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Alternatives to Home Foreclosure Can Save Your Home
Home foreclosures are at an all time high. And its not just hitting people with bad loans living in homes they can't afford. With jobless rates rising, people who made conservative choices and saved for a rainy day, people who never spent beyond their means and live frugally are just as susceptible as those who made bad choices.
Special Forbearance. Lenders are continually finding more and more creative ways to help people stay in their homes. A special forbearance is a repayment plan that can allow for the reduction or suspension of payments for a limited period of time while the borrower deals with an unexpected job loss or increase in living expenses. These require proof of hardships that can be overcome within a pre-defined period of time.
Mortgage Loan Modification. The United States government has made it attractive for banks work with homeowners to modify their loans to an affordable level. In some cases, this involves refinancing the loan at different terms, in others, extending the length of the mortgage loan. The goal of loan modification is to empower homeowners to reduce monthly payments so they can afford their payments. These programs also require verified hardships and a commitment to repaying the loan in the future.
Partial Claim. HUD offers interest-free loans, which are available in special circumstances. These loans can be used to bring a lapsed mortgage current. However the homeowner must prove to HUD and the lender that the loans could be repaid.
Pre-Foreclosure Sale. This is an excellent option for families who cannot afford their payments but have some equity in their home. It enables the homeowner to sell the property, pay off the mortgage loan and avoid foreclosure.
Short Sale. This is a special option available at the lender's discretion. Similar to the pre-foreclosure sale with one major difference: the lender willingly takes a loss on the property. Loans settled in this way do not show as satisfied on the credit rating, but are far less damaging to the overall score than an actual foreclosure.
Deed-In-Lieu of Foreclosure. Accepting a deed-in-lieu of foreclosure is typically a last resort. It involves the lender allowing the homeowner to "give back" the property to the lender on a voluntary basis. The benefit to this is that the homeowner takes a lesser hit to their credit, which can improve their chances of getting another mortgage loan down the road.
Understand that lenders are under no obligation to accept any proposal. Don't wait till the last minute to contact the lender.
About the Author Sean Rutledge represents both plaintiffs and defendants in civil litigation with an emphasis on consumer protection and consumer rights as it pertains to real estate law. As the Managing Director at United Law Group, he manages the firms' Manhattan and Irvine offices.
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