The Dreaded Foreclosure Notice
You walk to the postal box and retrieve your daily mail. You casually glance over the various envelopes as you are slowly strolling back toward your home. Then all of a sudden, you see it. You see a letter from your mortgage lender. You hesitantly open the letter and find out that it is a dreaded foreclosure notice. The letter is telling you that your mortgage payment is in default and that the foreclosure process has begun.
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Getting a foreclosure notice is frightening. You have spent years paying for a house that might be sold to the highest bidder in a few months. Even though facing foreclosure is not any fun, the following tips will help equip you to avoid foreclosure.
- Don't panic
First, do not panic. Things are usually not as bad as they seem. If you are behind in your mortgage, notices will come and usually with increasingly harsh tones. Do not worry. The foreclosure process takes time. It can take anywhere from a few months to a year to finalize the foreclosure and sell the property. So, just take a deep breath, relax, and find out what you should do next.
- Talk with your mortgage lender
Do not be afraid to talk with your lender. Believe me; they do not want your house. They want your money. Lenders are prepared for defaults and they know that they will happen. They want you to keep your home just as much as you do. Therefore, they will try to work something out with you.
- Start saving for repayment
If you want to keep your home, you will need money. The mortgagor will not let you stay in your home if you do not eventually pay something. Save money or at least a portion of your monthly note so they will know that you want to pay and have something to offer.
- Research your options
There are many alternatives to foreclosure. Loan modification, repayment plans, deed in lieu, short sales, just to name a few. Talk with your lender and go over the many options that are available to you. The following is a list of the most common options for any homeowner facing foreclosure of mortgage payment default.
Alternative Foreclosure Options
- Refinance
Refinancing your home is a great way to ease your financial burden. If your credit score is good enough for the bank to allow a refinance of your property, you could lower your monthly mortgage payment and/or borrow available money to pay off other debts.
- Forbearance and Repayment Plans
A mortgage company grants forbearance when a borrower shows that they temporarily cannot afford to make monthly payments due to hardships, such as, unemployment or medical illness.
After forbearance, repayment plans are usually set in place to allow the borrower to catch up monthly payments.
- Loan Modification
A lender normally grants a loan modification when a borrower needs their loan to be completely re-evaluated or adjusted so that the borrower can afford the monthly payment now and in the future. For example, the borrowers employment downsized or one of the borrowers lost their job and is no longer able to make the usual payments. Therefore, a lender grants a loan modification to a borrower that reduces their interest two points, thus lower their monthly payment by $200.
- Assumption/Lease Option/Rent
Another great alternative to foreclosure is the let someone assume your mortgage, if it is assumable. When someone assumes your mortgage, they are taking up your mortgage with it's payments and balance. You will still be obligated for the loan if they do not pay, unless you sign a release of liability of the mortgage, which the lender can only grant. Lease option considering leasing your home, which should at least pay the mortgage, and after a specified period, the tenant has the option of purchasing the property. The other option is to rent the property for a pre-determined amount of time. Renting will help borrower pay the mortgage and not lose their home to foreclosure. If after the rental lease expires, if the homeowner can afford it, they can move back in the property and continue where they left off.
- Short Sale
A short sale is the selling of a property where the proceeds fall short of the amount to pay the balance of a mortgage. If a property owner can no longer pay the monthly payments and the best alternative is to sell the property, then the lender may approve a short sale of the property. Short sales are great alternatives to foreclosure because the lender saves money in costly legal fees, as well as, the borrower usually does not receive a negative rating or foreclosure on their credit.
- Deed in Lieu
A deed in lieu is consists of a borrower voluntarily given the property back to the lender. In most cases, the property has a market value appraised at least the remaining balance on the property. Again, many lenders agree to this arrangement because it saves the lenders costly legal fees and the borrower can avoid a foreclosure on their credit report.
- Bankruptcy
If all else fails and nothing can be worked out to save the property or the lender cannot or will not agree to any type of arrangement, bankruptcy is an option to consider. Filing bankruptcy should not be entered into lightly. It will appear on your credit report anywhere between seven to ten years, depending on the type of bankruptcy filed.
Foreclosure does not have to be in your future. Talk with your lender and quickly come up with a plan that saves you time, money, and the loss of your property.
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Posted in Financial Services Post Date 03/04/2017
