Things are still on fire in our real estate market, with foreclosed homes here well below the national average. Even so, if foreclosure looms, it’s a frightening prospect. Job changes, divorces, retirement, and additional expenses are just a few life changes that can have a negative effect on your finances. These emotional tolls can be devastating.
While no one plans a foreclosure, there are many steps that you can take to protect yourself and your family if you find yourself in a financial crisis. It’s important to remember that in most cases, the last thing a bank wants to do is to take possession of your home. The bank is in the business of loaning money, not managing real estate, and they want you to keep your house whenever you can.
You have options, and it’s important to take time to review the best one for your situation.
Talk To Your Lender
Since your bank doesn’t want to go through process of foreclosure to get their money back, they will usually be receptive to an offer from you to bring your loan current. Talk to them about your situation and what you think you can do to keep your home. Many times, they can work with you on revising your terms. They cannot, however, help you at all if you do not communicate with them.
Some of the options that your lender may be able to offer are:
- Changing the terms of your loan. Your lender can freeze your interest rate on an adjustable mortgage. They can also change the rate to a more affordable one for you.
- Spread out the missed payments. The bank can allow you to add a little more to your regular mortgage payment until you make up the past due balance. They may also allow you to dip into equity and add the missed payments into your existing mortgage.
- Give you another loan. Your lender will have information about the types of loans that may be available to you, based on the terms of your mortgage and other credit worthiness considerations.
- Forgiving a missed payment. In some cases, the bank may forgive some or all of your late payments after reaching an agreement with you to become current on your mortgage.
You must first contact your lender before you can explore any of these options. If you refuse to communicate, they are left with no choice but to proceed with foreclosure. Call them!
A short sale occurs when the lender agrees to accept less than what is due on the mortgage and is “shorted” on the balance of the mortgage. A short sale affects your credit, but not as severely as a foreclosure.
Here are a few of the specific circumstances in which a lender may accept a short sale.
- Your home’s market value has dropped. Evidence must exist that substantiates the home’s value is less than the outstanding mortgage.
- The seller presents a letter of hardship that explains why the seller is unable to honor the balance of the mortgage.
- The mortgage is at or near default. Realizing that a homeowner may be experiencing difficulties that can lend to a defaulted loan, many lenders will accept loans that are still current for a short sale. Unemployment, divorce, illness, and bankruptcy are considerations that may lead to an agreement for a short sale.
- The seller has no assets. The lender conducts a review of tax returns and bank accounts to determine assets available that may cover the debt.
Deed in Lieu of Foreclosure
Deeding the loan back to the bank effectively stops the foreclosure process. The homeowner gives the bank a notarized deed and the lender forgives the mortgage. While stopping foreclosure, a deed in lieu of foreclosure has the same effect on your credit as a foreclosure.
Bankruptcy halts foreclosure action. If you find yourself considering this move, contact a lawyer who specializes in bankruptcy to find out all your options, including the time frame and costs involved.
List Your Home For Sale
Contact a realtor about listing your home. The Eugene housing market is very strong right now and you may be able to sell your home quickly. A local realtor will be able to help you find a buyer and sell the home before you default on the loan. Communicating this step with your lender will also help them to understand that you are taking steps to ensure payment for the balance on the home.
Contact a Real Estate Investor
A real estate investor pays you cash for your home. You don’t have to remodel, paint, or upgrade the property because they buy the house as is. This is the most expedient option for paying a distressed mortgage.
The Bottom Line
USA.gov has a page devoted to foreclosure information. Of special note on this page is information about scams and frauds perpetrated against distressed homeowners. There is also valuable information there about how to avoid a foreclosure and how you can get housing help.
Fortunately, the Eugene housing market is strong and housing is in demand. Make the most of a very strong seller’s market, and you can resolve your distressed status quickly.