Take Steps To Avoid Foreclosure On Your Southern California Home
Real estate foreclosure is a court action initiated by a lender or a lien holder for the purpose of having the court order the debtor’s real estate sold to pay the loan or other lien (mechanic’s lien or judgment). It is a legal process. There are specific steps the lender or lien holder must take to force the sell of the property. These steps are governed by various state and Federal laws.
The lenders do not want to foreclose on the real estate. They are in the lending business not the real estate management business. The worse thing that can happen to them is that they foreclose on the property. With the way the economy is now, it is very likely that they will receive the property back instead of receiving their money.
The lender WILL foreclose on a person’s home if they feel that this is the only way the situation can get resolved. This is also their last choice. They prefer to work with home-owners to help get them back on track. Here are the steps you must take to avoid foreclosure:
- If you are unable to meet your obligation, call the lender immediately.
- Do not ignore letters from the lender. Your failure to respond will make the situation worse not better.
- Assess your current financial state to find out where you can cut expenses and raise money to pay back your delinquency.
- Talk to friends and family to help you cope with the added stress.
- Take the time to relax. Do something you enjoy.
- Contact a professional to solicit their input.
If you’re behind on your mortgage payments or facing foreclosure, receive a hassle-free offer on your property.
There are options you may have when you talk to the lender:
1. Forbearance – The lender may postpone any foreclosure action against you if you can repay the delinquent amount you owe within a short period of time.
2. Forgive the payment – If you can convince the lender you experienced a temporary setback and you will not miss a payment again, you may be able to have the delinquency forgiven. They may waive the amount.
3. Spread the payment over a longer time frame – Sometimes the lender will allow you to repay the delinquent amount over a longer period of time. They prefer to have the money sooner than later, but they also do not want to foreclose. For example, you may have a normal mortgage payment of $1500 per month. You may be four months behind. The lender may allow you to pay back the $6,000 plus interest over say five years by adding approximately $100 per month to your payment. You will now pay $1600 per month for five years and then $1500 per month after fives until the mortgage is paid.
4. Loan modification – If you have an adjustable rate mortgage, the lender may agree to freeze the interest rate or change the interest rate to an amount that is mutually beneficial. They may also increase the term of the loan to lower the payments.
5. Move the amount owed to the end of the loan – If you have some equity in your property, the lender may move the amount owed to the back of the loan. There may be a balloon payment at the end or larger payments for a few months.
6. Make an additional loan to you – Some loans that are backed by the government contain provisions to help home-owners who are in trouble. Check different government web sites such as those for the Department of Housing and Urban Development (HUD) and the Department of Veteran Affairs (VA) for more information.
As stated, the lender does not want to foreclose.
Foreclosures cost the lender BIG money and hurts their ability to borrow money.
After the lender has filed a formal lawsuit against you, your options become more limited. Additionally, time is of the essence. All parties of the lawsuit must adhere to a certain timetable.
Here are some of your options after the lender has filed a notice of default:
1. Reinstate the loan – You may pay the lender the back payments, interest, penalties, legal expenses, and all other expenses associated with the collection of the debt and reinstate the loan. This action will stop the foreclosure.
2. Sell your house – This is fairly straight-forward. There are three ways that you can sell your house– through a real estate agent, for sale by owner, or to an investor. There are pros and cons to the three ways. Sign up to receive updates to this blog. We will post an article about the pros and cons of each.
3. Seek a “short sale” – If your house is worth less than what you owe, you may convince the lender to accept a “short sale”. A short sale is when the lender accepts less than what you owe as full payment of the loan. There are various laws and criteria involved. Additionally, there may be paperwork that must be completed before the lender even agrees to ponder a short sale. If you are interested in pursuing a short sale, submit information about your property to us. We have relationships with various firms that negotiate short sales.
4. Sign a “deed-in-lieu of foreclosure” – When you sign a deed-in-lieu of foreclosure, you are effectively giving title to the property to the bank. It helps to cut down on the added expenses of the foreclosure. Your credit will be affected. Contact a national credit restoration law firm today to help with your credit.
5. File bankruptcy – Bankruptcy should be a last resort. Please keep in mind that the bankruptcy will not stop the foreclosure. It will only postpone it. Contact our firm and we will provide a list of some bankruptcy attorneys you may wish to contact.
6. Loan Modification – Have you been hearing a lot about loan modifications? The term seems to pop up everywhere these days. But what really is a loan mod, and who can qualify for one? A loan modification is an agreement that is negotiated with your lender that changes the terms of your current loan. It can alter the characteristics of the loan term, rate, balance, and penalties. Lenders can be willing to negotiate when you are facing financial difficulties and can not find other financing alternatives. You must be able to show your lender why it would be in their best interest to agree to a modification.
A lender may be willing to reduce the interest rate, monthly payment or change other terms. It is important to understand that a loan modification is not reported to the credit agencies and will not have an adverse impact on your credit scores. Today let’s take a look at what characteristics the banks are looking for when reviewing your loss mitigation case with the lender. Every lender is different, so there is no exact science to determine if you truly qualify for a loan modification. Some of the potential reasons why the lenders allow a loan modification are as follows:
- Someone who no longer qualifies for a refinance
- Someone currently in an adjustable rate mortgage (ARM)
- Someone who is behind on their mortgage (it is always recommended to make all mortgage payments as agree when able)
- Someone whose mortgage payments have become high
- Someone who has experienced a hardship
- Someone who is self employed during tough economic times
- Someone who has no equity in their home or is "upside down"
- Someone who is about to go into foreclosure
Do one or more of the above categories apply to your situation? The government is forcing the lenders to negotiate and modify Thousands of these loans, so they are picking and choosing who get a mod, and who doesn’t. So why are the lenders doing this? With the housing market in total disarray, the lenders loosing money, and the economy on a huge downturn, the banks would rather modify your loan terms then take on another Foreclosure. Equity in homes has all but disappeared and in many area’s become negative, leaving homeowners upside down on their loans. Banks would rather reduce the payments and/or balance than foreclose on another property. The banks and lenders are not in the real-estate business, and they don’t want to start now. The fact that banks are willing to negotiate lower payments brings about this part of the real estate cycle know as “The Modification Period”.
Although extremely rare, during these periods, both the bank and the borrowers are deemed powerless. Both face tough times ahead and only as a team can the banks and borrowers pull out of this deep real-estate tailspin. They must work together to keep Americans in their homes but also to begin to turn this recession around. Loan modification often equates to immediate financial losses for our banking institutions, but the long term gain will well outweigh the short term loss.
By slowing future foreclosures through loan modifications, the banks will begin to firm up soft markets. This in turn will offer relief to the homeowner’s upside down on their loans. Slowing the foreclosure crisis right now is the first step to jump starting the housing markets again. So if you think you are a potential customer for a loan mod, the time to act is now!!! You can attempt a loan modification yourself, or you can hire a company. California law dictates that a company cannot charge you money in advance to attempt a loan modification. It is suggested any agreement you sign with such a company be specific as to what fees would be paid based up definitive levels of success. Reducing monthly payments as the result of lower interest rates is one thing; getting lower interest rates plus a reduction in the principal loans is another not to mention the amount ($) of the loan reduction.
