Foreclosure is one of the most devastating financial challenges a homeowner can face. Many options exist to avoid this catastrophic experience. Here is a list and brief explanation of the solutions available to the residents of Brevard County:
Sell the Property
Homeowners with sufficient equity can list their property with a qualified Broker that understands the foreclosure process.
- Pros: Allows homeowner to avoid foreclosure and net their equity.
- Cons: If a homeowner does not have sufficient equity to sell their property, then they purse one of the following options.
If a homeowner has sufficient equity in their property and their credit is still in good standing, they may be able to refinance their mortgage.
• Pros: In some cases, this will lower payments.• Cons: A refinance will raise mortgage payments if the seller has negative equity, seller will often have to put money into the transaction.
Rent the Property
A homeowner who has a mortgage payment low enough can rent the home and use the rental income to pay the mortgage, if negative equity, seller will lose money each month.
• Pros: Allows homeowner to keep property and keep tax write-off.
• Cons: Rent may not cover the full mortgage and repairs and maintenance can become a concern.
A mortgage modification involves reducing the interest rate on the loan, the principal balance, mortgage terms or a combination. Goal is to lower the monthly payment.
• Pros: Reduces the payment on a monthly basis and may reduce the principal balance of the loan.
• Cons: Requires that a homeowner 'qualify' for the new payment and will often require full documentation.
A reinstatement requires the total amount owed to the mortgage company to be paid to date. Options can be implemented up to the day before the final foreclosure sale.
• Pros: Does not require the mortgage company or lender's approval.
• Cons: Requires that a homeowner be able to pay all back payments, fines and fees.
Forbearance or Repayment Plan
A forbearance or repayment plan involves the homeowner negotiating with the mortgage company to allow them to repay back payments over a period of time. The homeowner typically makes their current mortgage payment in addition to a portion of the back payments they owe.
• Pros: Allows the homeowner to make back payments over time.
• Cons: Requires that a homeowner be in a financial position to pay not only their current mortgage, but also a portion of the back payments owed. Some mortgage companies will require a homeowner to 'qualify' for forbearance.
If a homeowner owes more on their property than it is currently worth, then they can try and sell their property by negotiating with the lender to cover the difference between what is owed and what it sells for. The homeowner must qualify for financial hardship. If there are two mortgages then the processes becomes more complicated.
• Pros: A short sale allows the homeowner to avoid foreclosure and salvage their credit. This also keeps foreclosure off the individual's public record, and in many cases will allow the homeowner to avoid a deficiency judgment. Borrower may qualify for another mortgage in as little as 24 months (as opposed to five years for a foreclosure).
• Cons: Short sales can be a trying process and there is no guarantee the lender will go along with the transaction.
Deed in Lieu of Foreclosure
A deed in lieu allows the homeowner to return the property to the lender rather than go through the foreclosure process. Lender approval is required and the homeowner must vacate the property.
• Pros: Many times in a successful deed in lieu, the lender will forego their right to a deficiency judgment.
• Cons: Requires that a homeowner vacate the property, and a deed in lieu may be reported to credit bureaus as a foreclosure.
Many have considered and marketed bankruptcy as a 'foreclosure solution,' but this is only true in some states and situations. If the homeowner has non-mortgage debts that cause a shortfall of paying their mortgage payments and a personal bankruptcy will eliminate these debts, this may be a viable solution.
• Pros: Does not require lender approval.
• Cons: A bankruptcy will only stall, not stop the foreclosure process. Bankruptcy can be costly, is damaging to credit scores, and can only be declared once every seven years.
Servicemembers Civil Relief Act (military personnel only)
If a member of the military is experiencing financial distress due to deployment, and that person can show that their debt was entered into prior to deployment, they may qualify for relief under the Servicemembers Civil Relief Act.
• Pros: This will lower payments on all consumer debt in addition to mortgage payments.
• Cons: Must be active military to qualify.
This represents only a summary of some of the solutions available to homeowners facing foreclosure. Please call me today for a free confidential evaluation of your individual situation, property value, and possible options.
Helpful resource links to research:
• http://www.hud.gov/foreclosure - you can see foreclosure avoidance counseling agencies approved by the U.S. Department of Housing and Urban Development (HUD); visit the HUD Foreclosure Web pages for more information.
• http://www.foreclosurelaws.org - to determine the length of foreclosure proceedings in your state.
• http://www.makinghomeaffordable.gov - Homeowners who are at risk of default may be able to take advantage of today's mortgage rates and keep their homes by refinancing to a 30 or 15 year fixed rate loan via Home Affordable Refinance, a component of the Making Home Affordable initiative launched in early 2009.
• http://www.usfn.org - Attorney's who work with distressed owners may take into consideration the owner's current financial realities and allow for ways to navigate the process with little or perhaps no attorney fees upfront. Consider the U.S. Foreclosure Network (USFN) as a possible source for locating attorneys who specialize in bankruptcy and foreclosure processes and law.