve.

That's why I've developed this site and report: to ensure that you get valuable resources that can reduce your financial strain and change your life for the better. As a CDPE and experienced agent working foreclosures consistently over these past few years, I know the options for homeowners in foreclosure or delinquent on their mortgages. AND as a Realtor® with 26+ years experience, I can help and have prepared this report detailing this information.

I hope that you will review this information carefully, so that your next steps are the right steps toward a real solution.

Let me help you evaluate your options and remedies and get back on track to a solid, stable future. Contact me.

Foreclosure Avoidance Options

Foreclosure is one of the most devastating financial challenges that a family can face and one that many times can be avoided. The options available to residents for foreclosure are many, including but not limited to short sales.  

The following is a brief explanation of these options:

Reinstatement

A reinstatement is the simplest solution for a foreclosure, however it is often the most difficult. The homeowner simply requests the total amount owed to the mortgage company to date and pays it. This solution does not require the lender's approval and will 'reinstate' a mortgage up to the day before the final foreclosure sale.

  • Benefit: Does not require the mortgage company or lender's approval.
  • Drawback: Requires that a homeowner be able to pay all back payments, fines and fees.

Forbearance or Repayment Plan

A forbearance or repayment plan involves the homeowner negotiating with the mortgage company to allow them to repay back payments over a period of time. The homeowner typically makes their current mortgage payment in addition to a portion of the back payments they owe.

  • Benefit: Allows the homeowner to make back payments over time.
  • Drawback: Requires that a homeowner be in a financial position to pay not only their current mortgage, but also a portion of the back payments owed. Some mortgage companies will require a homeowner to 'qualify' for forbearance.

Mortgage Modification

A mortgage or loan modification involves the reduction of one of the following: the interest rate on the loan, the principal balance of the loan, the term of the loan, or any combination of these. These typically result in a lower payment to the homeowner and a more affordable mortgage.

  • Benefit: Reduces the payment a homeowner is required to make on a monthly basis and may reduce the principal balance of the loan
  • Drawback: Requires that a homeowner 'qualify' for the new payment and will often require full documentation. Lender has to be actively pursuing modifications. The reality is that most never work out and the amount owed is simply tacked on to the back end of the loan.

Rent the Property

A homeowner who has a mortgage payment low enough that market rent will allow it to be paid, can convert their property to a rental and use the rental income to pay the mortgage. CAUTION: DO NOT COLLECT RENT and stop paying your mortgage. That is fraud and carries severe penalties.

  • Benefit: Allows homeowner to keep property indefinitely.
  • Drawback: The issues that can arise with a rental property are many, and rent often does not cover the full cost of property ownership and maintenance so a shot sale or foreclosure occurs anyway. Owners can easily get into additional legal issues. 

Deed-in-Lieu of Foreclosure

Also known as a "friendly foreclosure," a deed-in-lieu allows the homeowner to return the property to the lender rather than go through the foreclosure process. Lender approval is required for this option, and the homeowner must also vacate the property.

  • Benefit: Many times in a successful deed in lieu, the lender will forego their right to a deficiency judgment.
  • Drawback: Requires that a homeowner vacate the property, and a deed in lieu may be reported to credit bureaus as a foreclosure.

Bankruptcy

Many have considered and marketed bankruptcy as a "foreclosure solution," but this is only true in some states and situations. If the homeowner has non-mortgage debts that cause a shortfall of paying their mortgage payments and a personal bankruptcy will eliminate these debts, this may be a viable solution.

  • Benefit: Does not require lender approval.
  • Drawback: If a homeowner cannot afford their mortgage payment, a bankruptcy will only stall—not stop—the foreclosure process. Bankruptcy can be costly, is damaging to credit scores, and can only be declared once every seven years.

Refinance

If a homeowner has sufficient equity in their property and their credit is still in good standing, they may be able to refinance their mortgage.

  • Benefit: In some cases, this will lower payments.
  • Drawback: In today's market, a refinance will almost always raise mortgage payments, and is an expensive process.

Servicemembers Civil Relief Act (military personnel only)

If a member of the military is experiencing financial distress due to deployment, and that person can show that their debt was entered into prior to deployment, they may qualify for relief under the Servicemembers Civil Relief Act. The American Bar Association has a network of attorneys that will work with servicemembers in relation to qualifying for this relief.

  • Benefit: If qualified, this will lower payments on all consumer debt in addition to mortgage payments.
  • Drawback: Must be active military to qualify.

Sell the Property

Homeowners with sufficient equity can list their property with a qualified agent that understands the foreclosure process in their area.

  • Benefit: Allows homeowner to avoid foreclosure and harvest some of their equity.
  • Drawback: In most cases today, homeowners do not have sufficient equity to sell their property without negotiating a short sale (see next solution).

Short Sale

If a homeowner owes more on their property than it is currently worth, then they can hire a qualified real estate agent to market and sell their property through the negotiation of a short sale with their lender. This typically requires the property to be on the market and the homeowner must have a financial hardship to qualify. Hardship can be simply defined as a material change in the financial stability of the homeowner between the date of the home purchase and the date of the short sale negotiation. Acceptable hardships include but are not limited to: mortgage payment increase, job loss, divorce, excessive debt, forced or unplanned relocation, and more.

  • Benefit: A short sale allows the homeowner to avoid foreclosure and salvage some of their credit rating. This also keeps foreclosure off the individual's public record, and in many cases will allow the homeowner to avoid a deficiency judgment. Borrower may qualify for another mortgage in as little as 24 months (as opposed to five years for a foreclosure).
  • Drawback: Short sales can be a trying process in which a homeowner is best served by contracting with a qualified real estate agent to guide the way.

This represents only a summary of some of the solutions available to homeowners facing foreclosure. Understanding your options now could mean all the difference in the world.

Contact me. We can help. At the very least we can review all your options so you understand them clearly and make the best choice for you and your family.

This site, Richard H. Zwick, Zwick Realty Group & Sand Dollar Realty are not providing legal or tax advice. The information provided is for educational and informational purposes only. It is recommended that sellers considering a short sale should consult an independent legal and tax adviser for more information.
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