Avoiding Foreclosure - Potential Solutions

The word "foreclosure" is a word that no homeowner wants to hear, because it signifies that they could lose their home. This is especially true if you are no longer able to make your monthly payments either on time, or at all. Frequently the cause of this unfortunate situation is a loss of employment, or an injury or other medical condition, and the costs and debts keep piling up. The homeowner would like to continue to make payments, and stay in their home, but events outside of their control have dictated a different course of action.

If you have a situation that could affect you making your monthly mortgage payment on times you will need to take immediate steps to avoid possible foreclosure of your home.

If there is no way that you can make a monthly payment, your first step is to contact your mortgage company or companies and alert them to your distressed situation. Ultimately, they want you to be able to pay your mortgage, as it is generating consistent interest (read: profit) for them. They may be able to provide you with some options that could help you to get back on track.

Preventive planning – know your monthly budget

Before you contact your mortgage company, you should create a detailed budget so you know how much you can afford each month for the mortgage payment without overextending yourself. In general, this is the first step in ensuring that you do not default on your mortgage and face foreclosure. However, as mentioned unforeseen events can change your budget. In these circumstances, redefining your new budget based on your current and expected circumstances is essential, as being able to explain your available budget will be a precondition of nearly all of the alternative options provided below. With this information in hand, call your mortgage company and inform them of your situation and ask to speak to someone who can help identify potential solutions.

Forbearance

This is a temporary agreement to delay the mortgage payment for a short period of time to help you get back on yor feet financially. You will need to convince the lender that this is warranted, and prove to them that will have some money soon and will be again be able to make payments when due without additional failures in the future.

Loan modification

The mortgage company could approve a decrease in the interest rate, which will reduce the size of the monthly installment payments. Aside from a loan modification, the mortgage company could also agree to extend the amortization period - the length of time it will take to pay off a mortgage in full.

Repayment plan

This is a solution where the missed monthly payments are totaled then diveded and scheduled to be added to future remaining monthly payments, in an effort to allow you to make up the missed payments on an arranged schedule.

As an example, if you historically have owed $1,000/month and you have been in default for three months, you would still owe $3,000. This debt would be divided and added equally to some or all of the remaining monthly payments, so your new payments would be greater than the $1,000 until you are caught up on that $3,000 owed, or until the mortgage is satisfied depending on the agreed upon repayment schedule.

Refinance

The missed payments would be added to the balance of the new loan. The amortization period would also be renegotiated, and depending on the current interest rates, you may even find a lower interest rate. Partial claim With some types of government loans, borrowers can be provided with another loan so they can pay back the payment in default.

Short Sale

If your bank is unwilling to work with you one one of the above solutions lilkely because they have already extended one or more of these options to you, and you are still struggling to get things back on track, then you may need to take one last step to avoid foreclosure, and see if your lender would be amicable to a short sale.

A short sale is the sale of a home for less than the amount owed on the home. While the homeowner cannot profit financially from this sale, it will avoid the negative credit impact of a foreclosure, and if set up properly, the bank will forgive the additional amount owed on the property and will agree not to pursue the homeowner for this money.

While the bank will lose money in this situation, in many cases the bank will choose to agree to this solution as it is less costly and takes less time than the foreclosure process.

Check out our blog titled Is a short sale the right solution? or contact IMN Homes today using the Contact Us link at the bottom of the page to get the short sale process started and to avoid foreclosure.