A bankruptcy may stop a foreclosure and allow a homeowner to reorganize his debt and keep his property. The reality however is that most of the time this is not the case and the bankruptcy only stalls the foreclosure. If the homeowner is not able to make the payments after bankruptcy the house will foreclose anyway.
The other major drawback to bankruptcy is that it makes it very difficult for the homeowner to sell his property once he enters the process. It makes it near impossible to negotiate a short sale. The only possibility is if the trustee of the bankruptcy agrees to release the property from the proceedings and allow it to be sold.
Certified Distressed Property Institute, LLC, 2008
A Deed-in Lieu (DIL) of Foreclosure is sometimes referred to as a “friendly foreclosure” since the homeowner essentially gives the Deed back to the bank. Because this may prevent the bank from go through lengthy (and costly) foreclosure proceedings, they will sometimes forego their right to a deficiency judgment. The bank agrees to take the Deed back in exchange for the property and the homeowner and back part ways with no further recourse.
This solution often only works when there is only one bank holding a note on the property and there are no significant junior liens on the property. If the homeowner has equity, this is usually not a good route to take. Why forfeit your right to that hard earned equity?
As with other foreclosure alternatives, the bank will only accept a DIL if you cannot make your mortgage payments. Also like the other alternatives, it is often less damaging to your credit than a foreclosure. Keep in mind, the bank will not present this as an option to you because this has to be done by you voluntarily. To maximize your chances of your lender accepting a DIL, do not wait too long – approaching them one week before the home is to be auctioned will often not work.
If you or someone you know is falling behind on their mortgage, please call me at 703-403-0536 or email me at patrick@patrickduffyrealtor.com. I’m here to help!
A Loan Modification is a change to one or more of the terms of a loan. For example, this could take the form of a lower interest rate, as in going from 7.5% to 5.5%. Or, it could involve extending the term of the loan, as in going from a 30 year term to a 40 year term. Whatever the case may be, the goal is to reduce the mortgage payment to one that the homeowner can manage and allow them to maintain ownership of their home. In many cases, the lender seeks to reduce the mortgage payment to 31% of the homeowner’s before tax income. For example, if you are making $5,000 each month – the terms of your loan would be modified so that your mortgage payment does not exceed $1,550 each month.
To obtain a Loan Modification, the homeowner must exhibit a verifiable hardship that makes it impossible for them to make the payments on the current terms of their mortgage. The hardship could be one or more of many things such as job loss, illness, death, payment increase due to interest rate adjustment, etc. Much like when the homeowner applied for their mortgage, they will apply for the modification and supply the lender with needed documentation to substantiate their case for the need of a loan modification.
Once initially approved, the lender will place the homeowner on a trial modification (trials periods can range from 3-6 months) in which the homeowner will have their payment reduced and will have to exhibit that they will be able to make the payment. After the successful completion of the trial period the modification will be fully reviewed and either granted or denied.
This was a brief overview of what a Loan Modification is and the process involved. If you would like to pursue a Loan Modification, I urge you to do some research. As always, I am here to help you with alternatives to foreclosure at phone: 703-403-0536 or email: patrick@patrickduffyrealtor.com.
Links:
Forum with over 20,ooo members, sharing their loan modification stories (successes and failures) – http://www.loansafe.org
In my first of a series of posts on foreclosure avoidance options, we will look at the quickest way to “get back in the good graces” of your lender – reinstatement. Unfortunately due to the homeowner’s hardship situation, it is often difficult to pursue this route. However, if the reason you have missed payments is temporary, this option allows you to reinstate your mortgage all the way up until the bank sale.
To have your mortgage reinstated, you quite simply have to pay the lender what they’re owed to bring you current. In order to due this, you will contact your lender and request the amount needed in the form of a reinstatement letter. Keep in mind this letter often is time sensitive, usually requiring the full amount in one payment within 3o days.
Once reinstated, go ahead and keep making those payments.
Reinstatement Example
Homeowner misses four payments on a $2000 per month mortgage and the foreclosure process has been started.
Reinstatement Amount
4 months @ $2000/mo.
$8,000
Late Fees
$400
Legal Fees
$1,600
Processing Fees
$300
Total Reinstatement
$10,300
As you can see, this option will often require a sizable lump sum payment. Due to the difficulty of coming up with that payment, other options may need to be explored – which will be covered in the coming days. The next foreclosure avoidance option in my series of posts will be Forbearance.
In a previous post, I provided a list of alternatives to foreclosure with a brief description of what they are. In the coming days, I will provide a closer look at each of the alternatives. Following is the list of options that we’ll delve into.
Reinstatement
Forbearance or Repayment Plan
Mortgage Loan Modification
Deed in Lieu of Foreclosure
Bankruptcy
Service Members Civil Relief Act
Sell the Property
Short Sale
Please visit my blog over the coming days to read more about these alternatives. As a Certified Distressed Property Expert, I am trained to handle this most difficult of situations, homeowners facing foreclosure. You are not alone and I am here to help you. In the meantime, feel free to call or email me anytime at 703-403-0536 / patrick@patrickduffyrealtor.com. A wealth of foreclosure resources can also be found at www.NorthernVaShortSaleHelp.com.
Selling a home is complicated and full of legal issues that anyone considering selling “by owner” needs to be aware of. However, two of the most important things you need to know in order to be successful as a FSBO (for sale by owner) home seller have nothing to do with legal issues.
Maximize Exposure
It takes more than just sticking a “for sale” sign in the front yard to get the right people to see your home. It is very unlikely that you will sell your Woodbridge home to a neighbor, or anyone in the neighborhood just driving by. It can happen, but that group is very limited. For sale signs help, but they don’t usually sell the home on their own.
It’s important to advertise in as many places and as many ways as possible including on the internet, in homes magazines and in the local MLS (Multiple Listing Service).
Know Your Buyer
The next thing that is complicated for an individual selling their own Woodbridge home is knowing which buyers are looking in earnest, which are just being nosey, and which have the ability to actual make good on an offer.
Along with exposure this is one of the biggest reasons FSBO sellers often end up turning to a good real estate agent. They have the ability to make sure buyers who come to view your home are ready, willing and most of all able to make a purchase.
If you would like more tips on selling your home “by owner,” subscribe to this blog. It’s free, fast and easy.
