Are you in serious trouble financially and haven’t paid your bills for months? If this is the case then you may be looking down the throat of a forced foreclosure on your home. A property isn’t in foreclosure until such time as the actual legal documents are filed in court. Anything prior to that is a delinquent loan. In either case, these are measures that homeowners can take to either save their home or sell it.
Reinstate the Loan
Most mortgage agreements stipulate that the mortgage can be reinstated upon payment of all arrearages, penalties and costs. The lender then has no choice other than to accept the money and dismiss any pending case. The homeowner is back in the saddle again, so long as future payments are made on a timely basis.
Chapter 13 Bankruptcy
Nearly everybody goes bankrupt after a foreclosure. Why not try to save the home in a bankruptcy rather than giving it up? An approved Chapter 13 bankruptcy plan allows the homeowner to pay off arrearages in three to five years, so long as they continue paying the original mortgage payment.
The federal Home Affordable Modification Program (HAMP) assists homeowners who are about to lose their homes due to financial hardship. A suitable candidate for the program might get their loan terms modified along with a reduced monthly mortgage payment. The Home Affordable Refinance Program (HARP) might help homeowners refinance their mortgages if they’re current on their payments but expect financial problems in the immediate future. The program is limited to Freddie Mac or Fannie Mae loans.
This option operates to reduce or suspend mortgage payments for a set period of time that the homeowner and lender agree to. When the forbearance period is over, the homeowner begins making mortgage payments again while also paying a set extra amount to bring the mortgage current. Forbearance is a very viable option for a temporary financial issue like starting a new job after a period of unemployment.
In a short sale, the lender agrees to discharge the borrower from the loan in exchange for payment of a sum less than the actual payoff amount. Short sales are often done with a commercial investor like HomeVestors of America, Inc. that specializes in fast cash buyouts and sells. The borrower can then walk away from the mortgage without a foreclosure.
If foreclosure is imminent, one of these avenues might be a better alternative than just walking away from your mortgage. Walking away only brings you face to face with a Chapter 7 bankruptcy and that leads to years of crippling credit.