dreamstime_xxl_4693605Understanding Foreclosure

Foreclosure is the legal process a creditor/lender uses to recover the balance of a loan. If a borrower defaults on the loan, the lenders move forward to reclaim the property through the foreclosure process. For the homeowner it means losing their home, hurting their credit score and in most cases, facing a deficiency judgment. No one wants to lose their property, but it happens, and can happen to anyone due to many reasons, such as loss of employment or working hours, illness or disability, etc. 

The Risk

If you allow foreclosure to be carried out, you not only will lose your home, but your credit score will be severely damaged. A bad credit score is likely to affect your ability to find a new job, (due to security clearances) apply for a car loan, leasing a car, obtain a personal loan and obtain a credit card or other lines of credit. After foreclosure, you might not be able to buy another home for up to seven years, and you’re not free of the court system or the IRS, as a deficiency judgment can be filed against you, and back taxes can still be assessed.

What are the options?

Do nothing do nothing about a pending foreclosure and you could not only lose your home, but you may be subject to legal and financial judgments and other difficulties you can’t imagine until they come knocking on your door. Doing nothing but just waiting for the bank to foreclose on your property is very bad idea and shouldn’t be considered as an option!

Loan Modifications – Some banks and lending institutions will consider “modifying” your loan if you meet their criteria by reducing the lending interest rate or by reducing the principle amount owed based on your financial situation and the property value. This sounds great, but there are some factors to consider.

Loan modifications are time consuming, the process takes months, keeping you on the hook until the lender makes a decision; the process itself involves a lot of paper work and your lender is not obligated to modify the loan at all. Even though rates may be lowered, loan holders may charge fees to administer the change and the borrower must submit solid proof he or she can afford the new mortgage payments with ease. In addition, even though a mortgage principle may be cut, the IRS may still charges taxes on the original principle.

Loan modification is a complicated process with no guarantee of success; if you consider applying for a loan modification, it is highly recommended to hire an experienced professional, such as an attorney or former banker, to help with this complicated process. (Often very costly).

dreamstime_xxl_18509152Short Sale
– A short sale is a process which the owner of the property or hired realtor finds a cash buyer who is willing to purchase the property/deed in lieu of foreclosure for its current market value (often less than the balance of the loan). The short sale is subject to the loan holder’s approval, and in most cases will release the borrower from their mortgage obligations and avoid a deficiency judgment to be filed against them. Some banks may even pay the homeowner a “relocation fee” or a “key-fee” at the end of the short sale process to help with their relocation expenses.

A short sale is by far the best solution to avoiding a foreclosure as it minimizes the negative impact on your credit score, and in most cases it releases the borrower from the entire mortgage obligation as well as prevents the lender from filing a deficiency judgment; it gives the homeowner time to plan their relocation, and the most important thing is the homeowner can apply for a new mortgage after 24 months of the short sale completion date.

Don’t wait for the marshal to knock on your door. If you are facing foreclosure, you want to fill out the foreclosure form or call us right now to explore all of the foreclosure assistance options available to you. Consultation will be given by our dedicated short sale specialists free of charge with absolutely no obligation – get foreclosure assistance now.