Foreclosure and Short Sale Alternatives

By | April 27, 2010

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There are several options you can pursue when you’re behind on your mortgage and you want to stay in the house. An attorney can help you work through most of these solutions.

Reinstatement – If the reason you’ve missed your payments was temporary and you’re now able to continue paying your mortgage, you may be able to reinstate your mortgage. You’ll probably have to pay all missed fees, late fees, and legal fees due up to the date that you reinstate.

Forebearance If you’d like to reinstate your mortgage but the one-time payment is too high, there is a chance that the lender will allow you to negotiate a repayment plan, or forbearance. The lender will allow you to pay your debt over a specific period of time or will tack the extra debt onto the end of the mortgage.

Rent The PropertyIn some cases a homeowner will have payments low enough to allow him/her to rent the property and pay the excess mortgage payment out-of-pocket.

Refinance – If you have sufficent equity and income, and your credit hasn’t taken too large a hit, you may be able to refinance to a lower rate or better terms – or get enough cash out to cover payments for a while.

Mortgage Modification – In cases where homeowners do have the means to afford their payments, or a payment close to their payment, lenders may qualify the borrower for a mortgage modification.

Short-Refi – The relatively new phenomenon shows just how far some morgage companies are willing to go to avoid foreclosing on properties. This process involves the refinance of a home with reduction in the principal balance and often the interest rate as well. While relatively rare, and attorney can help you negotiate a short-refi.

Deed-in-Lieu – Often called a “friendly foreclosure,” deed-in-lieu occurs when the homeowner gives his deed back to the bank. In exchange for a non-contested repossession the banks will often give up the right to a deficiency judgement; however, in most cases a short sale is more beneficial to the homeowner.  It is still a form of foreclosure and will affect your credit as such.

Bankruptcy – Bankruptcy may allow the homeowner to reorganize his debt and keep his property. An attorney can help you with a bankruptcy.

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