Pacific Northwest Real Estate

Alternatives for Homeowners Facing Foreclosure

1.  Forbearance/Repayment Plan

Negotiate with your mortgage company to determine a repayment plan. You’ll need to make up all the payments you owe, along with late fees and legal costs, in small payments over time rather than a big lump sum.

2.  Reinstatement

To stop foreclosure, you have the right to pay all money owing (payments, late fees, legal costs) up until the day of the court house sale.

3.  Rent Your Home

Finding someone who will rent your home is a good way to ensure that your mortgage can be paid each month. It will save you the burden of coming up with the money yourself, and can also prove a good investment once these hard times are over.

4.  Refinance Your Home

As long as your credit hasn’t been too badly damaged by late payments, etc., you may refinance your mortgage at a lower interest rate and reduce your total monthly payment, provided current interest rates are lower than the rate on your current mortgage.

5.  Sell Your Home

Do you have equity in your home? If so, it’s better to sell the home rather than risk the damaging effects of foreclosure on your credit and financial future. Susan and her team of expert Pacific Northwest professionals can help you calculate the market value of your home, as well as how much you would walk away with after the sale. (It’s important to have your mortgage’s current payoff balance to calculate this amount accurately, so contact your mortgage lender).

6.  Mortgage Modification

Foreclosure is a no-win situation for you and your lender — you don’t want to lose your home, and the banks don’t want to own real-estate, since they have to pay taxes, insurance, maintenance, utilities, Realtors, attorneys and other maintenance until the house is sold. Increasingly, mortgage lenders are willing to negotiate with homeowners to reduce monthly payments to something they can afford to pay.

7.  Short-Refi

Also known as the US government’s HOPE program, this program involves refinancing the home with a reduction in the principle balance and the interest rate to make payments more affordable and avoid foreclosure.

8.  Service Members Civil Relief Act (SCRA)

This law provides certain protections to military personnel and service members. Call our office for more information if you believe this may apply to you.

9.  Deed in Lieu of Foreclosure

Essentially a “friendly foreclosure,” in this situation the homeowner gives the deed back to the mortgage company, which allows both sides to skip the hassle of a lengthy foreclosure proceeding. It is still recorded as a foreclosure on your credit report, and it still carries all the same penalties for your credit as a regular foreclosure. Because of your cooperation, however, the mortgage lender may waive their rights to a deficiency judgment. This solution works best when there is only one mortgage and no liens on the property, as the first mortgage company rarely works with the second mortgage company.

10.  Bankruptcy

In this scenario, homeowners hire an attorney to file a Chapter 7, 11 or 13 Bankruptcy in an attempt to get the courts to dismiss part or all of your debt. A bankruptcy delays foreclosure, but does not prevent it. In the end, you end up with both a bankruptcy and a foreclosure on your credit report. Many people mistakenly think that bankruptcy will fix all of their problems, but in many cases creditors can still come back to you for payment. Serious tax consequences can also apply.

11.  Short Sale

What does it mean to be short?

You’re “short” when the amount you owe (combined with closing costs and commissions) is higher than the current market value of your home.

What are the advantages of choosing a Short Sale?

• Mortgage lenders are welcoming short sales as a viable, agreeable alternative to foreclosure. Because it’s a cooperative effort between you and your lender, there’s usually a much more favorable outcome for everyone.

• It’s okay if you have more than one mortgage on your home — even with a first and second mortgage and a home equity line of credit, you and your Realtor can still negotiate a short sale that’s agreeable both to you and your lender.

• Short sales cause much less damage to your credit report. Short sales show up as late payments and a “satisfied debt.” Though these are still viewed negatively, it lowers your credit by only about 50 basis points for 2 years (as compared to a drop of 300 or more points with a foreclosure, which shows up on your credit report for 10 years).

***Susan Stecher is a Certified Distressed Property Expert - CDPE, Specialized Service Provider – FSSR, in Foreclosures, Short Sales and Bank-Owned Properties, a Short Sale & Foreclosure Resource – SFR and a Certified Short-Sale Professional – CSP. Call today for a confidential consultation to determine what your best options are to avoid foreclosure — call direct at (360) 319-4939, or toll-free at (888) 319-4939.

Direct: (360) 319-4939
Email Susan

Susan Stecher

Broker, CFP, CRS, CDPE, RFC, SRES, CHLMS, Realtor® Direct: (360) 319-4939
Phone: (888) 319-4939

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