SOUTHERN CALIFORNIA'S TRUSTED PROBATE & FORECLOSURE AVOIDANCE EXPERTS.
You have several options and actions you can take when you are facing foreclosure. The following options are available to you:
1. Reinstating the financing by making up missed payments, including the interests and fees. 2.Negotiating a workout, such as a repayment plan, forbearance, or loan modification. This can be done through the lender with assistance from an HUD-approved counselor.
3. Refinancing the loan in its entirety.
4. Arranging a short sale.
5. Arranging a deed in lieu of foreclosure or giving up the house.
6. Setting up a reverse mortgage.
7. Delaying foreclosure or stopping it by fighting foreclosure proceedings in court.
#1 - Reinstating Your Mortgage
If you can access another loan or have sufficient cash, you can reinstate the mortgage by making up the missed payments, including the costs, fees, and interest. You have a certain time period to facilitate the process after the lender gives you notice.
In California, you have up to three months to reinstate your loan after a Notice of Default or NOD has been mailed to you. If, after that period, you have not negotiated a workout, the lender can accelerate the loan, or declare that the entire loan amount is due and payable now.
He or she can also send Notice of a Trustee’s Sale, declaring that the house will be auctioned or placed for sale within 20 days. The law in California gives you up to five days before the foreclosure sale to reinstate financing. Most lenders would rather work out a plan rather than accelerate the loan.
#2 - Negotiating A Workout To negotiate a workout, you need to initiate the process with an HUD-approved counselor. With his or her assistance, you can do the following: Receive temporary financial relief from making monthly payments or obtain a reduction in what you have to pay (also known as forbearance). Work out a plan to make up the missed payments, either by scheduling the payments at the end of the loan period or adding them to your current payments for a specific time. Lower the rate of interest so your payments are lower. Reduce the principal of the loan balance.
#3 - Refinancing Your Home If you can refinance your loan at a lower rate and pay off your old financing, you can have a new beginning. However, if can be difficult to refinance a mortgage unless your credit is good and your home value and equity are good to excellent.
#4 - Arranging A Short Sale Of Your Property
To arrange a short sale, contact a real estate agent that specializes in this types of sales. Never attempt the short sale yourself. In California, all short sale transactions must be overseen by a licensed real estate agent. After you have hired an agent, determine the listing price. It is best to list your property at 10% below the short sale value to encourage offers or to drive up the price. If you want to leave some room for negotiation, list the property at 10% higher than the short sale value.
One thing you have to keep in mind if you sell your home by short sale is that you will probably have to move out immediately after the closing. While this may not be difficult to do if you want to leave anyway, you will miss out on the chance to sock some money into savings without having to pay a mortgage.
#5 - Arranging A Deed In Lieu Of Foreclosure (Giving Up The Property) If you do not want to keep the house, you can request that the bank or lender take the home back. This is done through a process known as a deed-in-lieu of foreclosure, or DIL. This process allows you to deed the real estate to the lender in exchange for forgiveness for any deficiency balance. A lender will only accept a DIL if the property has no other liens on it and it is vacant.
#6 - Setting Up A Reverse Mortgage Reverse mortgages permit older homeowners to convert the equity in their properties into a line of credit or income. They are only available to people who are at least 62 years old and occupy the property as the principal residence. A reverse mortgage differs from a traditional mortgage, as it does not necessitate that the borrower pay monthly payments to repay the loan.
Even though you are not responsible for the payments on this type of mortgage, you do have to pay the property taxes, house insurance, and maintain the property.
The proceeds of the loan are paid to the borrower through a line of credit, monthly payment, or through a lump sum payment. A combination of a line of credit and monthly payments can also be established. A reverse mortgage becomes due and payable when the property is transferred, when the borrowers die, or when the home is no longer used as a principal residence.
#7 - Giving Up Your Home
While a deed in lieu of foreclosure is one way to give up your home, you do have other options. The choice you make should be done with the least emotional upset in mind. While this guide covers several fundamental choices for bypassing foreclosure, sometimes it is just best to walk away.
If you elect to walk away, you will, no doubt, lose your home. Nevertheless, you can save what you would make in mortgage payments during this period. You do not have to make the payments to a lender but place them in savings instead. Doing so can result in substantial savings – savings that you can use to buy or rent a new home.
People walk away from a foreclosure default for one of two reasons – either the mortgage is no longer affordable or the home is basically a poor investment. Think carefully before you walk away, as a deed in lieu of foreclosure or short sale are more positive choices.
#8 - Strategic Default
If you can afford to pay the mortgage but walk away, this move is known as a strategic default. Again, you may be better off by choosing a short sale or deed in lieu of foreclosure. Be careful about this choice, as you can be sued for the difference of the sales price and the amount you owed at the time of the auction. The liability for the difference is known as a deficiency. This amount can be discharged in a bankruptcy. However, if you do not opt for bankruptcy, you can be saddled with a large debt.
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