I’m in trouble
and can’t pay
My mortgage.
What are my options?
There are several options, some of which will help you save your home and some of which are truthfully just ways to try to make the best out of a very bad situation where you will still lose your home. Here they are in order from best to worst cases:
Loan Modification
If the lender will not accept a Short Refinance, a loan modification (loan mod) can often be negotiated. A loan modification involves working with your lender to change your loan terms. An example would be changing a monthly adjustable rate mortgage(option arm) with a rate of 7.5% and a 30 year term into a 40 year fixed rate with an interest rate of 5.5%. Currently loan modifications are more widely accepted by lenders and are being encouraged by the Federal Government. See the FAQ section on Federal Bailout Programs.
You should exhaust every option for keeping your home before proceeding to any option that starts with the loss of your home as a given.
There is also an excellent site for information about loan modifications at www.loanmodificationconnection.com, which you may wish to visit. There are many of the same documentation requirements for a modification as there are for a short sale, so yo may wish to go ahead and read that section here. Obviously, this is a better option than anything down lower on this page; so, if you think you could stay above water on your bills if you just got a break on your mortgage payments, try this first.
Short Refinance
A Short Refinance, also known as a short payoff, is a transaction, where the lender agrees to accept less than the full amount owed. Instead of the property being sold, it is refinanced with a new lender.
The short refinance allows the homeowner to retain ownership of the property, while at the same time avoiding a foreclosure or possible bankruptcy. If you want to keep your home, but don't have enough equity to get the bank to do a loan modification, a short refinance may be your answer.
By negotiating a short refinance with your current lender, you can obtain a payoff of less than the full amount owed, and refinance your home with a new lender. It's sort of like doing a short sale to yourself. Your lender will require that you find a new lender willing to refinance the home at the reduced price that they agree upon, so start looking now. There may be tax implications with this option that are similar to those in a short sale, so read about that in the FAQ section. Also, you’ll need to have a clear agreement, in writing, that your current lender won’t pursue a deficiency judgement against you for the amount that your are short.
Short Sale
A short sale is usually an arm's length transaction, where the current lender agrees to accept less than the full amount owed when the property is sold.
If you are facing foreclosure and don't have thoughts of keeping your home, we can also negotiate a short-sale.
If you already have someone to purchase the home, but need a short sale negotiated, we can help. Or, if you do not have a potential buyer, but feel the only way to get out of the house is through a short sale, we can also negotiate a pre-short-sale price with your current lender. This will allow you to put the house on the market for sale at a set short sale price, and sale the home quickly.
If you have decided that it is in your best interest to do a Short Sale, you will want to have an expert in this field contact you as soon as possible. Call me today to get started. Read the rest of the FAQ section on short sales.
Deed-in-lieu of Foreclosure
The deed in lieu of foreclosure offers several advantages to both the borrower and the lender. The principle advantage to the borrower is that it immediately releases him 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 he would in a formal foreclosure.
If you have been unable to make your monthly mortgage payments and have also been unsuccessful trying to sell your home at the market value, this form of foreclosure may be what is necessary to get you back on track. This procedure allows you to transfer your property voluntarily to your lender or Mortgage Company and your debt or deficiency is often forgiven. This will not save your home, but it will help you with your chances of getting another mortgage loan in the future and it will help you avoid the lengthy legal process of foreclosure. Although it is a negative strike on your credit rating, it is less harmful than a mortgage foreclosure.
Typically your Mortgage Company will require that your home has been listed with a Real Estate Agent for at least 30 days and there are no other liens on the property for them to approve you. Some Companies may also require that the property be vacant, an interior appraisal of the property and a minimum of 60 days prior to a Foreclosure sale. Let us help you with filing the necessary paperwork and negotiating with your Mortgage Company.
FORECLOSURE - You really don’t want to go there.
BANKRUPTCY - You don’t want to go there either. Read more on why in the FAQ section.