Credit River,MN (WiredPRNews.com) — Some times you just don’t know what to do,and you start searching for some answers which can help save your home and give you time to re group and look at all your options, so here is some things to think about as you find your self in a hard spot. This information is not legal advice and you should always consult a legal professional,but it will make you a lot smarter and open up new possibility’s and give you some tools as you re build.
1. Repayment plan — Easy to understand, easy for creditor acceptance. The debtor pays a portion of the arrearage and agrees to pay the rest in addition to the regular payment over a period of months. With proof of the income and the proper down payment, most lenders will accept this type of plan all day. Expect half of the arrearage plus its legal fees get paid up front with a promise to pay the rest of the arrearage in addition to the regular payment within six months. Plans with less down and paid over a longer period of time can be negotiated by Loss mitigation professional.
2. Short Sale — The property sells to a third party; the creditor accepts this price as full settlement of the debt if it is negotiated that way. Beware of the bank attempting to take a short sale and ask for a mortgage deficiency too. In cases where the owners being foreclosed on have many other assets there may be no way out of the foreclosure deficiency.
3. Forbearance — In exchange for money or the debtor taking some other action (perhaps listing the property with a Realtor or making repairs) the creditor agrees to temporarily cease legal actions. Sometimes in cases of hardship the lender will just allow a break in payments to allow a situation to resolve itself. You might find this with medical issues or job losses where by granting some time to stay in the home with a forbearance on mortgage payments the homeowner gains the ability to make payments once again by healing and/or returning to work. In these cases a modification or repayment plan must still be negotiated to deal with any arrearage that built up during the forbearance.
4. Friendly Foreclosure — The creditor or a friendly third party that has bought the mortgage sells the property at foreclosure to clean the title of other lien holders. Later the property sells back to the debtor or another predetermined entity.
5. Deed in lieu of foreclosure — Here the debtor gives the property back to the creditor usually in exchange for their forgiveness of potential deficiencies. Do not think this happens without some negotiation by you or a foreclosure specialist. Even if you give the house back or the bank takes it at a foreclosure auction you may owe the deficiency. This amount will be the difference between what the house sold for at the foreclosure sale and what you owe including the legal fees. While the deficiency can be settled without paying any of it, this must be agreed to and certainly does not happen automatically in most states. Most banks will not consider a deed in lieu of foreclosure until you have attempted a short sale for a few months.
6. Short pay or Short refinance — In most situations people accomplish this through a refinance of the property facing foreclosure. Example: The debtor owes $100,000 on their mortgage with another $15,000 in rearrange and legal fees. Someone negotiates for the loan to be settled for $80,000 and arrearage a new loan for $85,000 to cover paying off the original bank and all associated transaction fees. The debtor has now avoided the foreclosure and eliminated $30,000 of debt. Sometimes a friend, relative or investor buys or pays off the mortgage from the creditor. Another way to make this work may be to negotiate as outlined here but instead of finding a foreclosure loan to cover both the settlement and the legal fees find the best loan you can and have friends or family make up the difference. at a discount
7. Modify the existing mortgage — In simple terms, the creditor, usually a bank, agrees to change the terms of the loan. Most often the changes are temporary. Reducing the interest rate, principal portions of payments, or extending the amortization in an effort to reduce overall payment obligations, remain the changes most acceptable to creditors. Unless the delinquency remains small with a loan at a local bank or the debtor has a nasty hardship under a government program this can be a tough plan to get through the creditor’s guidelines. Often a professional foreclosure negotiator can get these plans approved even when the debtor cannot.
8. House-sitting — I made up this term for a situation I sometimes see; it’s really a form of forbearance. A property owner, most times with investment property, cannot pay the mortgage. The bank does not want to take title to the property, probably because of environmental, management or other liabilities. The property owner keeps title and “House-sits” the property until one party or the other can execute another option.
*Bankruptcy — Filing for Chapter 7 or Chapter 13 bankruptcy protection sometimes paves the best path for debtors to retain their houses and deal with their creditors. Advantages of bankruptcy include the debtor’s ability to stop foreclosure without creditor acceptance and encompassing more than just the mortgage debt with a single action. If bankruptcy emerges as the first recommendation, your personal circumstances must be well suited for this option.
*Full Payoff Refinance — Borrow enough money on a new mortgage to pay off the balance on the old mortgage including arrearage and legal fees. This happens more often then one might guess. If the debtor has enough equity in the house, bad credit will not stop them from getting a new loan.
*Full reinstatement — It doesn’t get easier than this, find out how much arrange is owed and pay it in full. If a debtor could do this they probably wouldn’t be reading this, but just in case, know it exists as an option. In fact, most state laws grant the home owner the absolute right to re-instate before the foreclosure and require that the bank accept the full re-reinstatement and stop the foreclosure. Unless a creditor gives a debtor a hard time, they should not need outside help on this option.
Written by: Michael Malloy (The Credit Physician) This author has been researching the anatomy of the credit report for years,giving readers the information to empower them to take control of there credit reports.
www.creditphysician.net [email protected]