If you're facing house foreclosure chances are you are uncertain of what to do. No one wants to lose their home, but sometimes there are no options left besides throwing in the towel. Believe it or not, even if you cannot save your home you can overcome this hurdle.
Let's face it. House foreclosure is scary. Not only do you lose a valuable asset, foreclosure has a tendency to strip away confidence and often leaves people feeling like a failure. As one who frequently talks to people facing tough decisions, I almost always recommend sitting down with a calculator and figuring out if saving your home is worth the effort.
Certainly, there are programs available that can help borrowers work out a plan with their lender. Some banks will offer options upfront, while others are unwilling to engage in negotiations unless borrowers can provide lump sum cash to cure mortgage arrears.
The first step of foreclosure prevention should be contacting your lender to determine what options are offered. This is often the hardest thing for borrowers. They often procrastinate for fear their lender will immediately repossess their house or demand payment they cannot afford. The truth is banks must follow legal protocol which includes sending out a Notice of Default (NOD) letter, followed by Lis Pendens.
The foreclosure process can take anywhere from a few months to over a year. However, once banks issue the NOD, options available to borrowers are limited. In other words, it is crucial to take action long before the bank files legal paperwork.
Loan default is typically managed by bank loss mitigation. Once borrowers miss a payment their account is turned over to a loss mitigator who initiates the collection process. When borrowers are facing temporary financial setbacks the bank might allow them to enter into mortgage forbearance. This agreement lets borrowers skip a few payments; however, they must be capable of paying missed payments in full at the end of the forbearance plan.
Another foreclosure prevention option is loan modification. This plan alters loan terms and reduces loan installment amounts by lowering interest rates. Some lenders are reducing the principal amount to help borrowers stay in their home, but this practice is not widely accepted. The only way to know if your lender engages in reducing principal amounts is to contact the loss mitigation department.
One program borrowers should consider is Making Home Affordable. Not all lenders participate in this program, but those that do are required to respond to borrowers' request for foreclosure help within 30 days.
Making Home Affordable offers several programs to help borrowers save their home. These include: loan modification, mortgage refinance, and foreclosure alternatives. This program also offers assistance to property owners who are enduring long term unemployment and those who have experienced substantial reduction of property value which has left them owing more than their home is worth.
Homeowners who do not qualify for loan mods or mortgage refinance should talk to their lender about real estate short sale or deed in lieu of foreclosure. Those who qualify for either may want to investigate options offered through Making Home Affordable.
The MHA 'Exit Gracefully' program offers homeowners up to $3000 in relocation assistance. Although borrowers lose their home, short selling and deed in lieu can be better options than foreclosure.
It is crucial to determine if the servicing lender accepts the short sale or deed in lieu as satisfaction of payment toward the loan. One important aspect of these foreclosure alternatives is the potential to be held financially responsible for deficiency amounts between the loan balance and sale price.
It can be helpful to consult with a mortgage specialist or housing counselor to assess available options and the pros and cons of each. The Obama Administration has provided nearly $73 million in housing counseling grants through the Department of Housing and Urban Development. Individuals in need of advice can learn more about HUDs housing counseling program at HUD.gov.
Last, but not least, we offer substantial information about foreclosure prevention and alternatives in our house foreclosure article library.
Published on March 17, 2011 at 03:55 AM