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These are your only options to
avoid losing your home. Your lender does not have to
agree to any of them. The lender may combine options such
as Forbearance and Repayment Plan. The sooner you contact
your lender, the more receptive the lender will be to a
compromise.
- Repayment plan: If you suffer a
short-term financial setback (expensive car
repairs, a medical emergency, temporary job
loss), your lender may provide some breathing
room by agreeing to let you pay off your missed
payment in installments over the next few months.
- Forbearance: Your lender may agree
to put the foreclosure on hold to give you time
to cure the delinquency.
- Loan modification: Mortgage servicers can
adjust the terms of your loan -- most often by
lengthening the amortization schedule, lowering
the interest rate or rolling the delinquent
amount into the loan and reamortizing the new
balance -- to help you bring the loan current.
Active military may be eligible for a mandatory
rate reduction.
- Short sale: The lender allows you
to sell the house for less than the outstanding
loan amount, takes the proceeds and forgives any
remaining debt.
- Short refinance: The lender forgives
some of your debt and refinances the rest into a
new loan.
- Refinance with a
conventional or "hard money" loan: If you have enough
equity and your credit is still intact, you can
usually refinance your way out of foreclosure. If
not, you may want to look at hard money loans.
You won't like the high rates and fees of a hard
money loan -- one from a private lender -- but it
may buy you time to sell your home and avoid
foreclosure.
- Deed in lieu of
foreclosure:
Your lender may allow you to surrender the home
to them, avoiding the foreclosure process. For
liability reasons, the lender will not initiate
or suggest a deed in lieu. The homeowner must
propose a deed in lieu in writing, clearly
stating that the proposal is completely
voluntary. The lender is unlikely to agree to a
dead in lieu if there is equity in the property,
a second mortgage or other liens.
- Friendly
Foreclosure:
A friendly third party buys the property at the
foreclosure sale, cleaning the title of junior
liens (tax liens and purchase money seconds not
included). At a later time the debtor buys the
property back using a smaller loan with lower
payments. The debtor must have complete trust in
the third party since there is no legal
requirement for the third party to sell the
property back to the debtor.
- Bankruptcy: Although bankruptcy
will not stop the foreclosure process, it might
give you enough time to bring the payments up to
date. Chapter 13 could give you a plan that
brings you up to date over a five year period.
This can be very helpful if you have a balloon
payment due. Bk13 could allow monthly payments to
continue, delaying the balloon payment for years.
- Lawsuit: If there has been fraud
or other illegal acts in the origination,
servicing or foreclosure process, you may be able
to recover damages. This option may still result
in you losing the home and may take several years
to resolve with no guarantee of success. Truth In
Lending violations can often be resolved quickly
and we can refer clients to attorneys
specializing in this field.
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