Foreclosure Avoidance Options

If you have fallen behind on your mortgage payments, or afraid that you might soon fall behind, then the  first thing that you should do is talk to an attorney regarding your options.  Be proactive.  The earlier you contact an attorney, the better your chances for finding the right solution for you.

There are several options available to homeowners who are late on their mortgage payments such as forbearance, loan modifications, refinancing, short sales, deed in lieu of foreclosure, and bankruptcy.  Under these options, you can stay in your home and catch up your missed mortgage payments over the next five years, lower the monthly payment, get rid of mortgage deficiencies, and in some cases, remove your second mortgage.

Forebearance

If you are unemployed, then contact your mortgage lender and ask about the “UP” program.  Any unemployed homeowner who requests a loan modification must first be considered for UP, which provides temporary assistance to a homeowner with hardship related to unemployment.  The minimum forbearance is 3 months, but may be extended at mortgage company’s discretion.  In some situations, the mortgage company may suspend the homeowner’s mortgage payment in full.

Forebearance is a temporary solution and other options have to be explored.

Loan Modification

A loan modification may help you restructure your mortgage agreement.  If you qualify for a loan modification, the current terms of your loan are renegotiated to adjust the payment plan to make it possible for you to catch up on the amount past due and make your payments affordable.

The servicer of your mortgage will look to reduce your monthly mortgage payment to 31% of gross income by either capitalizing outstanding interest, escrow advances, out‐of‐pocket servicing expenses (no late fees); cut your interest rate to as low as 2%; extend the loan term up to 40 years; or defer a portion of principal, interest‐free, until loan is paid off.

Loan modifications are governed by the Home Affordable Modification Program (“HAMP”) and for more information regarding this option, please visit www.coloradoloanmodifications.com.

Refinancing

Refinancing may be another option; however it might be difficult if you are behind on your payments and it can often require an additional down payment.  Also, with falling home prices, the current real estate market makes it difficult to obtain refinancing.

The Federal government is offering a Home Affordable Refinance Program (known as “HARP”) until June 30, 2011.  HARP helps homeowners unable to refinance due to declining property values.  Under HARP, you can replace an ARM or Option ARM mortgage with a fixed rate mortgage or reduce amortization term in order to build equity.

Short Sale

A short sale can be a mutually beneficial way to stop foreclosure as it helps both the homeowner and the lender. A short sale occurs when the bank agrees to sell the property for less than what is owed. A lender may accept this option to avoid the time, expense and hassle of foreclosure as well as ownership of the property.

A short sale allows you to extract yourself from a bad situation while preventing the stigma of a foreclosure on your credit report.  If you want to short sale your property, then contact a real estate agent who has experience in short sales.  Not every real estate is capable to handle the complexities associated with short sales.

Deed in Lieu of Foreclosure

A “Deed in Lieu of Foreclosure” is another way to stop foreclosure in which you essentially turn the house and keys directly over to the bank. If approved, the lender would now own the property and the foreclosure stops allowing you time to move to a new residence.

If you have a second mortgage on your home, then this option typically does not work unless your bank owns the first and the second mortgage.  Also, some banks are hesitant to take the home as the bank is now the homeowner responsible for paying the HOA fees, utilities, etc. until the home is sold at a later date.

A Deed in Lieu of Foreclosure is reported to credit reporting agencies the same way a foreclosure would be. It will not be as damaging, but will still have a negative impact.

Bankruptcy

The final and usually the best option for stopping a foreclosure is Bankruptcy.  A bankruptcy will stop a foreclosure and can be used to provide additional time to allow a short sale or loan modification.

Bankruptcy can also be a way to repay missed payments so you can keep your home.  In some instances, bankruptcy may be able to remove a second mortgage from a property.   Not only can bankruptcy stop a foreclosure, it can resolve other debt problems as well such as credit cards, taxes, medical bills, collection lawsuits, etc.  For more information about bankruptcy, please visit www.ColoradoBankruptcyExperts.com.

CALL US TODAY

You have more rights and options than you know.  The worst thing to do is nothing.  Heupel Law can offer more advice and helpful resources to homeowners facing foreclosure during our free initial consultation.

For more information about foreclosure avoidance and options, call the experts at Heupel Law, (720) 319-8900.