If the reason for missed payments was temporary and has been resolved, you may have the option to reinstate your mortgage right up to the time of the bank sale. In order to reinstate, the homeowner has to pay all missed payments, late fees, and legal fees that are due up to the date that the loan is reinstated.
Forbearance or Re-Payment Plan
If the reason for missed payments was temporary and the homeowner is not able to make a onetime reinstatement payment, you may be able to negotiate a forbearance or repayment plan. The lender may allow you to pay the missed payment amount over a period of time or the lender may place the amount on the end of the amortization of the loan. If the amount is to be paid back over 12 months, once the homeowner completes the 12th payment the mortgage would go back to its original payment amount. Note: typically a mortgage is not fully reinstated through a forbearance plan until all the payments are made in full. If you miss just one payment, you can end up in the same stage of the foreclosure process you were in previously.
Sell the Property
You have equity in your property, you can sell it and cure the foreclosure.
Rent the Property
If you have payments low enough to allow you to rent the property and keep up with the mortgage payment. Remember you will need to keep the taxes and insurance premiums up to date.
If you have sufficient equity and income and your credit has not been too badly damaged, you may be able to refinance your loan to lower your payment.
You may qualify for a loan modification where the lender lowers the interest rate on the existing loan in order to lower the payments. You will need to submit proof of income and expenses.
This process involves the refinance of a home with a reduction in the principal balance and often the interest rate as well. You will have to quailify for this process both in showing a hardship as well as the ability to pay the new mortgage often through a fully documented qualification process.
Deed-in-Lieu of Foreclosure
Often referred to as a “friendly foreclosure” since the homeowner essentially give the deed back to the bank. This may prevent the bank from having to go through a lengthy foreclosure process and in exchange they will sometimes forgo their rights to a deficiency judgment. This solution only works in cases where there is one mortgage and no other liens. If you have equity this is not a good option since you give up any right and equity to the property.
A bankruptcy may stop a foreclosure and allow a homeowner to reorganize his debt and keep his property. A major drawback to bankruptcy is that it makes it very difficult to sell the property once you enter the process and near impossible to negotiate a short sale. Be sure to consult your attorney for other ramifications associated with bankruptcy.
Service members Civil Relief Act (SCRA)
The SCRA is a bill that was signed into law on 12/19/2003. This law provides certain protection to military personnel that are in foreclosure in specific situations and also provides other protections.
If you owe more than your home is currently worth and one of the above solutions do not apply to your situation, you have the option of pursuing a short sale. A short sale occurs when a negotiation is entered into with your mortgage company(s) to accept less than the full balance of the loan at closing. A buyer closes on the property and the property is “sold short”. A seller without financial hardship that is upside down on their mortgage and want to sell is not a potential short sale.
Here are some frequently asked questions about shorts sales we’ve put together.