If you have received a “Notice of Default” from your lender/servicer, and don’t know what to do, please review all the available options that you may use to stop foreclosure. I have written many articles about how to stop foreclosure and this post will summarize the various loan modifications and options that are currently available to you.
So take a look at all options available to you and decide which avenue would best resolve your problem.
Loan Modification Programs
Under the loan modification (a.k.a loan workout) you and your lender modify your present loan to either reduce your monthly mortgage payments and terms or the principal balance of the loan. This is done by using one or a combination of various loan programs or using the “Making Homes Affordable” (MHA) programs as follows:
Forbearance Agreement just need some time to catch up and put the delinquent payments on the back end of the loan
Home Affordable Modification Program (HAMP) – currently employed and struggling with mortgage payments
Home Affordable Refinance Program (HARP) – not behind on your payments and need refinancing
Home Affordable Foreclosure Alternatives Program (HAFA) – for those who want to “walk-away”
Home Affordable Unemployment Program (HAUP) – for the unemployed
Principal Reduction Alternative (PRA) – for homes that have significantly less value than what is owed
Second Lien Modification Program (2MP) – for homes with a current HAMP loan and need to modify the second lien
FHA Home Affordable Modification Program (FHA-HAMP) – for homes with current FHA financing
Veteran’s Affairs Home Affordable Modification (VA HAMP) – for homes with current VA financing
FHA Short Refinance for Borrowers with Negative Equity (FHA Short Refinance) – not behind on your payments but owe more than your home is worth
Hardest Hit Fund (HHF) – aid for homeowners in the hardest hit states
In the event that any of the above loan modification programs are not suitable for you, then one of the options below will be your last resort.
The short sale is used when loan negotiations/workouts cannot be achieved to satisfy the lender or the homeowner because of financial hardship conditions. In this situation, the only viable alternative would be to short sale the home whereby the lender agrees to the sale and recognizes.that they will take a loss.
This program should be your last resort if you want to stay in your home. Use this program only if you have decided that you no longer want to stay in your home. Too many over zealous, greedy realtors push homeowners into this program unnecessarily.
Nevertheless, this is not said to discredit realtors (because I’m also a realtor), there are great realtors in the market who really know their business. My suggestion is to find a realtor that is knowledgeable about short sales and can make it a smooth transition.
Personally, I am not opposed to this program, however, in my opinion this program is only a “win” if it is to the advantage of the residing homeowner. Albeit, we all know most lenders would never let the homeowner, buy their home back at a reduced price. Therefore, push for the Principal Reduction Alternative (PRA) if you decide to stay in your home.
The primary advantage to a deed in lieu of foreclosure from the homeowners perspective is that it releases their obligation and responsibility to a defaulted loan. You are required to willingly, voluntarily and in good faith grant a written instrument, known as the deed in lieu, to your lender thereby relinquishing all your rights and possession to the property. In short, you have agreed to “walk away debt free.”
It will also be viewed more favorably by creditors and lenders, as well, when applying for a new future mortgage.
Filing a Chapter 13 Bankruptcy is not a solution to avoiding foreclosure….it is only a “stall” tactic. It will not prevent the lender from eventually foreclosing on your property if you do not credit and income qualify.
Though,, there are a few lenders that will make a loan to homeowners while they are in a Chapter 13.
Here is an option to foreclosure that is on the “boiler plates” of the Obama Administration. The rent-to-buy your house back option would allow “underwater” homeowners to rent or lease their homes while staying in their homes. Needless to say, it has not been widely accepted by many lenders other than Citimortgage, to my knowledge.
In spite of the opposition by many lenders, this would be a solution to resolve foreclosure in totality.
In conclusion, all current and available solutions to foreclosure have been identified, it is your choice to make decisions that will be in your best interest. I wish you the best and good luck!
Please leave a response and share your ideas.