Real Estate News
| Alternatives to Foreclosure and Advice
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ALTERNATIVES TO FORECLOSURE Facing the prospect of
foreclosure can be overwhelming, but less so if you know your
other options. Homeowners with distressed loans often ignore
their alternatives to foreclosure until it's too late. Don't
make that mistake. Consider your other options right away. The
more time you have before you ultimately lose your home through
foreclosure, the more viable your other options may be. Things
may seem bleak, but now is not the time to falter. Knowledge and
determination will give you the resolve you need to overcome the
financial challenges you face.
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WHAT IS FORECLOSURE? |
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Foreclosure is the legal process for a
mortgage lender to sell property to satisfy a defaulting
borrower's debt secured by that property. Foreclosure
can take quite a toll on homeowners, both emotionally
and financially. Depending on your circumstances,
foreclosure may force you and your family out of your
home, damage your credit, increase your tax liability,
and expose you to other personal liability. |
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1. housing counselor to try to work something out.
If you just need a little time to get back on your feet, your
lender may agree to a loan workout plan to temporarily reduce or
suspend your payments, allow you to repay what's past due in
monthly installments, or provide some other type of relief.
Loan Workout: If you experience difficulty paying your mortgage,
you should immediately contact your lender or a
Loan Modification: Even if your financial difficulties are
severe and long term, you should contact your lender or a
2. housing counselor to try to work something out.
Your lender may agree to a loan modification to permanently
change one or more of your loan terms. A loan modification may
involve a reduction of your interest rate, an extension of your
loan term to 40 years, a reduction in your loan balance, or
other changes to the terms of your loan to make your mortgage
payments more affordable. Your lender may participate in the
government-subsidized Home Affordable Modification program which
gives monetary incentives to both lenders and borrowers for
modifying certain distressed loans. For more information about
the Making Home Affordable program, go to
http://makinghomeaffordable.gov/.
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CONTACT A HOUSING COUNSELOR: |
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For assistance with foreclosure
avoidance, you may contact a qualified housing
counselor. A housing counselor may discuss your
situation with you as well as interface with your lender
on your behalf. A list of housing counseling agencies
approved by the U.S. Department of Housing and Urban
Development (HUD) is available at
http://www.hud.gov/offices/hsg/sfh/hcc/fc/.
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3. Short Sale: Another way to handle a distressed
loan is to sell your property. Selling, however, may be
challenging if you're "upside down", which means your unpaid
balance is more than your sales price. Even so, your lender may
voluntarily agree to a short sale by accepting a loan payoff of
less than what's owed. As with foreclosure, a short sale may
affect your credit, tax liability, personal liability, and pose
other consequences. With a short sale, however, you can avoid
what some people perceive as a stigma of foreclosure. Doing a
short sale also allows you to take a proactive approach to
dealing with your distressed loan, rather than go through what
can be an agonizing wait for the foreclosure process to run its
course. For more information, contact your REALTOR® to get a
better idea of your property's current market value and to find
out about listing and selling your property.
4. refinance your loan with your lender or another
lender. Although low FICO scores, low appraisals, and the lack
of income are common obstacles to refinancing distressed loans,
whether you qualify for a refinance depends on your individual
circumstances. You may also be eligible for federal assistance
through the Home Affordable Refinance program for up to 125% of
the property's value if you currently have a Fannie Mae or
Freddie Mac loan, or the Hope for Homeowner program for a
FHA-insured fixed-rate refinance up to 96.5% of the property's
value, but other terms apply.
Refinance: If you cannot do a loan workout or loan modification
with your existing lender, you may still be able to
5. Deed-in-Lieu of Foreclosure: A deed-in-lieu of foreclosure is
a voluntary agreement between a borrower and lender for the
borrower to give title to a property to the lender in full
satisfaction of the loan secured by that property. Your lender
may look favorably at a deed-in-lieu of foreclosure because it
will not have to spend time and money pursuing foreclosure.
6. Bankruptcy: Bankruptcy is a federal court proceeding for
settling your debts with your creditors under a judge's
supervision. If you face foreclosure, the filing of a bankruptcy
case may provide an "automatic stay" to temporarily stop the
foreclosure proceedings. If, however, you file for liquidation
under Chapter 7 of the Bankruptcy Code, the court may, in time,
lift the automatic stay to allow the mortgage lender to resume
its foreclosure proceedings. Alternatively, if you file under
Chapter 13, you may be able to keep your property, but you must
generally repay the overdue amount in a three-to-five year plan
along with your regular mortgage payments. For more information
on bankruptcy, you may go to
http://www.uscourts.gov/bankruptcycourts/bankruptcybasics.html.
7. Other Alternatives: There are many other alternative to
foreclosure. You may be able to borrow money from family or
friends. You may be able to supplement your income by renting
out a bedroom or getting a second job. You may have a struggling
small business that qualifies for an interest-free,
deferred-payment America's Recovery Capital (ARC) loan up to
$35,000 from the U.S. Small Business Administration. If your
lender fails to follow proper foreclosure procedures, you may be
able to file an injunction to stop the process. If you have
legitimate discrepancies in your loan documents, you may be able
to sue your lender. You may also be able to come up with some
other alternatives to foreclosure not mentioned here. For any of
these alternatives to foreclosure, carefully consider their pros
and cons, including possible credit, tax, legal, and other
consequences.
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AVOIDING FORECLOSURE SCAMS |
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FORECLOSURE PREVENTION RESOURCES |
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FORECLOSURE TIMELINE |
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HOMEOWNER LIABILITY AFTER FORECLOSURE |
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PROPOSITION 8 - PROPERTY TAX RELIEF (CA Only)
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