Foreclosure Alternatives

Do Nothing - If a homeowner does nothing, they most likely will lose their home at foreclosure auction. Loan applications generally ask if the applicant has ever been foreclosed upon. Credit reports also disclose this damaging information.

Reinstatement - A reinstatement is the simplest solution for a foreclosure and does not require the mortgage company or lender(s) approval, however it is often the most difficult. The homeowner simply requests the total amount owed to the mortgage company to date which include the entire default amount plus interest, attorney fees, late fees, taxes, missed payments, fines and fees, and pays it.

Loan Modification - A mortgage modification involves the reduction of one of the following: the interest rate on the loan, the principal balance of the loan, the term of the loan, or any combination of these. These typically reduce the payment a homeowner is required to make on a monthly basis and may reduce the principal balance of the loan allowing the homeowner to catch up at a more affordable level if they qualify.

Rent the Property - A homeowner who has a mortgage payment low enough that market rent will allow it to be paid, is able to convert their property to a rental and use the rental income to pay the mortgage. While this allows the homeowner to keep property indefinitely, issues sometimes occur when the rent often does not cover the full cost of property ownership and maintenance.

Forbearance or Repayment Plan - If you can prove your financial hardship was based on a verifiable temporary setback,  sometimes a Lender will allow forbearance and/or a repayment plan which can help a homeowner get back on their feet and avoid foreclosure.  In this case, Lenders can suspend payments or offer reduced payments, usually no more than 6 months.  At the end of the temporary payment plan, however Homeowners generally are required to make up the defaulted amount also know as arrears,  over a specific term which customarily is achieved by the lender by taking the entire defaulted amount, dividing it over a 12 month period and adding it to the homeowner's current mortgage payment.

Refinance/ Payoff - In a good market, completely paying off your mortgage loans, closing cost and fees are usually accomplished through a refinance loan.   However obtaining a refinance in today’s market can be extremely difficult as qualification guidelines generally requires a homeowner’ credit to be in good standing and normally require a certain amount of equity and/or a certain loan to value to qualify.

Unfortunately, homeowners that are behind on their mortgage, have NO equity and/or have experienced a financial hardship during the past  24 months,  don’t  normally qualify for a traditional loan and  sometimes  seek private money from investors which sometimes, can be a very scary thing!  Based on your specific scenario, should you not qualify under normal qualification guidelines and choose to work with a private money investor who’s willing to lend on a distressed property, with no equity and/or is upside down, BEWARE!

At Real Estate Alliance Group, we strongly suggest you meet with qualified, licensed real estate attorneys before signing any documentation and/or paying any expenses out of pocket, as most private money loans charge extremely high interest rates and fees, and include prepayment penalties.

Service Members 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 their deployment, they may qualify for relief under the Service Members Civil Relief Act. The American Bar Association has a network of attorneys that will work with Service Members in relation to qualifying for this relief.  If qualified, the Service Member must be active duty and may be able to lower payments on all consumer debt in addition to their mortgage payment.

Partial Claim 
- Subject to borrowers qualifications, the lender has the option to advance funds on behalf of the borrowers, however keep in mind the maximum amount allowed by The U.S. Department of Housing and Urban Development (HUD) cannot exceed a total of 12 months mortgage payments (PITI) which includes all cost incurred by the bank; i.e., back payments, legal costs, penalties and fees.  If a lender WILLINGLY offers to a Partial Claim, the borrowers must sign a promissory note for the amount advanced in which case it is then recorded against the property, as a subordinate lien, to the existing liens and becomes due and payable when the property is sold or is no longer owned by the borrower.

Bankruptcy - Currently under FHA guidelines, if a homeowner who has had a bankruptcy discharged for a minimum of 2 years, has re-established at least three new accounts that are in good standing, and maintained their credit for the past 24 months without  any derogatory credit ratings, homeowners can re-qualify under a government backed loan, with the best rates and terms in as little as two years from the date their bankruptcy was discharged.  Keeping in mind of course, that qualification guidelines, terms and conditions have been known to change daily and without prior notice!

1804 Queens Court, Roseville CA 95661
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