A 2004 Freddie Mac study exposed a major problem among homeowners who were behind on their mortgages. 61% of these homeowners were unaware that their lender offered programs to help them keep their homes. Here's a brief description of those 5 programs.
1. Reinstatement - You bring the loan current by paying back everything you owe in one large installment.
2. Repayment Plan - You catch the mortgage up over a period of a few months with payments that are larger than your usual mortgage. Many lenders will initially offer you repayment plans of 3-6 months. Some will go as long as 12 or 18 months if you can show them that you need more time.
3. Forbearance - This program is really helpful when your financial problems are short-term. A forbearance gives you a smaller mortgage payment for a specific number of months. Some lenders may even let you go without making any payment for a short time. When the forbearance is over, you are generally expected to bring the loan current with a reinstatement or repayment plan.
4. Modification - For many, this is the program of choice. A modification occurs when your lender changes one or more of your loan terms to bring your mortgage current again. It can get you a lower payment if you've had a permanent reduction in income. You can also use a modification to move all the money you presently owe to the end of the loan. With this kind of modification, you just make your regular mortgage payment again.
5. Partial Claim - Unfortunately this program is for FHA loans only. With a partial claim, the government cuts your lender a check to bring your mortgage current. That allows you to start making your regular mortgage payment like nothing ever happened. The government, or more specifically HUD, puts an interest-free second mortgage on your property for the amount that they paid. The best part is that you don't have to make a monthly payment on the HUD loan, just your first mortgage.
Many lenders utilize a special loss mitigation department to work with borrowers who are behind on their mortgage. Their job is to get you into the program that is most appropriate for your situation.
Refinancing and Bankruptcy
When you lender won't approve you for one of the techniques listed above, you might want to consider refinancing your loan or declaring bankruptcy.
6. Refinancing - A new loan can give you a fresh start, but there are many restrictions. As a borrower, you become a greater risk as you fall further and further behind on your mortgage. As a result, any new lender is only going to loan you a certain percentage of your home's value. You may end up with a higher monthly payment than the one you had before. One way around the issue of a higher payment is to pay off some other debts with the new loan.
7. Bankruptcy - Because of its long-term credit implications, a bankruptcy should only be considered as a last resort. A Chapter 7 will only stall the foreclosure process for 30-90 days. It's not an effective long-term solution. A Chapter 13 bankruptcy can force your lender to accept payments on the past-due amount. But, you would also have to make your regular mortgage payment as well. Be sure to seek qualified legal council if this is an alternative you are considering.
What You Can Do Next
Once you have selected a way to stop foreclosure, it's important to take action as soon as possible. The amount of time a lender has to wait to foreclose varies from state to state. So pay attention to any notices that you receive from your lender or from your county court.
No matter what anyone tells you, you won't be evicted from your home until after the home is auctioned off or awarded to your lender in court.
You have received a notice of foreclosure on your real estate. It may seem hopeless, but the last thing you should do is give up. Many people encounter life-altering events that interfere with their ability to pay their debts. Usually the last payment to be late is the mortgage, but it happens. Too many late mortgage payments mean a possible foreclosure.
First and foremost, lenders do not want to foreclose on your real estate. They are not in the real estate business and are willing to work with homeowners. If you have not been able to reach a solution with your lender or you have ignored the lender's letters and phone calls, then foreclosure is their only option.
In the state of California, there are two types of real estate foreclosures ? judicial and non-judicial. A judicial foreclosure is granted by a court to a lawsuit brought by the lender against you, and is necessary when a "power to sale" clause was not included in the mortgage contract. Since commercial lenders usually include the clause, which grants them the right of non-judicial foreclosure, the mortgage contract you signed automatically gives them the power to seize your real estate in order to recoup their losses.
With the non-judicial foreclosure, you usually have 120 days to redeem your real estate before it is sold. With a judicial foreclosure, your real estate is auctioned off immediately to the highest bidder.
