1. You can call your bank or lender and ask them to reinstate the loan.
The first thing you should do is contact your Lender. I am amazed at how many people avoid doing this. There is something you must understand, the bank does not want your house, they want the payments on the loan they made you. In fact they are very likely and willing to pursue any option that will avoid foreclosure. You see, you and your lender both want the same thing, for you to keep your home. There is just that one detail that needs to be worked out… the payments.
If you had all of the money they are due and could afford to bring your loan current, also referred to as reinstating the loan, obviously you would have done that already. So what is the point of contacting the bank? To NEGOTIATE! That’s right; it’s time to work something out other than reinstating the loan. Negotiations aren’t always adversarial. It is just a process to come to an agreement that is acceptable to both parties.
There are a couple of different options worth pursuing with the lender like recasting the loan. Recasting is restructuring a loan with a new interest rate and term. It may be the same loan from the same lender, but the terms change. FHA has a formal procedure to recast loans to assist home buyers to stay in their houses. And then there is a modification to reinstating the loan called a forbearance agreement. This is where lender voluntarily accepts payments that are lower than originally agreed in the loan documents for a limited period of time in order to allow the borrower to recover financially. The borrower must eventually repay the missing or reduced payments, as well as all the other remaining payments on the loan.
Common Foreclosure Terms
2. You can refinance your home.
If you are already in Default on your loan your credit rating may already have been affected. You may or may not be able to qualify for a new loan. However, if you have a lot of equity in your property this is worth pursuing. You will have to combine the loan(s) balance with the amount you are behind in payments, including penalties and fees, to the cost of the new loan (closing costs). This new loan would have to cover that amount and get you a new start with a new loan that you can afford. You don’t want to find yourself back in default.
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3. You can list your home with a realtor.
This one is tricky. I don’t mean to offend anyone, but I have strong opinions about Real Estate Agents. There are a lot of great Agents out there don’t get me wrong, but just like any other profession, there is also bad. I just happen to think it is way, way too easy for people to get their license. Because of that, there are a lot of people in that industry with very little education and experience. Choose wisely.
With that being said, listing your home for sale with a realtor may be a good option for you. Consider the fact that the majority of home sales happen with the assistance of a realtor. Take into consideration also the timeline you are up against. And add to the cost of satisfying the debt and fees on the property a 4 – 6% commission for the agent’s services. I don’t know your individual circumstances, so you will have to decide if this is right for you.
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4. You can sell the house yourself.
This usually takes more than just sticking a sign in your front yard. If there are a lot of listed, (being sold through a Real Estate agent), homes in your neighborhood then traffic alone may bring you a qualified buyer.
When you sell a house you have to consider your competition when pricing your home and presenting it to the market. What are the homes like that you are competing with for buyers? There are a lot of things to consider when selling a home on your own. I will focus on the financial aspect.
Run through it in your mind first. This will help you to see if this option is right for you.
You add up the balance of your loan or loans + the payments that you are behind along with any accrued late fees, penalties and interest the bank has tacked on. Let’s just say that in order to pay all debt and give you a little walking money you come up with $275,000 for example sake. You now have to do some homework. Put yourself in the Buyers shoes for a minute. If you were looking into buying a home in the $275,000 range what kind of home would you have to choose from? And what locations are available in that price range? How does your home compare to the others? What makes your home more attractive to the buyer and his money than everything else he could buy at that price?
Maybe it’s that you just can’t find anything as nice, as big, as new or in a better neighborhood as your house for under $300,000. That would be sure to bring eager buyers to your door!
But what if the opposite is true? A buyer can find nicer, newer homes, in better locations for less than you would have to sell yours for. That brings us to one more possible negotiation with the bank. If you cannot sell you home and pay everything off then the home is going to go all the way to foreclosure and nobody really benefits if that happens. The only alternative is what is called a short sale. That means that a lender agrees to let the property be sold for less than the amount that would pay them off in full. The lender would have to agree to this because they were given a lien on the property pledging your home as collateral for the money they loaned. (see #6)
5. You can give the property back to the lender.
If there are no other liens on the title, the lender may agree to take the property back without going through the entire foreclosure process. This process of transferring ownership from you to the lender under these circumstances is called a Deed in Lieu of Foreclosure, and is sometimes referred to as a "friendly foreclosure" because in essence that what it is. You just walk away. For this to work there would have to be no other lien holders with claim to the property behind them on title (also called junior lien holders) unless they took the property “subject to” the other liens.
6. You can sell your home to us.
This is probably the quickest way to handle the situation. Let me explain. If you sell the home to us then we will be the ones negotiating with the lenders to help you stop the foreclosure. You do not want a foreclosure on your credit! We will try to get the bank to accept less than they are owed so that we can buy the property under market value.
