As of now the U.S. economy and the state of the housing market have brought many homeowners from relative security to nervous uncertainty. Yet, as a country enveloped within this uncertainty, solutions are being created to assist those who need help. If you or someone you know are struggling, right now, to pay the mortgage isn’t it vital to really understand ALL the options available to you. So you will be able to protect your long term Financial Independence and your Self Worth.
The stress and pressures of having a mortgage on a home that is much greater than the home is worth not only is felt by the homeowner,but also is felt by the homeowners that live in the same community. In addition, Lenders are looking to avoid their stress and pressures of foreclosure by working with homeowners to find solutions to their financial situations. Lenders are not in the real estate business, they do not wish to take ownership of a home, and do not want their investment to sit idle and exposed to loss.
Some options that are available for you to consider, if you, or someone you know, are currently facing a situation of delinquent mortgage payments, or possible foreclosure can be a Short Sale or a Deed-in-lieu of Foreclosure. These options could allow you to sell or walk away from your home without incurring liability for deficiency.
OPTION ONE – SHORT SALE: In a Short Sale, a seller works with their mortgage lender to accept a price that’s less than the amount owed on the home. This results in the seller avoiding foreclosure, and allows the lender to avoid taking ownership and selling the property.
OPTION TWO – DEED IN LIEU OF FORECLOSURE: A Deed-in-lieu of Foreclosure is a process in which a property is given fully to the lender because the homeowner can no longer make payments. The lender then sells the property in order to retrieve a part, or whole of the loan balance owed. In most cases, the homeowner must attempt to sell the home at fair market value for at least 90 days before a mortgage company will consider a Deed-in-Lieu. This may not be an option if there are other liens on the property, such as second mortgages, judgments from creditors, or tax liens.
In both a Short Sale and Deed-in-lieu, your lender can claim you owe a deficiency judgment on your remaining balance. This means the lender may have the right to pursue the difference of what you owed and the eventual sales price of the home.
Foreclosure, by definition is the termination of all rights held by the homeowner covered in a mortgage. The process, in which the lender claims ownership of the property, begins when the homeowner fails to make mortgage payments at the appointed time- this is called delinquency. Typically, a formal demand for payment is issued from the lender through a NOTICE of DEFAULT. Although this varies by state, the lender will often issue this notice when the homeowner has been three months delinquent on the mortgage payments.
In a foreclosure, all rights to your property are lost, while the lender retains the right to pursue a deficiency judgment. It will also remain on your credit history for ten years or more. Foreclosures can:
With more than 1 in 7 U.S. homeowners not paying the mortgages, it’s clear that no one is immune to the current economic situation. I truly believe every homeowner deserves the best information and education to protect themselves from losing their home to foreclosure and ruining their credit. For those already struggling to pay their mortgages and unsure of what to do next, understanding short sales and deeds-in-lieu can ease their stress and potentially save them from an impending foreclosure. Deciding on which route will be best for you and your family’s future is the most important decision you can make. Please use this information to better understand the options available. Talk to an educated real estate professional to evaluate your particular situation and assess your options. Before applying for a deed-in-lieu, you should have a plan of action should you not qualify, or if the transaction does not go through.