Under the judicial foreclosure, you may seek a deficiency judgment to recoup some of your losses on the seizure and sale of your real estate. Under some circumstances, you have up to one year to redeem your property. Under the non-judicial foreclosure, you have no rights of redemption nor can you seek a deficiency judgment.
So, your best bet is to do something before your real estate is seized and sold. Here are some ideas:
1. Speak to a HUD-approved counselor, especially if you have not kept in contact with your lender or you wish information before contacting them again. A counselor can help you determine what options may be available to you, as well as help you negotiate with your lender to work out a repayment program. To find a counseling agency in your area, call HUD at 1-800-569-4287.
2. A reinstatement may be possible, if you can promise to pay a lump sum to bring your payments current by a specific date.
3. Forbearance allows you to delay payments on your real estate for a short period, but you must be able to bring the payments current again by a specific date. Reinstatement generally is used in combination with forbearance.
4. A repayment plan is another option. It is used for homeowners who are behind in their mortgage payments, they can now begin making payments on time, but they do not have the resources to catch up the past due amount in a lump sum. Usually a lender adds a portion of the past due amount to a specified number of payments in order for you to catch up.
5. Rather than a repayment plan, your lender may agree to a mortgage modification. There are two possibilities here ? (1) add the past due amount to your existing real estate loan and finance it over a long term, or (2) if you need the payments reduced, extend the length of the loan in addition to adding the past due amount.
6. Selling your real estate is another option, if all else fails. Ask your lender, however, if they will put the real estate foreclosure on hold to give you time to sell. Otherwise, the public will learn through their realtors about the foreclosure, and you will not get a very good price for the real estate. If you must sell quickly, this also can lower your sale price.
7. Called a deed in lieu of foreclosure, you may be able to deed the real estate over to the lender. This forgives your debt to the lender and has less of a negative effect on your credit rating than a foreclosure.
8. Veterans and military personnel have some extra alternatives. First, contact your VA loan representative for counseling. Active duty personnel may be able to stop foreclosure under the Soldiers and Sailors Civil Relief Act, and may be eligible for a reduction in their interest rate. Additionally, veterans may be eligible for "workout" programs (options to resolve the foreclosure) under FHA, VA and some conventional real estate loans.
9. If procedural errors were made in the lender's foreclosure or in the original real estate loan origination, you may consider filing a lawsuit to enjoin or stop the foreclosure. Consult with an attorney in this instance.
10. Bankruptcy is a temporary solution, since it will stop the foreclosure for a short period only. It may give you some leverage in resolving the situation. Again, consult with an attorney.
Whatever plan you consider to stop the foreclosure of your real estate, you must put the plan into action, contact the appropriate people, and provide any requested information to the lender and/or its trustee (representative). Do not take a "wait see" attitude. Also, put everything in writing. If you have a phone conversation with your lender or the trustee, follow it with a letter reiterating the important points (say you want to ensure you understood the conversation correctly). Finally, follow through on your promises ? you will not get a third chance.
Both Nicole Williams & J Harris are contributors for EditorialToday. The above articles have been edited for relevancy and timeliness. All write-ups, reviews, tips and guides published by EditorialToday.com and its partners or affiliates are for informational purposes only. They should not be used for any legal or any other type of advice. We do not endorse any author, contributor, writer or article posted by our team.
Nicole Williams has sinced written about articles on various topics from Foreclosure Help. Nicole Williams has held numerous positions in debt management, credit counseling, home lending, and property management. She is the author of a number of articles designed to help homeowners avoid foreclosure. For more information about the programs de. Nicole Williams's top article generates over 1300 views. to your Favourites.
J Harris has sinced written about articles on various topics from Camping, Real Estate and Home Management. John Harris is an expert researcher and writer on real estate topics such as economics, credit improvement tips, home selling advice and home buying preparations. For more on San Diego Homes for Sale visit. J Harris's top article generates over 368000 views. to your Favourites.