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V. Workout options. If you enter into discussions with a lender or their "loan servicer" – companies that collect your payments – some options are open to you. While lenders are not required to modify loan arrangements, many will. But, please, remember to talk to an independent professional first. You're not used to talking to lenders. Read through all of the following methods until you basically understand them – then contact us.
Deed in Lieu of Foreclosure: Often – particularly if you have zero or very little equity in the home – this can be your best workout option. The lender accepts return of your title, and it may be possible to follow this process and not have credit impairment or a tax bill because of the lender filing a 1099 (meaning that you may have to pay income taxes on the difference). We can negotiate with your lender to avoid credit impairment. And, on occasion, enable you to exit your home with cash in your pocket to defray moving expenses.
Refinance: It's a nice idea, but, tricky in today's market. Do you have enough equity (nearly 30%)? Is your credit score high enough, or improveable? Are you prepared to own a home that will continue to lose value over the next 2-4 years due to market conditions beyond your control?
Reinstatement: Let's say you missed two or three monthly payments. With a reinstatement, aka a "temporary indulgence," you bring your loan current, pay late fees, other costs, and the loan continues as before. Great! But often difficult – if not impossible – due to the financial conditions that forced you to miss payments.
Re-amortization: With this option, missed payments are added to the loan balance, bringing your account current. However, because your debt has increased, future monthly payments may be larger unless the lender agrees to lengthen the loan term.
Forbearance: A temporary change in mortgage terms, allowing you to skip a payment or make smaller payments for a year or less, the balance is applied to the total amount of your loan.
Modification: This option should be considered when you experience difficulty making regular mortgage payments as a result of a permanent or long-term financial hardship. Permanent interest rate reductions appeal most to borrowers, and a temporary rate reduction of one to three years can provide substantial help.
Short sale: An arrangement where you sell your home and the lender accepts less than the mortgage debt in satisfaction for the entire loan amount. Also called a "compromise agreement." The problem is that currently lenders are very very slow to approve of short sales, and your buyer may give up and withdraw the offer. Be very very careful, because in some instances money that is not repaid may be regarded as a gain for you and therefore taxable income.
Bankruptcy: To be avoided at all costs. It’s very difficult if not impossible to qualify for Chapter 7 these days, and under Chapter 13, you may still have to pay your mortgage off—even if you lose your home! You’ll need to talk to a lawyer that you can trust—not one that wants legal fees to file bankruptcy for you, and watch you ultimately lose your home anyway, and worse, have your credit impaired for many years while buried under debt!
FHA loans: If you financed with a loan guaranteed by the Federal Housing Administration, call 1-800-569-4287 or 1-800-877-8339 (TDD) to reach a HUD-approved housing counseling agency for assistance and advice.
There are many many homeowners who have fallen significantly behind (90-120-150-180 days) on their payments and they have not received a phone call or any type of letter demanding payments. This is due to the fact that Wall Street firms who bought the loans from local lenders have not gone forward with Notices of Default (NODs) because the information would become public and the bonds they created that are collateralized by your home loan would go down in value. Wall Street is forestalling the inevitable, sending misleading signals to borrowers and the market. Ultimately, all home values may go down 20% or more. You should be preparede for this!
Consequently, if you're willing to take action to protect your family, you may be able to save your situation before it becomes much worse. We'll be glad to explain to you the details or refer to to someone who can. Contact us.
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