Even now in 2018, the real estate landscape has many uncertainties. We are here to help guide you through this most challenging of times. A foreclosure is scary and we always say “Bad things can happen to good people at anytime” Divorce, passing of a loved one, medical bills, job loss, reduction in income and relocation out of state are just some of the situations that can lead to a short sale. There are multiple options that can be used to solve a potential foreclosure problem. Here are the pros and cons.
• Reinstatement: Paying the total amount owed by a specific date in exchange for the lender agreeing not to foreclose.
• Forbearance: An agreement to reduce or suspend payments for a short period of time.
• Repayment Plan: An agreement to resume making monthly payments with a portion of the past due payments each month until they are caught up.
• Claim Advance/Partial Claim: If the loan is insured, a homeowner may qualify for an interest-free loan from the mortgage guarantor to bring the account current.
Pros – No lender approval
Cons – have to come up with the money to get the loan back on track.
• The lender may agree to change the terms of the original loan to make the payments more affordable. For example, missed payments can be added to the existing loan balance, the interest rate may be modified or the loan term extended
Pros – Reduces payment to allow homeowner to stay in the property
Cons – Full documentation needed, most often just puts a band aid on the bullet would and does not solve the problem and payments usually INCREASE.
• If the lender will not agree to a loan workout or modification, the homeowner may be able to refinance the loan with another lender.
Pros – allows owner to stay in home, does not require permission from lender
Cons – more often than not the payment INCREASES and does not help at all.
DEED-IN-LIEU OF FORECLOSURE
• The lender may allow a homeowner to “give back” the property. This option may not be available if there are other liens recorded against the property.
Pros – hand the keys to the bank and you are done
Cons – lender will not approve is there are other mortgages or liens on the property, affects credit the same as foreclosure, is considered a voluntary foreclosure.
WORK OUT SALE (SHORT SALE)
• The lender may allow a specific amount of time for the home to be sold and the loan to be paid off. The lender may also allow a buyer to assume the loan to purchase the property even if the loan is non-assumable. The lender may also pay relocation incentive to a homeowner for helping the lender by selling the property prior to expensive legal costs.
Pros – avoid public foreclosure, salvage your credit, avoid a costly deficiency judgment in some instances, qualify for a new loan sooner
Cons – process can be time consuming but is well worth the benefits
• If you are considering bankruptcy as an option, consult with an attorney that specializes in bankruptcy cases: www.azbar.org/LegalResources/findspecialist.cfm Access the Arizona Bankruptcy Court self-help information at http://www.azb.uscourts.gov/ or call 1-866-553-0893
*Please note THE HYSS Group and it’s members are not attorneys and cannot provide you legal tax or credit advice however we can refer you to an attorney that can assist.
Pros – Can be filed at any time prior to the foreclosure sale
Cons – does not solve the problems, many times will still end up in short sale or foreclosure situation.
• Allowing the lender to foreclose is another option.
Pros – The property is the banks problem now, not yours.
Cons – maximum waiting period to obtain a new loan, maximum credit hit, depending on loan(s) type(s) possible judgment that stops you from being able to purchase a home in the future of face embarrassing paycheck garnishing.
These are just some of the situation that we see, to best assess your specific short sale circumstances contact us to see what all solutions might be available.