Foreclosure is becoming one of the largest problems experienced by the citizens of the United States of America today! Incalculable numbers of homeowners that didn’t have problems in the past are now in default on their mortgage, risking losing the home they have worked so hard for, and feeling helpless! It’s happening because of the current economy and the fact that is still deteriorating. It’s lowering incomes, raising expenses, and the mortgage payment, as agreed is still due each month.
Foreclosure doesn’t happen overnight, rather it takes time. This time can be more stressful for many, but also a motivation to find a better way when they miss their monthly payment. It’s when the missed payments become 60, 90 and more days late that it can go into foreclosure. Even at this point though there may be a way to fix the situation and get back on track. What follows are some possible fixes to this undoubtedly stressful situation that reality brings many!
1) Home Loan Modification: This is fast becoming the most accepted and successful means to stop foreclosure today. The process involves the eventual permanent change of terms in the mortgage effectively reducing the monthly payment due. Among the terms that have been changed in past modifications are the term, interest rates, principle balance lowered, and waiving past due payments. A positive side effect is with successful future payment at the reduced payment, you keep your home and your credit score will work again towards higher levels.
2) Refinance: If you have equity in your home (the principal balance of your current mortgage is significantly higher than its value) you may be able to find a new mortgage with a reduced payment and/or by increasing the term of the mortgage. When considering this option you will want to shop around for the best APR (and other terms), and being behind on your current mortgage may make the process more difficult.
3) Reinstatement: In the process of foreclosure, you will usually be given the option of paying everything up along with additional fees to simply pick up with the next payment back in business as usual. This is often combined with Forbearance as the source for payoff will usually be predictable and the change in times may simply align with it consistently.
4) Forbearance: This is where your lender agrees to reduce or eliminate your payment altogether for a specific time frame. This is often used when some unpredictable event has occurred (such as a layoff or other loss of income) that prevents you from making payments on time for a limited time. This is often combined with a repayment plan or reinstatement to catch up on the unmade payments.
5) Repayment Plan: This option to catch up is when your mortgage lender allows you to repay missed payments on a schedule (in addition to your monthly payment). In some cases this may even be simply added to the loan extending it.
6) Deed in lieu of foreclosure: In some situations the borrower can simply sign over the property to the mortgage lender and be exonerated of their mortgage debt and responsibilities.
7) Short Sale: This is where the owner sells their home. If the amount the sale brings isn’t enough to pay the mortgage lender off, they may be prepared to accept a different payoff amount that is lower than the due balance.
By John Hester