Here we cover your possible options as a distressed homeowner. The scenarios below are rather lengthy but comprehensive as presented by the CDPE Institute. It is important to know your options; while we want to earn your business, our priority is for you to make the right informed decision that is best for your situation. Keep in mind as you review your options that we are well versed in real estate but offer no legal, tax or financial advice. Should you need assistance in those areas, we have an expert team available to help.
So, let’s jump in:
- Short Sale- A short sale allows the homeowner to avoid foreclosure, minimize financial damage and move on from a burdensome, unaffordable mortgage. In many cases, a short sale allows the borrower to qualify for a new mortgage in just 24 months, as opposed to five years or more after a foreclosure. A trained real estate agent can negotiate a short sale with your lender if you have three qualifications. First, you must show some type of financial hardship. Second, you must have a monthly shortfall, meaning your monthly expenses are greater than your monthly income. Finally, you need to prove that your debts are greater than the
value of your assets (certain investments, property, etc.).
- Reinstatement- A reinstatement is the simplest solution for a foreclosure, however it is often the most difficult for homeowners
to achieve. The homeowner simply pays the total amount past due (including late fees) to the lender. This solution does not require the lenderâ€™s approval and will â€œreinstateâ€ a mortgage up to the day before the foreclosure sale.
- Forebearance or Repayment Plan- A forbearance or repayment plan involves negotiating with the mortgage company to allow the homeowner to repay back-payments over a period of time. The homeowner typically makes current mortgage payments in addition to a portion of the back-payments owed. This option requires lender approval.
- Mortgage Modification- A mortgage modification involves the reduction of one of the following: the interest rate on the loan, the
principal balance of the loan, the term of the loan, or any combination of these. These changes require lender approval and typically result in a lower payment for the homeowner and a more affordable mortgage.
- Rent the Property- This option does not require lender approval, but does require the homeownerâ€™s ability to rent the house
for enough money to cover the monthly mortgage payment. It is important to remember that there may be unexpected costs associated with the maintenance of a rental property in addition to the monthly mortgage payments. Homeowners should take this into consideration when deciding whether this option will work for them.
- Deed-In-Lieu of Foreclosure- Also known as a â€œfriendly foreclosure,â€ a deed-in-lieu allows the homeowner to return the property to the lender rather than go through the foreclosure process. Lender approval is required for this option, and the
homeowner must also vacate the property. Deed-in-lieu can potentially lessen the damage to a credit score and future loan eligibility, and sometimes the lender will forgo their right to pursue a deficiency judgment, meaning the homeowner will not be responsible for further payments.
- Bankruptcy- Many have considered and marketed bankruptcy as a â€œforeclosure solution,â€ but this is only true in some states
and situations. This does not require lender approval, but you must have non-mortgage debts that you claim as a hardship.
Entering bankruptcy can be a risky and costly process. Be sure to seek the advice of a qualified bankruptcy attorney when pursuing this as an option.
- Refinance- As opposed to mortgage modification, refinancing means you will be acquiring a new loan based on your current credit standing. If you have already missed mortgage payments, your credit score may make it difficult to find a loan with cheaper payments.
- Service Members Relief Act (for military personnel only)- If a member of the military is experiencing financial distress due to deploymentâ€”and that person can show that the debt was entered into prior to deploymentâ€”he or she may qualify for relief under the Servicemembers Civil Relief Act. The American Bar Association has a network of attorneys that will work with service members to help qualify them for this relief.
- Sell the Property- Homeowners with sufficient equity can list their property with a qualified agent who understands the foreclosure process in their area. Unfortunately, many homeowners in todayâ€™s market have experienced a decline in home
value and may owe more than what the home is worth.
These options offer a summary of options available to those facing foreclosure. Next, find out “Do You Qualify For A Short Sale?” If you need help exploring your options and want to find out more about how we can help you as Distressed Property Experts, call Ben and Kathy – 404-314-8129 – we are just a call or email away and are ready to assist you.