Are You
Eligible?
Please use the self-assessment tools
provided on the government website,
Making Home Affordable, to see if you are among the
7 to 9 million homeowners who
may be able to benefit
from refinancing and mortgage modifications.
What Options Does a “Homeowner”
Have When Facing Foreclosure?
By
Gary L. Seymour
As posted on
moneycrossing.com
and
univision.com
Option 1:
Contact the Lender and ask for
help before falling behind on
payments! Many homeowners assume
that the Bank will not help them
restructure payments or modify
their mortgage. Although there
is no guaranty that the lender
will assist the homeowner, this
is still the first place to
start. If there is little or no
equity in the house the
homeowner may decide to give the
Bank the property by executing a
deed in lieu of foreclosure. In
this scenario, the Bank releases
the debt in return for the
homeowner deeding the house to
the bank. This may save the
homeowner’s credit if it has not
already gone bad.
Option 2:
Refinancing may be an
option if the homeowner is not
yet in foreclosure. Not too long
ago this was all the rage. Now,
in the age of falling home
values and severely restricted
lending programs, it is not
nearly as easy to refinance. In
addition, refinancing often
serves to only stem the tide and
does nothing to actually solve
the homeowner’s problem.
Refinancing will certainly not
help the homeowner make more
money to pay his debts. If other
debts such as credit cards are
folded in, the homeowner’s
payments can actually get
higher!
Option 3:
If the Bank will not
work with the homeowner and the
homeowner cannot find other
resources to make payments, the
homeowner should consult an
attorney immediately. Many
states have statutes that help
the homeowner when he is unable
to make payments due to
financial hardship. Qualifying
for help under the statutes may
be hard, but it is worth a shot.
Option 4:
If the aforementioned
options are not available to the
homeowner, the Bank will
foreclose usually within three
months of non-payment. The
homeowner should visit with an
attorney and see if there are
defenses to the foreclosure.
There is currently a ground
swell around the idea of
“predatory lending.” Perhaps
this can be asserted as a
defense in to foreclosure. The
bottom line is that if the
homeowner puts his head in the
sand he will lose his home AND
POTENTIALLY BE LIABLE FOR A
DEFICIENCY JUDGMENT!
Option 5:
The homeowner may
qualify to do a “short sale.” A
short sale occurs when the home
is not worth the amount of the
debt and expenses necessary to
sell it. For instance if a home
is worth 350k but the bank is
owed 380k there will not be
enough money to pay the Bank
off. Add to that expenses of
selling such as realtor
commission, transfer taxes,
attorney fees, etc. and there is
potential for a 50k shortage. In
this scenario, the homeowner
lists the property for sale with
a realtor and solicits a buyer
in the conventional way. When
the offer comes in, it gets
submitted to Bank for approval.
If the Bank approves the “short
sale” then the homeowner will be
relieved of the debt and it will
be reported to the credit
agencies as paid.
Option 6:
The homeowner may
qualify for either Chapter 7 or
Chapter 13 Bankruptcy. Chapter 7
allows the debtor to discharge
all debts, including a
deficiency judgment should the
Bank obtain one. In Chapter 7,
the homeowner does not keep the
home unless all payments are
made under the original terms of
the loan. On the other hand,
Chapter 13 allows the debtor to
set up a payment plan through
the bankruptcy court to be
administered over several years.
Provided all payments are made
as scheduled the homeowner’s
default with the Bank will be
cured, and he will retain the
home. The catch is that the
homeowner must make enough money
to support the Chapter 13
payment plan.
Option 1: