My Options
What Are Your Options?
You have several options to help stop or prevent foreclosure. Every option is different and has certain requirements to get approved by your mortgage lender. You will have to qualify for an option and the lender has to agree to specific terms.
Different loan modification options include:
Reinstatement Plan
The Reinstatement is basically the total amount that is past due including late fees and attorney costs. Paying the past due balances will get your mortgage caught up immediately. There might be a huge amount of past-due fees which could include back payments, late fees and legal expenses.
Repayment Plan
Another way to bring a loan current is the repayment plan. Lenders will require that up to 50% of the past due balance is paid. While this sounds great, in many cases this is just not possible. After all, if you had 50% of the past due balance, you probably would not be that far behind. You will still need to collect all the documentation but will ask that your lender work with you on obtaining a reasonable amount of money from you to bring your loan current.
Loan Modification/Loan Restructuring
Most people will find themselves using a Loan Modification Plan to stop foreclosure. If you can currently make your regular payment, but you cannot catch up with the past-due amount, you may negotiate with your lender to roll any past-due amounts, including interest and escrow, into the unpaid principal balance.
If you are unable to make payments at this rate, you will need to negotiate with your lender to extend your loan for a longer period of time, modifying the loan amount to a more affordable level. You may be successful at lowering the interest rate, giving you a lower monthly payment which you can afford. If your rate has adjusted, you may be able to have the rate adjusted back to the lower rate.
Loan Forbearance
Loan Forbearance is designed to give people time to gather their assets. During Loan Forbearance, the mortgage company allows you to delay or reduce payments for a short period. This delay does come with a commitment and understanding that another option will be used after the short period to bring your mortgage to a current status. This could delay and even terminate the legal action taken by your lender.
Partial Claim
Partial Claim only applies to clients with FHA loans. Your mortgage company might agree to help you with a one-time payment, which would come from the FHA Insurance Fund.
Qualifications needed for this help includes:
- Must be at least 4 months delinquent, but no more than 12 months
- Able to begin making full payments again
- Resolution of past hardship
- May or may not be in Foreclosure
- The mortgagor has the ability of long-term financial stability to support the mortgage debt or make the payment
- If the home owner cannot bring the loan current through a forbearance of loan modification
- Property is primary residence
- HUD will require a signed promissory note. HUD will then place a lien on your property which is interest-free and will allow you to bring your loan current. However, the balance of this loan will be due when you pay off the loan or sell your home or leave the property
Terms for Partial Claim:
- Interest-free note
- No monthly or periodic payments
- Note due when the mortgage is paid off or when the home owner sells the property
- No repayment penalty
- A refund can be applied for the mortgage insurance premium when the note is paid in full
- Note payable to HUD
- Partial payments can be made by cashiers check or certified funds
Pre-Foreclosure Sale
If you are willing to sell your home or currently have your house on the market, some lenders might agree to put your foreclosure on hold while you attempt to sell your home through traditional real estate methods. This will stop the foreclosure process and may allow you to sell your home and walk away with some money in your pocket, rather than losing it! In some occasions, the new investor may be willing to give you a lease option to buy.
Short Sale
For some home owners, selling their home and starting over is actually the relief that they need. Home owners might review their financial portfolio and realize that they obviously cannot afford their home anymore. Most home owners have finally realized this after a long period of time, then have tried to sell their home the original way and have had no success.
Due to current market conditions beyond your control, many home owners cannot sell their home for their offering price. This is where a Short Sale comes in and allows you to sell your home at a discounted price.
Deed-in-Lieu of Foreclosure
A Deed-In-Lieu procedure allows the home owner to give the property voluntarily back to the lender. Often, the debt or deficiency is forgiven. A Deed-In-Lieu will not save your home, but may be used to avoid a long legal process of foreclosure and increase your chances of getting a loan in the future. Deed-In-Lieu will have a negative affect on your credit. However, it is often a better alternative to a foreclosure.
Loan modifications can be arranged for any type of home and it does not matter if the home is owner occupied or an investment property.
Can you try to negotiate with the lender on your own? Of course you can. Just as if you were being sued, you have the right to represent yourself in court. However, that is usually not the best idea.
Homeowners who are behind or in default are in no position to effectively negotiate with their lender. A professional mitigation team will build a case which places the lender in an obligatory position. Statistically, a legal team will get you a much better deal than you can accomplish on your own.
It is very difficult to effectively negotiate with your lender when you are behind on your payment. We separate the emotions and turn this into a business decision for you and the lender.
Where to get my money from?
What if you don’t have the money to pay for this?
In reality, paying a professional $2,000-$4,000 to save $100,000, save your long-term credit and save your house? There is really no question!
There are different ways to get the fee, none of which are ones that you would typically want to think about, but again the goal is to keep your house: credit card, savings, personal loan, loan/gift from relative. You can typically use any combination.
If a homeowner has already stopped making their mortgage payments - where is that money going?
A typically overlooked cost is what it would cost the homeowner to move out of their home and into a rental, including security, cleaning and pet deposit, moving costs, first months rent, utilities, insurance and more.
