Nov. 10, 2011
How to Stop a Foreclosure in San Diego
Prevention of Foreclosure Options
Our beloved USA is under one of the worst housing and financial crisis' ever faced. Foreclosure is completely devastating to your families future, but the hard truth is that 1 in 6 homes are facing this scenario. Surprisingly, foreclosure can be avoided, and their are options available to San Diego residents. Here is a very brief overview of some foreclosure avoidance options.
Reinstatement
A reinstatement is the quite simple, but probably most challenging for a foreclosure solution. All the homeowner has to do is request for the total amount owed on the mortgage and simply pay for it with a check or wire transfer. Lender’s approval isn’t needed and it will reinstate the mortgage up until the day before the foreclosure sale date.
- POSITIVES Quick and easy, and doesn’t require bank approval
- NEGATIVES: A large lump sum of money needs to be free-at-hand (many people can’t afford this)
Refinance
If there is enought equity in the home and homeowners credit is good, the lender or any outside lender can refinance the mortgage into a new loan.
- POSITIVES: Can result in lower monthly payments.
- NEGATIVES: Most San Diego homes do not have equity, so this option is very hard to get. Or homeowner must pay for negative equity to the lender before entering into a refinance.
Rent the Property
If the mortgage payment is low enough to turn a small profit from rent, then this option may work.
- POSITIVES: Homeowner can keep the property indefinitely.
- NEGATIVES: Possible risk in running a landlord/renter scenario, or rent cannot cover full cost of property with respect to mortgage, property taxes, HOA, and maintenance.
Loan Modification
A Loan modification is an agreement by the mortgage company to reduce the loan interest rate, principal loan balance, term of the loan (time), or any combination of the three. Any change to these factors normally lowers the homeowners mortgage, thus making it more affordable.
- POSITIVES: Lower monthly payments and/or possibly reduced principal loan amount.
- NEGATIVES: Homeowner must qualify for the new adjusted payment as support qualification with large amounts of documentation. Nationwide, failure rate is about 95%, so only 5% get lucky with a modified loan.
Forbearance or Repayment Plan
A forbearance or repayment plan is an agreement between the mortgage company and homeowner to repay the back payments (missed mortgage, fees, taxes, etc.) over a set time period. Many times it is the normal mortgage payment with an addition amount to cover the back payments.
A forbearance or repayment plan is an agreement between the mortgage company and homeowner to repay the back payments (missed mortgage, fees, taxes, etc.) over a set time period. Many times it is the normal mortgage payment with an addition amount to cover the back payments.
- POSITIVES: Allows homeowner to catch-up back payments over time
- NEGATIVES: Homeowner has to be able to meet current mortgage payment in addition to forbearance amount.
Bankruptcy
Bankruptcy is a legal protection device to alleviate the burden of paying off a homeowners debt, especially the mortgage. Technically, the homeowner doesn’t have to pay for their mortgage anymore, in a legal sense
- POSITIVES: No lender approval needed, since it is homeowners legal right to pursue.
- NEGATIVES: Bankruptcy only delays the foreclosure process. Even though homeowner no longer legally has to pay for home, lender still has legal right to foreclose on property and gain possession of home. Bankruptcy is not free, damages credit, and is only allowed 1 time every 7 years.
Deed in Lieu of Foreclosure
A Deed in Lieu of Foreclosure is pretty much a self-imposed foreclosure, but without the standard legal time-frames. A homeowner will hand over the property to the lender, instead of going through the normal foreclosure process. Of course the lender will have to agree and the homeowner must vacate the home.
- POSITIVES: Saves the lender time and money and may influence lender to give up right to pursue a deficiency judgement.
- NEGATIVES: Homeowner is still leaving property and there is no guarantee that the deed in lieu won’t be reported as a foreclosure on credit score.
Servicemembers Civil Relief Act (military personnel only)
If a military servicemember is facing financial hardship from deployment, and the mortgage was created before deployment, then they may qualify for the Service Members Civil Relief Act. An attorney must be evaluate situation to qualify for program.
- POSITIVES: Lower monthly payments on mortgage and all consumer debt
- NEGATIVES: Must prove deployment was cause for financial hardship, homeowners must be active military.
Traditional Sale of Property
If the home has enough equity, the homeowner can sell the home and use the funds to payoff the mortgage and back payments, as well as stop the foreclosure process.
- POSTIVES: Stops foreclosure and homeowner can receive profit from remaining equity
- NEGATIVES: Most San Diego homes don’t have any/enough equity to sell for a profit.
Short Sale
A short sale is the process by which homeowners can sell their home for less money than they actually owe on the mortgage. Homeowners must prove that there is financial hardship with lots of documentation. If a bank approves the discount of a mortgage, the home can be sold for a price lower than the amount owed without the seller having to come up with cash to cover the shortfall. The mortgage is satisfied and any foreclosure process stops.
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POSITIVES: Allows homeowner to avoid foreclosure, recoup some dignity, reduce credit hit, is not reported to individuals public record, and possibly avoid deficiency judgement. Federal mandates to allows homeowner to purchase another home in the span of months versus 5-7 years in a foreclosure.
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NEGATIVES: Negotiating a short sale is very challenging and must only be pursued with a real estate agent who is has a successful track record of delivering short sale approvals.
Are you in the foreclosure process already or very near to it? You still have time to go over the options and come up with the best solution for your needs. We are always here to help figure things out with you. Please call/text/email us at Agent619.com to just talk it out.
Written by Jeffrey Luzadas on November 10, 2011 for the Agent619.com
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