Saturday, February 28, 2015

Behind On Your Mortgage? What Are Your Options?

When someone falls behind on their mortgage, the first thought he or she usually has is to walk away and allow the property to be foreclosed upon by the lender.
While foreclosure may be the first thought, it should be the last resort.

There are actions that you can take in an attempt to save your home. At the very least, the options will help you stay in your home longer.
So first consider these other options.

1.       Loan mitigation/modification: If you are working and drawing a steady income, you may qualify for a loan mitigation with your lender. Loan mitigation involves submitting an application to your lender documenting your income and expenses along with an explanation as to why you are having trouble paying your mortgage.

Loan mitigation is essentially a negotiation with your lender which may reduce

·   Principal amount owed;

·   Interest rate which will reduce the monthly payment; and/or

·   Monthly payment regardless of the other aspects of your loan;

·   Or possibly a combination of one or more of these terms.

2.       Short sale: What is short sale? A short sale involves selling your home for less than what it is owed on the mortgage. The buyer’s offer to purchase is submitted to the lender who then decides whether or not to accept the offer.
      The lender may accept the sales price as payment in full on your debt. In most cases, the lender will not attempt to recoup the balance owed. If the lender opts to not pursue collection the additional balance owed, it is called forbearance.
In many instances, you may be able to negotiate a cash payment from the lender for moving expense, usually a few thousand dollars.
Here is an example of how a short sale works. Say you owe $300,000 on your mortgage. If you attempt to sell your home and a buyer offers $250,000, you accept the offer and submit it to the lender for approval. The lender may accept the $250,000 as payment in full and discharge the remaining $50,000 of debt. The lender, however, is not required to forgive the remaining debt and may continue to hold you responsible for the unpaid balance.
Another advantage to a short sale is that attorney fees, realtor commissions and closing costs are usually borne by the lender and buyer.
3.       Deed in lieu of foreclosure: Deed in lieu of involves turning over the deed to the property (ownership) to the lender. In exchange, the lender agrees to not pursue foreclosure through the court process. This avoids a public record of foreclosure.

4.       Keys for cash:  Keys for cash is similar to deed in lieu of. The difference is that with keys for cash, the lender will give you a cash payment in return for turning over the keys to the property. If the property is in good condition and has been maintained, this may be a viable option. This option also avoids the very public foreclosure process.
If your lender has already filed for foreclosure, there are still actions you can take to possibly keep you in your home longer, though those actions are more limited. At this stage of the process, it is important that you show up for all court dates. By doing so, you will know what is happening with your case as well as potential opportunities to explain your situation to the judge to ask for more time to receive a short sale, or work out another resolution with the lender.
Taking these steps usually will help keep you in your home for several months, maybe even years. I know of several instances where the homeowner has been in the foreclosure process for several years.
If you are dealing with mortgage issues, do not hesitate to ask for professional help.

DISCLAIMER: Nothing in this article is intended to offer legal advice

This topic is elaborated on in my book “Money Matters Made Simple: A Woman’s Guide to Financial Health and Wealth” which can be purchased from my website or on Enter code X5S2AAZR for a 10% discount.

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