Pre foreclosure is the process instituted by mortgage lenders when borrowers default on their house payments. Most lenders take pre foreclosure action when the borrower fails to remit their mortgage payment for two or more consecutive months. Occasionally, lenders will wait three months before filing pre foreclosure notice; however, this is rare.
The pre foreclosure stage gives borrowers an opportunity to work with their lending institution to rectify the situation and avoid foreclosure. If the borrower is able to get their mortgage payments current the lender will generally reinstate the loan and no further action will be taken.
If the borrower is unable to get caught up on their mortgage payments, and depending on the circumstances, the mortgage lender may offer a Special Forbearance agreement. This agreement allows borrowers to reduce or suspend payments for a specified period of time. In some cases, mortgage payments are reduced up to 50 percent for a period of three years.
While this may be a solution to avoiding foreclosure, it's important to consider the long-term financial impact. Not only will the borrower be paying on the mortgage loan for a longer period of time, they will also be paying additional interest. This could add several thousand dollars to the loan. Obtaining a Special Forbearance requires the borrower to fill out financial documents and provide proof they are able to meet the requirements of the payment plan.
During pre foreclosure some lenders allow borrowers to obtain a Mortgage Modification. This type of agreement allows borrowers to refinance or extend the terms of the loan. Mortgage modifications are a good choice for people who have recovered from the financial challenge that caused them to fall behind in their mortgage payments.
If borrowers are facing financial hardship due to serious illness or loss of employment, they may qualify for a Partial Claim through the U.S. Department of Housing and Urban Development (HUD). When a lender files a partial claim, HUD will pay the lender the amount necessary to bring the mortgage current.
To qualify for a Partial Claim, borrowers must be at least four months, but no more than twelve months, delinquent on their loan. Borrowers must sign a promissory note and a lien is placed on the property until the note is paid in full.
In addition to Partial Claim, HUD offers the Pre Foreclosure Sale Program (PFS) which allows the borrower to sell their home and use the profits to satisfy the mortgage debt. To qualify for PFS, borrowers must meet certain criteria and adhere to HUD policies.
Another option available to borrowers in pre foreclosure is known as a Short Sell. This option allows borrowers to sell their home for less than is owed and walk away free and clear of the debt. Although a short sell is reflected negatively on the borrower's credit report, it is not as derogatory as a foreclosure.
If you are currently facing pre foreclosure, it's best to consult with a real estate professional such as Simon Volkov. We can help you sort through the options and determine which best suits your financial situation.
First we need to gather information about your pre-foreclosure property. To get started, fill out the requested information on our secure Pre-Foreclosure form. There is no fee to speak with one of our highly trained professionals. Upon receipt of your information we will contact you within 48 hours.
We understand the urgency of your situation and would like to work with you to dissolve the stress associated with the pre foreclosure process. Contact us today to discuss your options with one of our friendly and knowledgeable associates.
Published on May 07, 2008 at 02:17 AM
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