Alternatives to Foreclosure-Help for Salem Oregon Homeowners
With the exception of illness and death, nothing is more devastating to a family, or any individual than losing their home. ” There is no place like home” is one of those phrases that characterizes life in the United States. If you are one of the thousands of homeowners facing foreclosure, what other options do you have? Your first step should be to contact an attorney. You can discuss these options with them, and also find out whether or not a short sale may be in your best interest. Once you speak with an attorney, you should also contact your accountant to see what effect some of these options may have on you. If a short sale is the road that your attorney encourages you to pursue, contact a local Real Estate Agent/Broker/Realtor immediately. The short sale process is not a quick process, so the sooner you get started, the better.
Forbearance-Under this plan the lender may allow the borrower to skip a payment or make a partial payment if the borrower can suggest a reasonable plan to catch up on the past due amount. This could be very favorable for someone who is temporarily out of work, or has experienced other unavoidable expenses such as illness or an emergency.
Reinstatement-Similar to Forbearance but under this plan the homeowner agrees to make a lump sum payment in the future to bring the mortgage “up to date”. This may be possible through tax returns, future bonuses, an increase in household income in the future, or other various scenarios. The difference here is the lump sum payment.
Repayment Plan-If the borrower cannot meet the requirements of Reinstatement or Forbearance the lender may allow the borrower to catch up on what is owed by increasing the monthly payments until the missed payments are brought current. This can be a very favorable option for many distressed homeowners,
Loan Modification Plan-Some lenders may be willing to do one or all of the following:
-Modify a Mortgage by converting it to a fixed rate mortgage at a lower interest rate and extending the years of the mortgage to reduce the monthly payments.
-Giving more years to pay off the mortgage and adding any missed payments to the balance of the mortgage.
-Forgiving part of the loan amount to make the payments more affordable.
Deed in Lieu of Foreclosure-Sometimes referred to as “Deed for Keys”. As with foreclosures, this plan does affect a person’s credit rating, however, not as negatively as foreclosure. In order to enact this plan the loan amount usually must be lower than the anticipated sales price. Many lenders require a 20% differential to make this work.
Cash for Keys-This plan works when there is equity in the property and the lender and homeowner agree to exchange cash from the lender for the keys to the property. The homeowner walks away with cash, and the lender owns a property that has enough equity to cover the cost.
Sell the Home-If the value of the property is greater than the loan amount it is a good possibility that the property could be sold. It is important to offer the property at a price that will attract many qualified buyers especially if the real estate values are falling or there are a considerable number of similar properties for sale in the area.
Upside Down Properties-This refers to those properties in which the mortgage is greater than the value of the property. The financial institution may be willing to forgive some of the mortgage to make a sale possible in order to avoid foreclosure. It’s important to keep in mind that the amount that is forgiven could be taxable and the lender may send the borrower at 1099 at the end of the year. This is referred to as a “Short Sale“. These transactions have become a preferred method of avoiding foreclosure. This process may result in a negative impact on the borrower’s credit rating though not as much as a foreclosure. It’s important to consult an attorney, and a tax professional when considering a short sale.
For more information on Short Sales and Foreclosures visit the Short Sale and Foreclosure section of this blog. If you or someone you know are having trouble making your house payments, please call me for a confidential interview at 503-931-1846.