FORECLOSURE
HELP - YOUR OPTIONS
1. Loan Reinstatement. Reinstatement
of the loan (or cure) basically means to pay the lender back.
You would pay back all that is owed to the lender including
all missed payments, late fees, legal fees, foreclosure fees,
and principal. This is done with one large payment and may
be difficult if the payments had fallen too far behind.
2. Repayment Plan. You can
make arrangements with the lender to set up a repayment plan.
If you're in the position to begin making payments again,
work with your lender to repay the backpayments and all fees.
The plan may require higher payments for quite some time in
order to get caught up.
3. Mortgage Modification. You
may be able to change the terms of a mortgage, such as reducing
the interest rate, switching from adjustable rate to a fixed
rate or extending the loan term (usually from 30 years to
40 years). Modifications are very hard to obtain from a lender,
you must have solid foundation to back you up. You may qualify
if you have recovered from a financial problem and can afford
the new payment amount.
4. Foreclosure Buyout. A Foreclosure
Buyout is a special type of loan that uses the equity in your
home to pay off the entire amount owed to your current lender
by a new lender, thus stopping the foreclosure. There must
be enough equity in the home to cover the whole amount. If
your lender will not work with you, another lender may help
you pay off the amount owed. There are few, but some lenders
do 'Foreclosure Buyout' loans.
5. Partial Claim. For FHA and VA Loans only.
Your lender may be able to work with you to obtain a one-time
payment from the FHA-Insurance fund to bring your mortgage
current.
6. Forbearance. Your lender may be able
to arrange a repayment plan based on your financial situation
and may even provide for a temporary reduction or suspension
of your payments. When repaying the loan, unless the term
is extended over a longer period of time (which happens rarely),
the later payments usually need to be higher until the loan
is up-to-date.
(Special Forbearance available for FHA and VA loans only)
7. Deed-in-lieu of foreclosure. You may
be able to voluntarily deeds collateral property in exchange
for a release from all obligations under the mortgage. A DIL
won't save your house, but it wont hurt your credit as a foreclosure
will. This is usually a last effort.
8. Pre-Foreclosure sale. Selling the home
before the foreclosure proceedings are complete will allow
you to avoid foreclosure. If the new appraisal matches or
exceeds what you owe on the property, you may walk away clean
with some cash in your pocket to start over again.
9. Short Sale. If you owe more than the
home is worth, you can make an agreement with a new buyer
to sell your home for less than is owed. This must be approved
by the lender with strong arguments as to why it is in their
best interest to sell short. You typically are not allowed
to receive any money from the sale, but will be better for
your credit than a completed foreclosure.
One Last Option. Don't Do Anything. Obviously
not a very good choice. Your credit record will be tainted
for 7 to 10 years, but you will be able to stay in the house
for a few months without payments, save your money and move
when the house is sold at foreclosure, when you receive an
eviction notice.
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