Avoiding Foreclosure

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House in Hands, avoiding foreclosure, foreclosure tips, short sale, deed in lieuIf you are having difficulty making your mortgage payments because you have lost a job, had a reduction in income or had an increase in your payments, foreclosure may be avoided. Here are some steps to take:

1. Don’t ignore the problem. The further behind you become, the harder it will be to reinstate your loan and the more likely that you will lose your house.

2. Contact your lender as soon as you realize that you have a problem. Lenders do not want your house. They have options to help borrowers through difficult financial times.

3. Open and respond to all mail from your lender. The first notices you receive will offer good information about foreclosure prevention options that can help you weather financial problems. Later mail may include important notices of pending legal action.  Your failure to open the mail will not be an excuse in foreclosure court.

4. Avoid foreclosure prevention companies. You don’t need to pay fees for foreclosure prevention help–use that money to pay the mortgage instead. Many for-profit companies will contact you promising to negotiate with your lender. While these may be legitimate businesses, they will charge you a hefty fee (often two or three month’s mortgage payment) for information and services your lender and a trained real estate professional will provide free.

5. Don’t lose your house to foreclosure recovery scams! If any firm claims they can stop your foreclosure immediately and if you sign a document appointing them to act on your behalf, you may well be signing over the title to your property and becoming a renter in your own home! Never sign a legal document without reading and understanding all the terms and getting professional advice from an attorney or a trusted real estate professional.

6. Examine foreclosure prevention options. Because of recent Federal legislation, an eligible homeowner facing foreclosure has several options based upon lender approval:

  • Loan Modification – You may qualify for a loan modification to make your monthly mortgage payment more affordable. Millions of borrowers who are current, but having difficulty making their payments and borrowers who have already missed one or more payments may be eligible.
  • Short Sale – You may qualify to sell your property for less than is owed to the lender. Under recent legislation, Home Affordable Alternatives Program (HAFA) has standardized the process and dramatically shortened the time frame on eligible loans. In addition to other requirements, the program requires that you list your home for sale with a qualified real estate professional. (Shameless plug…Better Homes and Gardens Real Estate Metro Brokers has a team of real estate professionals who specialize in the facilitation of short sales at NO cost to the homeowner.) 🙂
  • Deed In Lieu of Foreclosure – You may qualify to transfer ownership directly to the lender in full forgiveness of the loan…even if you owe more than the house is worth.

In order to be eligible for any of these options under the recent federal legislation, the following guidelines apply:

  1. The home must be your Primary residence.
  2. The amount you owe on your home must be less than or equal to $729,750.
  3. A financial hardship makes it difficult or impossible for you to make your payments. The financial hardship must be a result of having had a significant increase in your mortgage payment OR a reduction in your income since you got your current loan OR you have suffered a hardship that has increased your expenses (like medical bills).
  4. Your loan must have been obtained prior to January 1, 2009
  5. Your payment on your first mortgage (including principal, interest, taxes, insurance and homeowner’s association dues, if applicable) must be more than 31% of your current gross income.

Even if your loan isn’t eligible under the guidelines above, you may still be able to negotiate an alternative to foreclosure with your lender.

Each of the foreclosure alternatives should be explored before allowing your house to go into foreclosure. Although all of them will have a detrimental effect on your credit, none of them will affect it as severely as a foreclosure. Because of the different potential tax consequences that may apply to you depending upon the path taken, consult an attorney and/or tax advisor.

Has this entry been helpful? Let me know if you need more information on foreclosures.

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16 Responses to “Avoiding Foreclosure”

  1. rockshukoor Says:

    great post! very useful ..

  2. Dennis Doll Says:

    Great information. Every homeowner can benefit from this data.
    The key is to NOT stick your head in the sand. Be proactive and you will benefit in the long run.

  3. Arthur Harris Says:

    Well written blog with good information. The key is that if you get into financial difficulty making your mortgage payments due to a hardship like sickness or loss of a job, speak to your lender immediately.They have a lot of options that may be helpful to you.

  4. Deborah Gaither Realtor Delivering On The Promise Says:

    Good article Dana!
    I plan to share it. Homeowners need the correct information for guidance during troubled times and contacting a real estate professional is the best route compared to “for profit companies” that you mentioned, that will only add to their problems.

  5. Adrien McMackins Says:

    Great information. It is important that sellers know to contact their lender and/or a real estate professional for assistance, and not use these 3rd party companies. For consumers, Better Homes and Gardens Real Estate has agents with training and experience with Short Sales. I am one representing Cobb and Cherokee Counties (another shameless plug). Contact us today for assistance.

  6. MEETA MODI Says:

    Thanks for great information. Metrobrokers has always been a great wealth of resources.

  7. Carolyn Nicholes Says:

    Thanks for the article, Dana. If all “under water” homeowners who are unable to make their mortage payments were aware of the alternatives, it would prevent many from going into foreclosure.

  8. Simah Benyamin Says:

    Great informaton. I plan on sharing this will the public; people need to know. Thanks again.

  9. Judy Levy Says:

    Good read I will be sharing it…

  10. Dick Warren Says:

    Thank you for making it easy for me to show Home Owners that I have been talking with, (who have lost their jobs and have several children to shelter), that they may be able to avoid foreclosure. This information helps us to help them! Thanks..

  11. Martha Edwards Says:

    Thanks for a well written and easy to understand for home owners article Dana, I will be sharing it . . .
    Christina Poodt

  12. Christina Poodt Says:

    Thank you Dana for this very thorough article on foreclosures, written in a format that is easy to understand. If you do not mind, I will be sharing this article, thank you!
    Happy 4th July and have a Great weekend!
    Christina Poodt

  13. Dann Greene Says:

    Thanks for the timely information. I have spoken to many home owners about this subject, before and since I read this blog. They usually ask what dept to I contact at the bank. I usually reply the loan modification or loss mitigation dept.

    What would be helpful would be a list of the major banks with the name and contact informatiion for their foreclosure prevention departments.

  14. Celia Metro Says:

    Excellent information. Homeowners can definitely put this information to good use. Thanks for the tips and I will be sure to share this on my Facebook business page!

  15. Jacqueline Evans Says:

    This is excellent information. I have a few clients that will find this very useful.

  16. Katherine Todd Says:

    Great article, thank you for sharing.
    I have two clients that will benefit with this easy to understand info.

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