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If you’re facing foreclosure, then you are probably under stress. You don’t know what is going to happen. How long will it take before the bank kicks us out on the street? Will I owe my lender a ton of money? Will I ever get my life back? That’s why we put this page together. You need to know what your options are. So, let’s go thru them here.
Option #1: Do nothing and the lender forecloses on the house. Please be aware that in most states the foreclosure process can take a long time. I’ve seen it take some lenders up to a year to foreclose on a house. Some banks have better lawyers and can get a foreclosure done in 3-4 months. But, that is often rare.
Option #2: Deed-In-Lieu of Foreclosure. A “Deed-in-Lieu” is where you surrender your home to the lender. This enables the lender to sell your home faster and protect their investment. What benefit does it give you? None. Do not consider this option unless the lender gives you something in return
Option #3: Loan Modification to reduce your mortgage payment. If you want to keep your home, then it is a good option. Many lenders will reduce your interest rate, or extend the term of the loan. To qualify, you often have to send your lender all of your pay stubs, bank statements, and other financial documentation.
Option #4: Reinstatement. This is when you pay the lender for all back payments, late fees, and other related costs. After that you start making normal monthly payments. This restores your account to its former current status. The only problem is that it requires you to come up with all the back payments and other fees.
Option #5: Get a New Loan and pay off your old loan. This is a good option if you still have equity in your home. However, if you owe more than your home is worth, then it will be hard to find a lender willing to pay everyone off. The other problem is that when your credit history shows late payments, then it will be hard to get a new loan.
Option #6: Sell the property. If you don’t want to your house anymore, then this is a good option to consider. However, if you owe more on the mortgage than the house is worth, then you will need to sell thru a short sale.
Option #7: Rent the property. This is a good way to earn some extra money. However, many mortgages are written with legal clauses that force you to forward any rent proceeds to the lender. In addition, many local and state governments have recently written laws forbidding you form renting a property unless the mortgage is current.
Option #8: Bankruptcy. This used to be a great option for a fresh start. However, in recent years the bankruptcy laws were tightened up considerably. The law now forces the bankruptcy judges to steer you to a Chapter 13 bankruptcy. This is versus the better bankruptcy option, which is a Chapter 7. The difference between the two is that a Chapter 7 gets rid of all your debts. A Chapter 13 basically sets you up on a court monitored repayment plan.
Under a Chapter 13, many people find themselves stuck under the same burden of debt that caused the problem in the first place. Only this time, they have to pay all the extra costs associated with the bankruptcy. I’ve heard some experts say that your just better of not paying your creditors than doing a Chapter 13 bankruptcy. This costs you less money out of pocket and your credit gets cleaned up faster.
Option #9: Short Sale. A short sale is when you owe more than your home is worth. You sell it with the assistance of a licensed real estate agent. It costs you nothing. The agent gets paid by your lender. It is well known that a lender will net more money on a short sale than taking a home back thru foreclosure. Why? A lender saves money on interest, attorney fees, and other related foreclosure costs.
A recent study done by the Boston Consulting Group showed that a lender will reduce their losses considerably with a short sale. If you are interested in a short sale, or have any specific questions or need help, please give me a call at (916) 747-2267. Remember I’m here to help you in any way that I can.