Foreclosure and the loss of the home is the usual result. Foreclosure is financially and psychologically devastating to the stability of the household. Their payments are based on indexes such as the prime rate that will be 3 or 4 times higher than they were when the loans were taken out.
On top of that, the housing market is already slowing. In many parts of the country, unsold housing inventory is doubling, homes remain unsold for 60 days or more and stocks of home builders are down by 1/3 or more. If you are facing foreclosure on your home, you are not alone. Millions of home owners will lose their homes in the next few years. The key to avoiding foreclosure is for borrowers to face the issue head-on.
Families fall behind on the mortgage payments because of illness, job layoffs, business failure, divorce and marital problems, and bad money management decisions. Mortgage payments will skyrocket as $1 Trillion dollars of adjustable rate mortgages adjust. In spite of the adjustment caps that most of these loans have, these homeowners will see their payments jump 20-40%.
Modification Plans
Banks sometimes will add those payments and interest owed to the loan, giving the borrower a fresh start. You may be able to refinance the debt and/or extend the term of your mortgage loan. The lender can modify your mortgage to extend the length of your loan (or take other steps to reduce your payments). These plans are used when a borrower falls behind and cannot make up the back payments.
This may help you catch up by reducing the monthly payments to a more affordable level. You may qualify if you have recovered from a financial problem and can afford the new payment amount. Modification might also be possible if you no longer have the ability to make payments at the former level. If you can make your regular payment now, but cannot catch-up the past due amount, the lender might agree to modify your mortgage.
Deed In Lieu Of Foreclosure Plan
Many lenders will agree to this arrangement since it gives them possession of the property minus exorbitant legal fees and court costs. It might not be possible if there are other liens against the home. Its It does have a negative impact on your credit record, but not as much as a foreclosure. If turning over the home is an option, contact the lender to voluntary release the deed to the property with the stipulation that the lender agrees not to start or complete foreclosure proceedings.
Further, request that the lender remove some or all of the missed payment reports to the credit bureau. The lender might require that you attempt to sell the house for a specific time period before agreeing to this option. When the lender allows you to give-back your property and forgives the debt.
Forbearance Plans
Lenders sometimes combine Forbearance with Reinstatement if you know you'll have the funds to bring your account current by a specific date. A forbearance plan is designed to bring payments current over a period of time by paying a full payment each month, plus a partial payment on the delinquent amount. The period of time during which foreclosure proceedings are stalled while possible solutions are being fulfilled. Most lenders have a forbearance program. You must be diligent in requesting forbearance, speaking with a manager with authority to approve the plan is a must. In forbearance, you are allowed to delay payments for a short period, with the understanding that another option will be used afterwards to bring the account current.
Repayment Plans
A loan modification changes the terms of the loan to lower the payments. Documentation of the hardship will be necessary. If a homeowner loses a job and falls behind on the mortgage before regaining employment, then the bank may arrange for the borrower to send a payment and a half for several months until the loan is current. Loan modifications are granted frequently. Still, you must aggressively negotiate with the lender.
If your home is FHA or VA insured, your mortgage lender must consider a workout before they can file a claim. If FHA or VA discovers you were not given the opportunity for a workout, then FHA or VA may deny the mortgage lender claim. These plans often give homeowners additional time to bring an account up to date. When the financial loss is due to an illness, death or loss of a spouse, or unexpected increase in expenses, (e.g. tax levy, sick child, or other permanent hardships), talk to the lender about a loan modification.
Short Sale Plans
If catching up is not a possibility, the lender might agree to put foreclosure on hold to give you some time to attempt to sell your home. The lender will allow you to sell the home to someone and accept far less than what you currently owe on the mortgage. Called a short payoff because the lender agrees to cancel the note and mortgage as a lien on the home.
How To Work With A Lender Plan
Mercy abounds for borrowers facing a job loss, illness or other unforeseen circumstances. But foreclosure proceedings take up to a year in most states. If the bank thinks you are trying, then they will work with you.
The best approach is to be honest with the lender and negotiate a lower interest loan or an extended payment plan. If they think you are avoiding the issue, then they are going to go on with the foreclosure.
About the Author
John Appleseed writes for foreclosurerefinance.com which offers resources and strategies for
bad credit stop foreclosure loans.
