In this report, there are five powerful strategies to stop foreclosure in as little as 48 hours or less and two complementary strategies that take a little longer but are also effective. Be sure to read each strategy in detail to see which will be the best solution for your situation.
REINSTATEMENT (BRINGING THE LOAN CURRENT)
Reinstatement occurs when the loan is brought current by paying the total amount due with all the interest and fees. You have the absolute right to fully reinstate your loan with your bank within 90 days after receiving a notice of default from them. If you are now able to make the mortgage payments or your income is returned to its previous level, you can negotiate with the bank or lender to bring your loan current by paying the arrears(principle, interest, and fees). A loss mitigator (name of the personnel at the bank who works on reinstatements) at the bank may be able to provide an increase in monthly installments until the loan is brought current. This means that every month you add the extra money (determined by the Bank and the loss mitigator) for the normal price per month until the amount of delayed payments has been repaid. If you are able to show the bank that you can continue the payments, and that the balance can also be done either in a lump sum or over a short period of time (12-24 months), you can restore your mortgage to being current and maintain your ownership in your home. Terms are usually payment of half the arrears as a down payment and monthly payments 1/2 until the loan is paid up current, but this is all negotiable and will be determined by you and your lender. Legal fees and additional expenses could be rolled into this agreement if a mortgage company began the foreclosure process and incurred fees due to this. Many loan holders require certified funds when reinstating your loan so be prepared to do that if needed.
FORBEARANCE PLAN “WORK OUT”
If you are unable to make your monthly mortgage payments, the mortgage company can extend forbearance by agreeing to suspend payments or accept partial payments for a limited period until the bank will be able to start a repayment schedule. Forbearance is a formal written agreement between you and the bank to reduce or suspend monthly payments for a specified period. This means that for a period, you will be paying only a part of your regular mortgage payment or not make any payments at all. At the end of the agreed period, you will be asked to resume regular monthly payments and pay additional funds to offset the amount due. During the time that payments are suspended or reduced, you would be able to solve the economic problems you face. This agreement will lead to the restoration of the loan.
There is no maximum, but the majority of delinquencies due are not to exceed 12 months in arrears of principal, interest, taxes and insurance. The Bank may consider this option if you have recently suffered a loss of income due to unemployment or illness. Banks may decide to wait for legal action against you, and you can process the repayment plan that is convenient for you.
SELL YOUR HOUSE TO CASH BUYER
If the property is worth more than the amount due on your mortgage, a cash fast buyer can help you avoid foreclosure, and all the problems involved in foreclosure. Cash buyers are usually real estate investors who buy your house “as is” condition, and sometimes you can negotiate a move away day of your choice from the buyer, giving you time to find a new home. The impending foreclosure should be discontinued as soon as the title is transferred, which means that your credit score will not be as hard hit. This is really the only option if you have capital available in the property. For homeowners who are working with limited time, selling their house for cash may offer the reliability and security that is necessary to meet their time allotted, which in turn minimizes the stress and worry normally involved in the sale process.
Selling property with a real estate agent can take an uncertain amount of time and at the same time selling a property at an auction almost always results in a sale, the price obtained is almost always much less than market value. By selling your house to a cash buyer may provide the certainty that the sale will close and the certainty of knowing exactly how much money you will receive at the closing.
SHORT SALE YOUR HOUSE
A short sale is when a lender agrees to discount the banks debt against your house or your loan balance due to economic or financial difficulties of the borrower (you). This negotiation is done through communication with the Department of loss mitigation of the particular lender. To sell your property for less than the outstanding loan balance, and put the funds to the lender in full satisfaction of its debt is the goal of a short sale. The lender has the right to approve or reject a proposed sale. There are many circumstances that influence whether a reduction of the bank loan balance will be made. These circumstances are usually related to the current real estate market and its financial situation. A short sale is typically executed to prevent a foreclosure of your home. Often, a bank chooses to allow a short sale if they believe that this will result in less financial loss than other option of them foreclosing.
For a home owner, the advantages are the prevention of a foreclosure of their credit history and the partial control of the monetary deficiency. In addition, a short sale is usually faster and cheaper than foreclosure.
Short sales are nothing more than negotiating with lien holders to accept less than they are owed on a piece of real estate.
