Help Prevent Foreclosure ~ Hampton Roads Real Estate Ramblings

Help Prevent Foreclosure

Wednesday, April 14, 2010

Hello Hampton Roads,

How do you Help Prevent Foreclosure?
With a wave of foreclosures on the rise, if you find yourself having trouble paying your mortgage, you may want to consider ways to help prevent foreclosure.  To find the best solution for you, start by keeping track of your financial records:

  • Evaluate your budget to eliminate unnecessary, discretionary spending and prioritize expenses like your mortgage payments. 
  • Determine if you can set aside extra earnings to save your home.
  • Check your mortgage to see if there are any disputes to resolve or taxes to pay. Settle those while you still can in order to prevent accumulation and higher payments.

Doing the steps above will help you to avoid your lender filing a Notice of Default (NOD). This document is filed in public records and says that the borrower is behind the mortgage payments and the lender will seize the home unless the loan is brought current.

However, if it appears that you’ll unable meet your mortgage obligation, you should talk to your lender as soon as possible and seek approval for any of the ways listed below to help prevent foreclosure:

Forbearance

If you still have the means to catch up on loan payments (e.g. you got a new job, expecting a bonus or tax refund), forbearance will allow you to make partial payments, or postpone payments, as long as that the lender agrees.

After forbearance, the loan may be reinstated generally if a lump sum payment (penalties, fees, back payment) is made to bring the loan current. Otherwise, a repayment plan may be offered; this is when you may not be able to afford the reinstatement lump sum payment but can start making payments to catch up; the lender may let you pay an additional amount each month until you are able to fully pay your mortgage.

Loan Modification

Loan modification is when the lender allows the terms of a loan to be changed such as a reduced interest rate or an extended loan maturity date or to add past due payments to the balance of the loan.

Deed in Lieu of Foreclosure

When your lender accepts a deed in lieu of foreclosure, the property reverts to the lender in exchange for having the lender cancelling/ forgiving the debt. Sometimes, you may be required to list your home for a short period of time before the lender will accept a deed in lieu of foreclosure.

Short Sale

A short sale is when a lender is willing to accept a discounted payoff on a mortgage thus selling the home “short” the mortgage amount, and avoiding the legal expenses of foreclosure, and has the benefit of the owner avoiding the credit blemish due to foreclosure. This option may or may not relieve the owner from the obligation of a deficiency judgment; meaning that the owner may still be liable to pay for any losses.

Re-Finance or Sell Your Home

If you have equity in your home, refinancing or selling your home may be viable ways to help prevent foreclosure.   However, refinance loans may be difficult to qualify for given today’s tight credit market or may even result in higher monthly payments.

File for Bankruptcy

Filing for bankruptcy, Chapter 13 can be used to temporarily suspend the foreclosure process since foreclosure is suspended until you are discharged from bankruptcy.  However, Chapter 13 still requires a repayment plan and there will be a bankruptcy on your credit.

Again contacting your lender early in the process is the best way to help yourself and ensure the greatest number of options are open to you.  You should also seek legal and professional advice.  Furthermore, the US Dept of Housing and Urban Development (HUD) has a link on it’s site with offers for free “Foreclosure Avoidance Counseling


Thanks for Reading,


_________________________
Serving your Hampton Roads and Virginia Beach Real Estate needs.