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| How to Avoid Foreclosure: Definitions & Solutions By Matt Hartley |
We all know that hindsight is 20/20 and that concept most certainly applies to your mortgage. With hundreds of
thousands of Adjustable Rate Mortgages and complex Interest Only loans about to incur rate increases, now is the
time to get the hindsight so you can avoid foreclosure in advance!
Regardless of whether you are in trouble with your mortgage payments for medical reasons, a job change or layoff
or simply because your mortgage payments have increased to any amount you can no longer afford, knowing how
to avoid foreclosure in advance is crucial to protecting your home, your credit rating and the equity you have in
your house.
Essentially, foreclosure (or, in some states, a trustee's sale) occurs when you fail to make your payments and the
mortgage company takes legal action to repossess your home. In some states, you have a "right of redemption"
which allows you to repurchase your house for a period of time after the foreclosure, but in many states (and most
western states) once a trustee's sale occurs, you have no further right to occupy or repurchase your home and you
must move out. Even if you live in a state where you have a right of redemption, it is nearly impossible to obtain
financing to repurchase your house, so practically speaking, you will not get your house back under the right of
redemption.
If at foreclosure your house is worth less than what you owe on your mortgage, the lender can seek a deficiency
judgment against you, and thus, not only do you lose your home, you still owe them money! In some states, such as
Arizona, a lender can not seek a deficiency judgment against you for your first mortgage, but they can for a 2nd or
3rd lien. Every state is different, so you will need to consult a local attorney familiar with the laws in your state for
more specific advice.
thousands of Adjustable Rate Mortgages and complex Interest Only loans about to incur rate increases, now is the
time to get the hindsight so you can avoid foreclosure in advance!
Regardless of whether you are in trouble with your mortgage payments for medical reasons, a job change or layoff
or simply because your mortgage payments have increased to any amount you can no longer afford, knowing how
to avoid foreclosure in advance is crucial to protecting your home, your credit rating and the equity you have in
your house.
Essentially, foreclosure (or, in some states, a trustee's sale) occurs when you fail to make your payments and the
mortgage company takes legal action to repossess your home. In some states, you have a "right of redemption"
which allows you to repurchase your house for a period of time after the foreclosure, but in many states (and most
western states) once a trustee's sale occurs, you have no further right to occupy or repurchase your home and you
must move out. Even if you live in a state where you have a right of redemption, it is nearly impossible to obtain
financing to repurchase your house, so practically speaking, you will not get your house back under the right of
redemption.
If at foreclosure your house is worth less than what you owe on your mortgage, the lender can seek a deficiency
judgment against you, and thus, not only do you lose your home, you still owe them money! In some states, such as
Arizona, a lender can not seek a deficiency judgment against you for your first mortgage, but they can for a 2nd or
3rd lien. Every state is different, so you will need to consult a local attorney familiar with the laws in your state for
more specific advice.
Avoiding Foreclosure
article continues...
If you're in trouble with your
mortgage payments, the
first thing you need to do is
contact your mortgage
company and let them
know. Prepare all your
financial information - tax
returns, bank statement,
pay stubs, etc. and don't
abandon the property. If
you leave the house it's
harder for anyone to help.
Avoid Foreclosure article
continues below...
article continues...
If you're in trouble with your
mortgage payments, the
first thing you need to do is
contact your mortgage
company and let them
know. Prepare all your
financial information - tax
returns, bank statement,
pay stubs, etc. and don't
abandon the property. If
you leave the house it's
harder for anyone to help.
Avoid Foreclosure article
continues below...
You have a variety of options. In some cases the government can help. Sometimes your mortgage company will
assist, and other times you need the help of a professional firm with the financial resources and experience to get
you back on track.
Here are some of your options:
assist, and other times you need the help of a professional firm with the financial resources and experience to get
you back on track.
Here are some of your options:
Special Forbearance
Your mortgage company can possibly arrange a new repayment plan based on your current/changed financial
situation. It's possible that they may provide a temporary reduction or suspension of your mortgage payments. This
is possible if you've lost or changed your job, or had a dramatic change in your expenses (medical emergency, etc.).
You'll have to provide them proof that you'll be able to make the payments on the new payment plan.
Mortgage Modification
It's possible to refinance the debt and/or extend the term of your mortgage loan. This gives you a chance to get
back on track by reducing your monthly payments to a more affordable level. This works if you're already in
"recovery" from a temporary financial problem, but your monthly net income is still less than it was before you
defaulted.
Partial Claim
If you meet the following requirements, your mortgage company can possibly secure an interest free loan from HUD
to return your mortgage to current status. 1. Your loan is at least 4 months delinquent but not more than 12 months
delinquent; 2. Your mortgage is not yet in foreclosure, and You are able to begin making full mortgage payments
When your file a Partial Claim, HUD helps out by paying your mortgage company the amount required to bring your
mortgage current. If you secure a Partial Claim you have to sign a Promissory Note and a new Lien is placed on your
property until the Note is paid in full. The benefit is that the Note is interest free and will be due if you sell or leave
the property, or when your mortgage reaches maturity.
Pre-Foreclosure Sale
With a pre-foreclosure sale, you simply sell your home before the bank completes the foreclosure. This has been a
good option the last couple of years, but not that the housing market is starting to slow down, it is more difficult to
sell you house quickly. The benefit of selling your home is that it allows you to pay off your mortgage thereby
avoiding foreclosure and helping to save your credit rating.
