A Homeowner’s guide: Short Sales and preventing Foreclosure Pt2 (Alternatives to selling)

The solutions

If you are in similar situations as mentioned on my previous post, there are some steps that you should take before refinancing. The first thing you should do is (*if you have enough time*) repair your credit (beware of credit repair companies). Next, calculate if you have built enough equity to benefit from the refinance. If you credit is in good shape and you have built enough equity you will most likely be able to either maintain or lower you payment after you have refinanced. Great! What a relief right?

If you cant repair your credit (beware of credit repair companies) in time to refinance or if you have already missed some payments due to your economic situation worsening (temporarily) because of a job loss, reduction in income, illness, divorce and/or family crisis; then you may qualify to an agreement with your lender for a temporary solution. DO NOT ignore the letters from your lender. Call or write to your lender’s Loss Mitigation department without delay and don’t leave your home as you may not qualify if you abandon your home.

Before you call your lender make sure you have all the information pertaining to your income, assets and expenses this way you can agree with your lender to a solution that will help you and not put you in a worst situation.

Options you may have with your lender are:

Forbearance agreement: If your situation is temporary your lender may be willing to accept a temporary solution. This solution may be a reduction on your monthly payments or temporarily allow you not to make payments until your economic situation gets better. However, as you may already know, nothing is free in this world therefore they may still charge you the interest that will accumulate during this forbearance period and at the end of this forbearance period you may have to either repay the unpaid balance of your payments or add this unpaid balance to the principal of your loan. This may be combined with a repayment plan.
Loan Modification: Your lender may modify your loan to a lower interest rate, extend your fixed rate period on your adjustable rate mortgage (ARM) or completely change your adjustable rate loan to a fixed rate loan or extend your payment period by extending the amortization schedule. In order to qualify for this option you normally need a good credit score with only 30-120days late in payments (a little tricky to do) and income to support the loan modification.
Partial Claim: If your loan is insured your lender may work with you to accept a one-time payment from an FHA-insurance fund to bring your mortgage current. You qualify for this option if you are at least 4 months delinquent in your mortgage but no more than 12 months delinquent and only if you are able to begin making full mortgage payments. When you qualify for this option the US Department of Housing and Urban Development (HUD) will pay your lender the amount necessary to bring your mortgage current. HUD will then place a lien for this amount on your property and it will be due in full when you pay off the first mortgage, refinance or sell your home. The good news is that this promissory note or loan is interest-free
Mortgage relief: If you call your lender, they may extend the period of foreclosure time in order to sell the house

Remember, lenders want you to stay in your home; they don’t want to foreclose on your home. They are not in the business of property management or selling real estate. Foreclosing on a home or selling a home as an REO (I will explain about this on a different article) cost lenders a lot of money so the last thing they want to do is kick you out of your own home BUT if they have to, THEY WILL DO IT!

Following is a video which lists phone numbers you can call in several states for help if you are facing foreclosure

Visit my YouTube Channel

Before making an important decision as a short sale or foreclosure you must read these other articles from the “Homeowner’s guide to preventing foreclosure”:

Homeowner’s guide: Short Sales and Preventing Foreclosure Pt3 (Selling your home)

Comments

10 Responses to “A Homeowner’s guide: Short Sales and preventing Foreclosure Pt2 (Alternatives to selling)”

A Homeowner’s guide: Short Sales and preventing Foreclosure Pt3 (Selling your home) : My Home is My Investment on September 17th, 2007 7:56 PM

[...] none of the solutions listed on the previous post helped you solve your problem you still have other options. Beware however that the following [...]
Combating the Subprime mess on October 4th, 2007 2:50 PM

[...] With their aggressive actions, lenders aim to save themselves huge amounts of money by avoiding short sales and foreclosures on hundreds of thousands of houses. In order for lenders to take these actions, they have been [...]
How long will collection or other derogatory information stay on your credit report? : My Home is My Investment on October 4th, 2007 2:55 PM

[...] credit information: 7yrs Collections: 7yrs from date of last activity Bankruptcy: 10 yrs Foreclosure: 10-12 yrs from the date filed Garnishment: 12 yrs from the date or entry or 7 yrs from the date [...]
Here you have the top ten questions about credit reports on October 23rd, 2007 4:19 PM

[...] How much is my credit score affected by a 30-day late mortgage payment? This is the most important question and the one that will impact your score the most. Your score [...]
Mortgage Rate Freeze Looks to Aid SOME Struggling Homeowners : San Jose-Santa Clara County Real Estate UNCENSORED on August 4th, 2008 6:34 PM

[...] for a freeze but you are struggling with your loan or are facing foreclosure, you could have your loan modified on a case by case [...]
SCAMS/FRAUD in today’s real estate and mortgage industry : San Jose-Santa Clara County Real Estate UNCENSORED on September 12th, 2008 3:31 PM

[...] I’ve also encountered people that got involved with a greedy real estate/mortgage broker and are now facing a short sale or foreclosure. [...]
Buying a Short Sale or Pre-Foreclosure Property : San Jose-Santa Clara County Real Estate UNCENSORED on October 10th, 2008 12:18 PM

[...] this happens the lender will begin calling the homeowner offering to assist them either through a loan modification, forbearance agreement, etc. If the homeowner does not qualify for any of these programs or ignores the calls (this is a big [...]
Foreclosure scams grow rampant in todays Real Estate market : San Jose-Santa Clara County Real Estate UNCENSORED on October 10th, 2008 2:07 PM

[...] Homeowner’s guide: Short Sales and Preventing Foreclosure Pt2 (Alternatives to selling) [...]
Felicia Newman on November 8th, 2008 2:57 AM

I would definitely agree that the last thing this lenders would want is to have to sort to foreclosure. Loan modification is definitely a much easier alternative. That way they are assured you will continue to pay your loans and they will not bear the problem of having to sell the mortgaged house.
Ney on December 16th, 2008 8:51 PM

Felicia,

As you stated, a loan modifications is definitely the better way to handle a borrower in default. However, many lenders still have inept and inexperienced loan modification negotiators in their departments. I believe that is one of the major reasons why so many consumers feel loan modifications are a waste of time.