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Explaining Foreclosure Options to the Homeowner

Aug 17, 2007
Some options available to homeowners facing foreclosure are as under:

Loan Reinstatement or Cure: This option includes the total payment due on the property to be paid all at one time and that would include everything from defaulted payments and associated penal charges, if any, legal fees, foreclosure fees and the principal amount due. This may include the seller deeding it to the investor, who will cure or pay off the loan. Since the lender may require the payment to be made within a short time and in one sum on account of the defaulted payment, the homeowner is at risk because after deeding it, he is no longer the owner and has no recourse open to him if the investor does not pay the loan.

Repayment Plan: This is an arrangement in which the payments each month are higher than the regular monthly payments, until the time that the outstanding default amount is covered and the loan stands on an even footing with a regular loan. There is a written agreement between the lender and the seller to this effect.

Modification of loan: This involves modification of the mortgage terms. Though not granted easily, there can be a modification of the terms related to interest rates or the product itself. It can also extend the repayment period or merge the default amount with the due amount and restructure the repayment. It is extremely difficult to avail of this option and it is allowed only if very strong and justifiable grounds exist.

Forbearance Agreement: In this option, the lender allows the borrower on request, a low or no installment period of three to six months. The amount falling due for these periods is added to the remaining installments unless the repayment period is extended, which is rarely the case.

Special forbearance: This is applicable only for Federal Housing Administration or FHA loans. Under this option, the eligible borrower is allowed to postpone the monthly payments towards the mortgage for at least four months, but never in excess of the amount that would equal twelve principal, interest, tax and insurance (PITI) installments.

Deed in Lieu: When a lender is unable to make the repayments in cash, he may be allowed to voluntarily deed collateral property to be released from all financial obligations under the mortgage. This option is not available to financially sound borrowers. If a borrower qualifies for the deed in lieu program, the lender may return back cash under the Cash for Keys program.

Cash Sale: In this option the buyer pays off the loan by quickly selling the property. He may be able to net in some profit also, if he is smart enough. It would mainly depend on the equity he holds in the property. The risk is that due to the requirement of sale at short notice, he may have to lower the price, which will negatively affect the net outcome.

Short sale: To save his credit worthiness, the seller formally agrees with the investor to sell at a price that is lesser that what is actually due to the lender.

Refinancing: Though difficult on account of poor credit rating, the borrower may try to obtain a refinance and clear off the old mortgage. The interest rate for the new loan will also be high.
About the Author
Stop Home Foreclosures by Selling Your Home Fast. As Is Now can help you get fast cash for your house in any condition. Our Licensed Realtors take out the hassle of selling your home. Visit us at http://www.asisnow.com.
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