As a certified distressed property expert (CDPE) specializing in the Fort Collins and Northern Colorado real estate market, I have received this extraordinary training which many agents and realtors haven’t. This training allows me to assess a homeowner’s situation and be able to suggest which of the following strategies or set of strategies a homeowner could use in order to avoid foreclosure.
Here are some of the options a homeowner has to avoid foreclosure.
Reinstatement
If the reason a homeowner missed payments was temporary and it has been resolved then they have the option to reinstate their mortgage right up to the bank sale. In order to reinstate a mortgage, the homeowner has to pay all missed payments, late fees, and legal fees that are due up to the date that the loan is reinstated.
Forbearance or Re-Payment Plan
If the issue that caused the homeowner to miss payments was temporary and the homeowner is not able to make a one-time reinstatement payment, they may be able to negotiate a forbearance or repayment plan. The lender may allow the homeowner a given period of time to pay the delinquencies.
Sell the Property
If the homeowner has equity in their property, they can sell it and cure the foreclosure. Unfortunately, many sellers believe they have to sell much faster than they do and end up taking the first offer that comes along.
Rent the Property
In some cases a homeowner facing foreclosure will have payments low enough to allow them to rent the property and keep up with the mortgage payments. However, this is often a short-term solution since when taxes and insurance payments come due, many homeowners cannot afford them.
Refinance
If the homeowner has sufficient equity, income and their credit has not been damaged then refinancing may be an option. Typically, this is a short-term solution if the issue that made the homeowner late in the first place has not been resolved.
Mortgage Modification
A mortgage company may qualify a homeowner for a mortgage modification if the homeowner has the means to afford their mortgage payments or very close to their mortgage payments. A loan modification is similar to a lower interest refinance where the lender lowers the interest rate on the existing loan in order to lower the payments. The homeowner will have to qualify for a modification by sending in proof of income and expenses.
Short Refinance
This process involves the refinance of a home with a reduction in the principal balance and often the interest rate as well. The borrower will have to qualify for this process both in showing a hardship as well as showing the ability to pay the new mortgage often through a fully documented qualification process.
Deed-in-Lieu of Foreclosure
This is sometimes referred to as a “friendly foreclosure.” The mortgage company agrees to take the deed back in exchange for the property and they typically have no further recourse. This solution only works in cases where there is one mortgage and there are no liens (or very small liens) on the property or in rare cases where a first mortgage holder will negotiate with the second mortgage holder.
Bankruptcy
A bankruptcy may stop a foreclosure and allow a homeowner to reorganize their debt and keep the property. The reality however is that most of the time this is not the case and the bankruptcy only stalls the foreclosure. If the homeowner is not able to make the payments after bankruptcy, the house will foreclose anyway. The other major drawback to bankruptcy is that it makes it very difficult for the homeowner to sell the property once the bankruptcy process has started. It makes it near impossible to negotitate a short sale.
Servicemembers Civil Relief Act (SCRA)
This law provides certain protection to military personnel that are in foreclosure in specific situations. As it applies to mortgages, the law reads: The SCRA can provide temporary relief from paying your mortgage. To obtain relief, a military member must show that their mortgage was entered into prior to beginning active duty, that the property was owned prior to entry into military service, that the property is still owned by the military member and that military service materially affects the member’s ability to pay the mortgage. http://www.uscg.mil/legal/la/topics/sscra/about_the_ssra.htm
Short Sale
When a homeowner owes more on a property than it is currently worth and one of the above solutions do not apply to their situation, there is the option of pursuing a short sale. Keep in mind that realtors with the CDPE designation, like myself, on average sell 80% of their short sales compared with only 10% by real estate agents that do not have the CDPE designation.
Those are the options available to homeowners to evaluate in order to avoid a foreclosure based on their unique situation.
You deserve the best chance to avoid foreclosure and restore hope to your family. Contact me at ShortSaleExpert@MikeMalvey.com for FREE advice and an opportunity to schedule an in-home consultation.
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