BANKRUPTCY TO STOP FORECLOSURE
The Law on Bankruptcy Reform of 2005 changed the whole picture of bankruptcy as they used to know it. Today, most bankruptcy lawyers need at least 3 weeks before a big event as a date of public auction in order to adequately prepare a bankruptcy petition and present it in court. Homeowners who have waited too long to deal with the foreclosure often find that there is little an attorney can do to help with a bankruptcy. The law still allows people to file their own bankruptcy petition in a pro-se (to represent themselves). Bankruptcy is a temporary solution and should always be an option of last resort. Most owners have the opportunity to present two types of bankruptcy, a Chapter 13 bankruptcy is a simple reorganization of debts, and Chapter 7 is a discharge of debt.
Bankruptcies can generally only prolong the situation. Only in rare cases, the owner can be successfully used the Chapter 13 bankruptcy as a tool for restructuring all their other debts where they are then able to release enough money to make their payments, such as house payments. Less than 10% of all people who file Chapter 13 bankruptcy ever managed to survive the end of the bankruptcy.
The filing of a bankruptcy is the only adverse reaction that continues in the credit report of a person from a foreclosure action. To file a bankruptcy, you will may have to hire a lawyer, and participate in all the different kinds of debt counseling before filing bankruptcy. In cases where the owner knows he can not make their mortgage payments because of their financial situation has changed for the worse, it would be prudent to wait to file chapter bankruptcy after the foreclosure process reached a definitive conclusion and you should seek competent legal counsel to find out.
Repayment plan. (Ch. 13)
Reform Act of 2005 was Chapter 13 of the most common form of bankruptcy. In essence, a Chapter 13 repayment plan under the supervision of the court and court-supervised the debtor provides the court with a list of all debts and budget for their monthly needs. All the extra money is applied each month to pay the arrears of debt. One of the advantages of a repayment plan in Chapter 13 is that many outrageous fees, interest rates and fees can not be applied to such debts. The typical rebate program usually lasts between 48 and 60 months.
The vast majority of chapter 13 repayment plans falter and eventually fail. Plans can falter even where the debtor gets a “grace period” from the Court for additional time to try and catch up for missed payments to the trustee. The typical Chapter 13 plan sends the debtor wages to the Court appointed trustee who pays all of the creditors according to a plan presented by the debtor and agreed to by the creditors.
After the bankruptcy reform act of 2005, chapter 13 repayment plans also include partial repayments in what used to be a complete discharge. Chapter 13 bankruptcies can be filed again within a shorter period of time after the last plan, either failed or terminated. However, to prevent abuse, if a chapter 13 plan is dismissed by the Court due to the debtor’s noncompliance, the debtor cannot file a new chapter 13 for at least one year.
Many of the new rules are in force and who abides automatic reclassification, are: the automatic stay expires after 30 days in the petition filed by an individual under:
First, Chapters 7, 11 or 13, if the dispute within a year before were released other than dismissal redeposited in 7078, may continue if the court finds that the reclassification of good faith.
Second, No automatic stay applicable in cases filed by individual chapters 7, 11 or 13, if two or more cases in one year before going to refuse to not re-filed under the dismissal of less than 70, the court may impose a residence is established as a result of storage in good faith.
Third, Stay automatically terminates 60 days after sec. 362(d) motion filed in case filed by individual under 7, 11, or 13 unless there is an extension or final decision
Often people do not understand how your house payment works and can leave it out in Chapter 13 plan. This is often the result of individual preferences of the lawyers hired to represent them, and the characteristics of the trustees appointed by the Probate Court to administer the Chapter 13 plans. Even if a house is not included in a chapter 13 bankruptcy, bankruptcy does not protect the home by filing a stay of foreclosure and remain in effect until the owner received and updating the house payments.
Discharge debts (Ch. 7)
Chapter 7 bankruptcy that the total discharge of debt and a settlement. Because of this powerful tool, you are able to file a Chapter 7 bankruptcy every eight years. In a Chapter 7 bankruptcy, people can list their home and the mortgage as a debt they seek to fulfill. If so, and it is clearly stated that they have to abandon all hope of saving the property. If a person chooses not to include in their home a Chapter 7 bankruptcy, because they still intend to keep the house, they must stay current with payments on the house while the remaining debts are discharged.
Many people think that if you are able to run other debts, then you have enough money on hand to get caught up in their house payments and keep up to date. More often than not, they are mistaken. Even if the house is not included in Chapter 7 bankruptcy, filing bankruptcy stay applies to the Mortgage and foreclosure. If the house will then be able to bring a mortgage current, then the foreclosure process will go away. Most of the time, even if the home owner is not able to carry or keep the existing mortgage and the bank files the motion of relief of stay. The chapter 7 is a valuable tool and a homeowner who realizes that they are going to lose the house may be better to wait after the Ch 7 case has been completed, or a short sale takes place, and then use chapter 7 bankruptcy to wipe anything which may remain.
