Solutions

Foreclosure Solutions

Contrary to popular belief, lenders and banks don't want to foreclose on properties, it should only be a last resort.

There is a huge expense that lenders incur when foreclosing which include lost interest income, foreclosure attorney expenses, vacant property vandalism, property rehabilitation, and realtor fees to name a few. All of these losses get added to the bottom line which means if a loan balance is $50k greater than the house value, and the lender forecloses and incurs the above expenses, when all is said and done, they could be over $120k in the hole.

Lenders learned quite a bit from the last down market in the early 1990's. Below are several foreclosure solutions that are being used today.

1. Real Estate Loan Modification.

This is fast becoming the most used foreclosure solution today. The lender negotiates with the borrower or an outside third party to restructure your existing loan without refinancing and give you an affordable payment. It is by far the best method available. Click here for more information on the real estate loan modification.

2. Reinstatement Plan

Where your lender will reinstate the original terms of your loan once you are caught up. Bringing a delinquent loan current is awfully expensive. Back interest, as well as installment payments, any late charges, and attorney fees must be paid in one lump sum. After that point, your loan stays as is with no changes.

3. Repayment Plan

Where your lender will tack on an extra amount onto each payment for a set period of time, usually 3 months. After that, your loan stays as is and you continue forward.

4. Loan Refinance

Refinancing may be an option, but only if your credit score is high enough and your loan is not currently in default. There must be enough equity in the home as well.

5. Forbearance Agreement

Where your lender negotiates a repayment plan and may force you to list your home for sale. Once your loan is current, the terms do not change, they remain as is.

6. Short Sale

You sell your property for less than you owe but your lender accepts it as payment in full.

7. Pre-Foreclosure Sale

You agree to sell your property before foreclosure takes place (requires equity) while your loan is or isn't in default.

8. Deed in Lieu of Foreclosure

You agree to sign your property back over to the lender and walk away, without completing the foreclosure process.

9. Bankruptcy

Bankruptcy today is a repayment plan. Your payments to all your creditors are negotiated to a lower monthly dollar figure which may or may not include your mortgage payment. If you mortgage is included in the repayment plan, and you miss a scheduled payment to the bankruptcy trustee, you are back in foreclosure. Bankruptcy is not a permanant solution to solving mortgage payment issues, it's merely temporary.

Of the above solutions, the loan modification is the best if your hardship is to continue for an extended period of time. For more information on the loan modification click here or feel free to give me a call at 805-276-1942

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