Can a Bankruptcy Lawyer Help?
One of the most difficult decisions for homeowners who are behind on their mortgage is whether to opt for foreclosure alternatives or to take the route with the bank. Foreclosure alternatives is available in many forms such as deed-in-Lieu of foreclosure and loan modification. For those unfamiliar with these terms, they are both loan modifications and foreclosure alternatives. Deed-in-Lieu of Foreclosure is a process in which a homeowner voluntarily relinquishes the property to the lender. Once this happens, the title passes to the lender and the homeowner is considered to be completely discharged from all further obligation to the lender. Loan modification involves negotiating the monthly payments and interest rate with the lender to achieve a desired outcome and keep the home in the homeowner's possession.
In lieu of foreclosure, the homeowner can engage a professional deed in lieu of foreclosure company which is able to negotiate the loan terms with the lender to achieve the best outcomes. A deed in lieu of foreclosure allows the lender to gain complete control of the property, including possession and title insurance protection. It also delays the foreclosure process for up to ninety days.
HUD home foreclosure alternatives are offered to borrowers to avoid the bad effects of HUD home foreclosures. The programs are available through a variety of sources. Many states have passed laws that require lenders to work with HUD approved service instead of private investors or other third parties. In addition, many federal loan defaults involve individuals who are unable to meet the payment arrangements required by the original contract and thus need assistance from HUD approved housing counselors.
For instance, a bank may not pursue a principal reduction for a homeowner who has failed to pay for a home equity line of credit, even if the borrower's financial circumstances would make it financially feasible to do so. Homeowners in this situation should contact their banks or mortgage servicing companies for information about other options, such as a second mortgage, an extended payment plan, or a deed-in-lieu of foreclosure. Of course, even when homeowners have exhausted all reasonable efforts at foreclosure prevention, their rights and their obligations do not terminate just because a lender has moved forward with a foreclosure.
Once a homeowner has chosen a path through the alternatives that are available to avoid foreclosure, the real work begins. This involves communicating with the loan servicer, and working with the homeowner to make sure that their needs are met in a way that is affordable. The first step involves a review of the financial documentation and the income and expenses that were calculated for the property. Reviewing this information and communicating with the loan servicer to make sure that there are options that can be explored is important for the homeowner.
The second step is to make arrangements with the loan servicer in order to stop the foreclosure process. It will be necessary to communicate with the loan servicer and include other information such as an explanation of the hardship and a budget plan. In addition, the homeowner should arrange an appointment with the mortgage lender and submit pertinent documents. Once again, communication with the mortgage lender is extremely important as this will provide important information necessary in both the initial loan approval and the final modification of the loan.
The second option, and probably the best solution, is to contact a Bankruptcy lawyer or bankruptcy attorney for advice and assistance regarding the various options available prior to filing bankruptcy. These professionals are experienced with all aspects of bankruptcy law and can advise you on whether or not a loan workout will work in your situation. They can also inform you on the various options available to you such as a loan modification, short sale, and repayment plan. If you are going to file for bankruptcy, having professional support during this time can make the process much easier. A bankruptcy lawyer can also help if you have assets that can be attached before you declare bankruptcy.
Foreclosure Alternatives - You Can Still Stop the Foreclosure Process
The Home Affordable Foreclosure Options ("HAFUD") program offers homeowners a second option to resolve their mortgage arrears and avoid foreclosure. However, if you are not able to qualify for a Loan Modification, you will still be able to sell your property through a simultaneous foreclosure or a short sale. The simultaneous foreclosure allows you to negotiate with your lender to have your mortgage payments postponed until you can get your loan modifications. You then hire a Realtor to sell your house at a predetermined price. A short sale involves a quick sale where you sell your property "as is" and without any type of repairs.
The mortgage modification enables a borrower to keep their home by lowering the interest rate, changing the term of the loan, extending the loan period, and in some cases even reducing the principle. Many times it also requires that the borrower pays a portion of their late payment penalties. This is a temporary measure until the borrower finds an income to replace the lost income from the loan modifications. Once they are back on track with their monthly payments, they can refinance again or choose another option such as a deed in lieu of foreclosure.
In deed in lieu of foreclosure, the mortgage company receives a deed to the property instead of a mortgage payment. The deed is considered 'free and clear' once it is signed by the mortgagor. This does not affect the credit history of either the homeowner or the lender, and neither can it prevent future credit requests. This option is typically used by homeowners who cannot afford the full cost of a foreclosure, but do not wish to risk having their homes foreclosed. Because there is no mortgage payment to make, and the owner receives a deed in lieu of foreclosure deed, this option allows them to live in their home while avoiding foreclosure, and will not receive any further negative credit remarks.
Another option is to apply for and receive a loan modification. With this program, mortgage payments can be decreased significantly, and the remaining balance due on the mortgage can be postponed until the new loan term is met. As with most loan modifications, the borrower must qualify, and the lender may require up to 18 months of financial documentation. The potential benefit to this type of modification is that if you qualify and the terms are agreeable, you can avoid foreclosure by paying the modified payment until you can catch up on your mortgage. The downside to this is that this type of loan extension does not benefit your credit score very much. If you find you need to take out a mortgage once the new loan term has begun, then this might be an option.
One of the other options available is a refinance with your original lender. If you have a first mortgage, and you want to transfer it to a different property or another lender, then you may qualify for a second mortgage through your original lender. You may also be able to apply directly to your original lender for a second mortgage. This will probably be the most expensive option, but if you owe less than your house is worth, then this could save you money.
Another Foreclosure Alternative is to go with a short sale. If you owe more on your house than it is currently worth, then your lender will usually agree to accept a short sale in order for you to avoid foreclosure. Your remaining balance will be paid by the mortgage company to the seller, who will then pay back your lender.