Deed in Lieu of Foreclosure
The absolute last resort is that you may be able to voluntarily "give back" your property to the mortgage company.
You don't save your house, but it does help your chances of getting another mortgage loan in the future because
you will not have a "foreclosure" on your credit report. You can qualify if: 1. You are in default and you can't qualify
for any of the other options 2. All attempts at selling the house before foreclosure were unsuccessful and 3. You
don't have a 2nd or 3rd lien behind your 1st mortgage. 4. Your lender is willing to cooperate with you.
Refinancing
Another option to save your house is to obtain a new loan to pay-off your loan that is in default. Traditional lenders
will not make a loan to you if you are in foreclosure or are 90 days behind in your payments and about to go into
foreclosure, but "hard money" or "private money" lenders can provide such financing. Such alternative hard money
lenders make their loan based on the value of your property as opposed to your credit rating. Some alternative hard
money lenders require proof of an ability to pay the new loan, but many do not. Rates from such lenders are much
higher and range from 11% to 18%. They also typically charge substantial fees to make the loan, although the fees
are generally paid from the proceeds of the loan. One benefit of these high cost loans is that if you are working and
can afford the new higher payments, you can use the loan to save your house from foreclosure and within 12 to 24
months, you can improve your credit rating enough to qualify for a new conventional loan at a lower rate and
refinance the high cost loan.
Conclusion
You do not have to lose your house if you are about to go into foreclosure or are already in foreclosure. You have
multiple options for saving your house and your credit rating. The most important thing to do is to take action
immediately and not sit back and wait for the worst to happen.
About the Author
Matt Hartley is Managing Partner of Copper Crest Funding, and Arizona based hard money lender specializing in commercial and
residential hard money and private money loans. In addition, Copper Crest Funding can assist you in avoiding foreclosure. Visit the
Copper Crest website at http://www.coppercrestfunding.com or call Toll Free 1-866-3366.
Your mortgage company can possibly arrange a new repayment plan based on your current/changed financial
situation. It's possible that they may provide a temporary reduction or suspension of your mortgage payments. This
is possible if you've lost or changed your job, or had a dramatic change in your expenses (medical emergency, etc.).
You'll have to provide them proof that you'll be able to make the payments on the new payment plan.
Mortgage Modification
It's possible to refinance the debt and/or extend the term of your mortgage loan. This gives you a chance to get
back on track by reducing your monthly payments to a more affordable level. This works if you're already in
"recovery" from a temporary financial problem, but your monthly net income is still less than it was before you
defaulted.
Partial Claim
If you meet the following requirements, your mortgage company can possibly secure an interest free loan from HUD
to return your mortgage to current status. 1. Your loan is at least 4 months delinquent but not more than 12 months
delinquent; 2. Your mortgage is not yet in foreclosure, and You are able to begin making full mortgage payments
When your file a Partial Claim, HUD helps out by paying your mortgage company the amount required to bring your
mortgage current. If you secure a Partial Claim you have to sign a Promissory Note and a new Lien is placed on your
property until the Note is paid in full. The benefit is that the Note is interest free and will be due if you sell or leave
the property, or when your mortgage reaches maturity.
Pre-Foreclosure Sale
With a pre-foreclosure sale, you simply sell your home before the bank completes the foreclosure. This has been a
good option the last couple of years, but not that the housing market is starting to slow down, it is more difficult to
sell you house quickly. The benefit of selling your home is that it allows you to pay off your mortgage thereby
avoiding foreclosure and helping to save your credit rating.
Deed in Lieu of Foreclosure
The absolute last resort is that you may be able to voluntarily "give back" your property to the mortgage company.
You don't save your house, but it does help your chances of getting another mortgage loan in the future because
you will not have a "foreclosure" on your credit report. You can qualify if: 1. You are in default and you can't qualify
for any of the other options 2. All attempts at selling the house before foreclosure were unsuccessful and 3. You
don't have a 2nd or 3rd lien behind your 1st mortgage. 4. Your lender is willing to cooperate with you.
Refinancing
Another option to save your house is to obtain a new loan to pay-off your loan that is in default. Traditional lenders
will not make a loan to you if you are in foreclosure or are 90 days behind in your payments and about to go into
foreclosure, but "hard money" or "private money" lenders can provide such financing. Such alternative hard money
lenders make their loan based on the value of your property as opposed to your credit rating. Some alternative hard
money lenders require proof of an ability to pay the new loan, but many do not. Rates from such lenders are much
higher and range from 11% to 18%. They also typically charge substantial fees to make the loan, although the fees
are generally paid from the proceeds of the loan. One benefit of these high cost loans is that if you are working and
can afford the new higher payments, you can use the loan to save your house from foreclosure and within 12 to 24
months, you can improve your credit rating enough to qualify for a new conventional loan at a lower rate and
refinance the high cost loan.
Conclusion
You do not have to lose your house if you are about to go into foreclosure or are already in foreclosure. You have
multiple options for saving your house and your credit rating. The most important thing to do is to take action
immediately and not sit back and wait for the worst to happen.
About the Author
Matt Hartley is Managing Partner of Copper Crest Funding, and Arizona based hard money lender specializing in commercial and
residential hard money and private money loans. In addition, Copper Crest Funding can assist you in avoiding foreclosure. Visit the
Copper Crest website at http://www.coppercrestfunding.com or call Toll Free 1-866-3366.
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