Many homeowners, who are at risk of default on their mortgage believe that foreclosure or even bankruptcy is their only solution. However, before you decide to go down this path, make sure you have explored these 5 options to foreclosure:
One of the great possibility for refinance this year has been HARP 2.0 – this program only works for Fannie Mae or Freddie Mac loans. However, the good news is you don’t have to be behind in your payments and it’s ok for the home to be worth less than what you owe. Go to MakingHomeAffordable.gov for more information or call your mortgage professional.
See other options for a refi’s – is a VA refi a possibility? Do you qualify for other programs?
2. Do a lender workout
a. In a forbearance, the lender spreads the back payments, fees, penalties, etc, over a fixed number of upcoming payments (the amount you are behind) to allow the homeowner to catch up. This would be a possibility, when the homeowner is back on track with life and is ready continue payments.
b. With a loan modification, lenders will often work with the homeowner to help them keep the home by reducing or rolling back interest rates (which have probably decreased anyway since the beginning of the loan in question), forgiving back payments or adding them to the loan amount or possibility re-casting the entire loan into a fixed rate that wraps all fees into the new loan.
3. Sell and bring cash to closing
If you have funds available and the deficient amount is not too large this might be for you. Make sure you speak with your finance and tax professionals before you ie. liquidate your 401(k)
4. Offer the lender a Deed in Lieu of Foreclosure
This is a situation where the borrower offers to trade the property to the lender in exchange for the cancellation of the note. This is more likely to work in states with long foreclosure timeline. The lender would agree as he would actually get the property sooner, than going through the regular foreclosure channels. Consult your tax and law professional
Attention: A deed in lieu might release you from your primary mortgage but most likely not your junior lien(s) -definitely get legal counsel before you decide to proceed with this option.
5. Request a short sale
Depending on your foreclosure timeline a short sale might be a possibility to recover some of the debt that is owed.
If you are in the latter stages of the foreclosure procedure, contact a real estate attorney immediately with expertise in foreclosures to determine if there is any possibility to take advantage of those other options.