Options to Foreclosure
You have several options for foreclosure. While some options for foreclosure allow you to keep your home, others do not. When faced with missed mortgage payments, it is essential to react quickly, review your options for foreclosure, and make the best decision for you and your family. I often receive phone calls from homeowners with an auction date a few weeks away.
While it is not impossible to stop an auction with the date a week or two out it makes it much harder. In Massachusetts, the foreclosure process is a long one and you have at least 6 months of knowing there is a problem paying your mortgage before a foreclosure auction will occur. REACT IMMEDIATELY when you know there is a problem. The foreclosure process varies from state to state, so do not assume you have plenty of time if you are in another state.
What are my options for foreclosure?
Options to foreclosure that will allow you to keep your home:
- Loan forbearance- Loan forbearance is where your loan payments are put on hold, or partial payments are made for a small period of time. This is reserved for homeowners who can document their financial situation temporarily and be put back on track quickly. While this is an option, I do not know of an incident where this has been done.
Loan Modification- A loan modification is where the mortgage holder agrees to lower the mortgage payment through interest rate deduction, lengthen the loan term, change the loan product, or all three. The bank will never forgive the loan balance you will always owe the same amount of money. You must qualify for a loan modification much like you do for a loan. I have a great article on loan modifications and is worth a quick read.
- Pay the Delinquent Balance- Getting your mortgage caught up and make timely payments is definitely an alternative for avoiding foreclosure. While for many this is not an otion it can certainly be the easiest route to go.
Options to foreclosure where you will give up your home but lighten the impact of a foreclosure:
- Short Sale- A transaction where you negotiate the short pay off of a mortgage with lien holders allowing you to sell your home for less money than what is owed on the property. This is probably one of the more common options to foreclosure.
- Deed-in-lieu– A transaction which a home owner signs the deed over to the bank. Many banks will not consider this as an option as they still have to take possession of the property. If they do consider a deed-in-lieu they usually want you to try and short sale your home for a period of 90-120 days. A deed-in-lieu can nly be considered if their is one lien holder.
The bankruptcy option to foreclosure:
Bankruptcy is in a category of its own. There are cases where you do a foreclosure and end up doing a short sale or deed-in-lieu of foreclosure. Then, there are times when you use bankruptcy to strip off a second mortgage to lessen your mortgage amount or reduce the amount of consumer debt so you can now afford your mortgage. Bankruptcy is complicated and should not be automatically considered until you have exhausted your options or know you will have to do bankruptcy regardless of a short sale, loan modification, or foreclosure.
The options for foreclosure provide you with a way to avoid foreclosure and the far-reaching effects of foreclosure. While the options may not be totally painless, they are better than having a foreclosure on your record. Any good short sale agent will have the experience to talk about your options with you and provide you with resources to pursue any of the options to foreclosure.
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Kevin Vitali of EXIT Group One Real Estate has provided you with the article, Options to Foreclosure. Kevin has successfully provided information to allow people to keep their home as well as help many underwater homeowners do a short sale. For any questions regarding avoiding foreclosure or Massachusetts Short Sales call Kevin at 978-360-0422