HOHO (Hope for Home Owners)
In July 2008, the U.S. Congress and President Bush signed a law, commonly called “Hope for the owners”. In the Land of acronyms, got the nickname HOHO. HOHO has certain characteristics that every owner who is thinking about it first needs to know before they try and access the guaranteed $ 300 billion loan designed to help homeowners who are underwater to refinance their homes. The phrase “under water” refers not Katrina or any of the recent flooding, but the fact that people are now owe more than their home’s are value at.
Under HOHO, homeowner who now owe more on their home than its worth may enroll in the program and receive a depreciation in the value of their mortgage for 90% of its current market value. In addition 90% of the current market value, then there is a rate of 3% added to the FHA refinance which goes on the new mortgage amount. The new mortgage would then come into the market for current interest rates of about 6.5% from the date of this writing, plus a 1.5% annual reduction rate of 8% from today’s writing. This interest rate is clearly not competitive on the market with other mortgages.
Finally, the Back-end is the kicker HOHO. When a house in the program finally makes some appreciation of the value because the market is changing, when a homeowner refinances from a high interest rate of 8%, or sells the property, HOHO takes half of all equity. The following illustration with some numbers to it will help you understand better.
A person who bought a $ 200,000 home five years ago and made a 5% down payment and received five years of interest-only $ 190.000. The house has now declined 25% to $ 150,000. With this program the property will be refinanced to 90% of the market value which is $ 135,000 plus 3% of the refinance for FHA bringing it to $ 139,050. Let’s say that in five years the house goes up to $ 165,000, when they sell their property, they would then have to split the $ 26,000 profit with the federal government.
DEED IN LIEU (also called DEED IN LIEU OF FORECLOSURE)
The deed in lieu of foreclosure allows a mortgagor in default, that are not eligible for any other loss mitigation option to sign the title of the house back to the mortgage company. An owner may be better to sign a deed in lieu instead of letting the process of foreclosure happen. This is because, with the signing of a deed in lieu the borrower voluntarily gives the house to the bank. Although non-performing loans payments will be recorded on your credit report, it may not do the damage of a foreclosure would. Foreclosures usually stay on your credit report for at least 7 years. You can also avoid the time and stress involved in a fight against foreclosure, which in the end the lender is usually sure to win.
The lender (a mortgage servicer) can pay up to $ 2,000 compensation to the creditor (you, the home owner), but $ 2,000 is paid to after you release the property. Compensation must be applied to any junior lien(s) connected to the property.
An act must be initiated in a deed in lieu of foreclosure within six (6) months after the date of default, unless the mortgagee qualified for an extension at first to try an alternative loss mitigation or another extension approved by HUD prior to the expiration of the time required. Deed in lieu if following a special agreement or failed pre-foreclosure sale, must be completed or foreclosure initiated within 90 days after a failure.
A deed in lieu can occur only when you have 1 mortgage on the property. If you have a first and second, you can not do one. There may be tax consequences due to a Deed in-Lieu of foreclosure so make sure you consult a tax professional.
MODIFICATION OF LOAN
Loan modification includes changing the initial conditions of the mortgage and there are a variety of methods in which banks do this. This option provides a permanent change in one or more terms of the loan, which allows the loan to be returned to current and requires payments you can afford. If the you have an adjustable loan, the lender might freeze the interest rate before it increases or change the interest rate so the rate may be more manageable for you. The creditor may also extend the amortization period. This is called a loan modification. The changes of the principle are rare, but possible. Loan modification can be any of these things:
• A permanent change in interest rate
• Capitalization of back principle payments, interest, or escrow items.
• Extension of the loan period.
The use of three of the above will result in reamortization of the loan. The interest rate adjustment to current market price plus 150 basis points is common, although, at the discretion of the mortgagee, interest rates may be reduced below market too. All or part of the of PITI (principal, interest, taxes and insurance) may be capitalized (added) the balance of the mortgage. Foreclosure costs, fines and other administrative costs may be capitalized as well. The creditor can collect legal and administrative fees (resulting from the cancellation of the pre-foreclosure action), that will not be reimbursed by HUD, and collect it via a lump sum or through a separate payment plan with the agreement modification.