You must realize that stopping the foreclosure doesn’t always mean “saving your house”! You may have to move. But if this is true for your situation, this is where we can really be of benefit to you. We are called Nu-Start Properties, Inc for a reason, we want to help you get a “Nu-Start” and we will do our best to get you into another home. I don’t know your personal situation so I don’t know what is best for you. If you want me to take a look for you go HERE and fill out a simple questionnaire.
Please don’t be fooled into believing that you can answer an ad or call the number one of the “We Buy Houses” signs you see on the side of the road and you will magically have all your troubles go away. Yes, we invest in Real Estate and we do it to make a profit, so does every other investor. As I mentioned before with regards to Real Estate Agents, there are also good and bad Investors. Choose wisely.
7. You can file bankruptcy.
While I believe you should avoid this option, you should know that it is one. Bankruptcy is not a cure. Filing bankruptcy is not going to prevent anything. It may postpone but will mostly not fix anything; instead it will make it worse. There are really two different types or forms of bankruptcy that would be available to you and that is a “work out” or a “wipe clean”.
A Chapter 13 filing is a kind of work out program that, when properly filed, forces your creditors (by order of the court) to accept a payment plan that they (the court) decide is “doable”. And, they have to quit harassing you. Sound good? Well it’s not!
When someone files a Chapter 13, they don't take all the assets and sell them. Instead they take all the monthly payments and discount them for pennies on the dollar. The creditor you owe won’t get all of their money but they’ll get some. It's like a debt consolidation plan. Whatever amount is agreed upon has to be paid to the bankruptcy count every month for the next 3-5 years.
So the homeowners get to keep their house, their cars, and all their assets. Now, as long as the homeowner stays current with the mortgage payments and pays the amount agreed upon, they will be fine. However, if any payments are missed, the trustee will dismiss the bankruptcy and the foreclosure process will begin again. A Chapter 13 bankruptcy is designed to have you repay your debts. When in a Chapter 13 bankruptcy you will still have to make your house payment and an additional payment for the back payments and other bills that the bank consolidated for you.
Do you want to know the truth? Over 80% of people that file Chapter 13 can’t make their agreed upon payments. It makes sense. If you’re having trouble making the payment on your home, how are you going to make your house payment and the extra payment to the court for your debt? Now you have a bankruptcy on your credit too!
It’s my opinion that this is not the way to go. But you need to know that it’s available.
A Chapter 7 is a wipe out program. When someone files a Chapter 7 bankruptcy, all assets are frozen. The attorney will create what is called an automatic stay. Meaning everything "Stays" put. The homeowners can't buy anything, they can't sell anything, and they can't even give away anything. If they try to sell their home, they couldn't. If they try to give away money in savings, they can't. Any unsecured debt like credit cards, unsecured loans, etc. are eliminated or wiped out. They do not exist anymore.
Then the trustee or attorney who represents the court and the creditors will look at all the assets (house, car, furniture, equipment) anything of value and decide what must be liquidated to pay some of the debt that was wiped out.
If the homeowners are in the middle of foreclosure, a Chapter 7 will stop the foreclosure process. Usually banks will then ask the trustee to release the property from the automatic stay so they may continue with the foreclosure process. Once the property has been released from the bankruptcy, the foreclosure process starts right where it left off. Typically you have anywhere from 3-5 weeks until the foreclosure process begins again.
You may buy a little time with this strategy but it’s my opinion that it costs you too much.
[Note: Bankruptcy should be the last alternative or option and should not be used to stop foreclosure unless you have no other option or else you need the protection of a bankruptcy due to other circumstances or situations you are currently up against. If you feel this may be your best option, please seek legal advise from a competent professional in this field.]
8. And finally, you can just let it go to foreclosure.
While I think that this would be “giving up”, especially because I just informed you of other options, it is certainly your choice. Typically you will get evicted after about 2-3 weeks. You leave with nothing in hand and a foreclosure on your credit report. This is without question the worst option of all. Don't let anyone convince you to just give up and do nothing. At least try something. You have nothing to lose. It could mean the difference between a few thousand dollars in your pocket, compared with nothing and a foreclosure on your credit.
I would hope that you would at least give us the opportunity to look at you situation and give you assistance if we can. You can go HERE to give us some information to look over and we will get back to you A.S.A.P if it looks like se have any help to offer.
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The foregoing has been prepared for informational purposes only and does not constitute legal advice.
The information is summary in nature and does not address any particular situation.
Readers should not act upon this information but should instead seek professional legal advice.
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If your home loan is in, or soon may be in, default that means your home could be foreclosed on.
This article is meant to give you a brief description of some of your available options.
