Facing Foreclosure

– You May Have A Better Way Out –

I have to address the most important factor to solve your financial hardship… the timing. The sooner you realize, and make a plan to solve your problem; you usually can achieve the best solution at the least cost. You are not alone. Please help me to help you get out of this mess, and sprint toward the brighter future.

There are countless hardships that can turn home ownership from a joy into a burden. The loss of a job, medical bills, or an unexpected hike in monthly payments can all make a mortgage unaffordable.

Furthermore, Real Estate value has gone down dramatically. This becomes a new burden to homeowners, as they now have to pay the huge amount of interest on something that they don’t have. However, ignoring the problems will not make them go away, it will only make things worse. You are not alone in this fight.

Alternatives to Foreclosure

In the following section, I will help you explore the alternatives to foreclosure. The foreclosure avoidance solutions are not limited to these alternatives. Everyone’s scenario is unique. You should consult you legal advisor before taking action. Options to Remain in the Home

  • Repayment Plan: The lender/servicer gives the borrower a fixed amount of time to repay the amount they’re behind by adding a portion of what is past due to their regular monthly payment. This option works best for solvent borrowers who may have missed a small number of payments.
  • Forbearance: Mortgage payments are reduced or suspended for an agreed upon period. At the end of that time, the borrower resumes making their regular payments as well as a lump sump payment, or additional partial payments for a number of months to bring the loan current. This may be an option if the borrower’s income is reduced temporarily. This option will not help borrowers if they’re in the home they can’t afford.
  • Loan Modification: The lender/servicer agrees to permanently change one or more of the terms of the mortgage contract to make the borrower’s payments more manageable. This may include reducing the interest rate, extending the term of the loan, or adding missed payments to loan balance. It may also involve reducing principal balance. A loan modification may be necessary if the borrower is facing an increased payment on an ARM.

A borrower should be prepared to show the lender/servicer that they are making a “good faith” effort to pay their mortgage.

  • Rent or Lease the Home: A homeowner may be able to convert their home into a rental and use their rental income to help pay the mortgage.
  • Stay in the Home and Keep making the Payment: A homeowner may decide to maintain the “status quo”.

Options to Sell or Give up the Property

  • Selling the Property: Depending on the homeowner’s local real estate market, selling the property may provide the necessary funds to pay off their mortgage debt in full. If not, the borrower would need to bring money to make up the difference.
  • Sell the Property and Rent/Lease Another: If homeowner cannot make mortgage payments, they can sell the property and buy or rent another property.
  • Short Sale: If homeowner owes more on their property than it’s currently worth, they can hire a qualified real estate professional market, sell and negotiate a short sale with the lender/servicer. Generally, a short sale requires the property to be on the market and homeowner usually must prove a financial hardship to qualify. Acceptable hardships include but are not limited to: job loss or transfer, reduction in work hours, reduced income, excessive debts, mortgage payment increase, divorce or separation, chronic or terminal illness, medical bills, death of family member, business failure… Other events may qualify. It needs to make sense to the lender.
  • Deed in Lieu Foreclosure: If the homeowner cannot sell their property in a reasonable amount of time, the lender may allow homeowner to voluntarily transfer the deed of the property to the lender.
  • Bankruptcy: Generally speaking, personal bankruptcy is considered the option of last resort because the consequences are long lasting and far-reaching. A bankruptcy may stay on an individual’s credit record for 10 years. It makes it difficult to get credit, buy another home, get insurance, get certain jobs, … However, it is legal, and can offer a fresh start for qualified individuals who can’t satisfy their debts.
  • Foreclosure – is always the very last option. Remember, the bank does not want to foreclosure on you and would rather work something out.


If my home dropped 50% from $500,000 and now is $250,000, in order for me to break even, my house would have to double in price from today is and is that likely?

Short Sale is an option

There are many homes that have recently been purchased in my areas that are renting for half of my mortgage payment. How can I compete with these homes?

Short Sale is an option

If my house doubles in value, wouldn’t it be better to have bought one for $250,000 and profit $250,000 rather than just catching up?

Short Sale is an option

I won’t be able to get credit.

Even people with good credit have gotten their credit card rates raised and their balances lowered so the credit available is far less then what it was in 2008 and prior. Presently many people are able to return to the same credit level as they were before their completed short sale after approximately 2 years- many even sooner!

What’s the average credit score?

Millions of people are having tough financial times and their credit scores are falling and as this happens, the average credit score falls too. Compared to the whole country, scores that used to be below average may become average or good. With the antiquated methods in place, the credit bureaus are currently considering changing their systems in order to adjust for the economic climate.

If I am going to short sell, is it probably better to do it sooner than later?

This is a personal decision, but if millions of people are in default, it would probably make the most sense to weigh all the options sooner rather than later. You may have missed an opportunity to get head start on special programs.

Will the credit guidelines change?

Let’s assume the banks only make money if they lend. If a high percentage of the population has hits on their credit, the banks and credit card companies will alter their lending guidelines to account for the following events: the worst housing market in history, biggest stock market crash since 1929, the worst recession since the Great Depression and the highest unemployment rate since that the historic event.

Will I have tax ramifications or deficiency judgments to deal with after a short sale?

Again, each situation has its own fingerprint and some are even state specific. Regarding taxes, the best thing to do is consult with your tax attorney or CPA to how this will affect your personal situation. Ask them if you:

  • Qualify for the Mortgage Debt Relief Act of 2007
  • Can file debt cancellation for the 1099C that the bank sent you
  • Qualify for insolvency. Tax Form 982
  • Or if you do not qualify for any tax relief can they negotiate with the IRS for a payment plan or full payoff if you pay a lump sum of pennies on the dollar of what is owed. Ex: Tax Masters

Again consult your tax advisor for advice regarding your personal situation. This also applies to any deficiency judgments. This is very state-to-state specific. Please consult an attorney regarding your state laws on deficiency judgments and ask them what your options are.

What are some advantages of a short sale?

  • Avoid foreclosure on your credit
  • Avoid potential bankruptcy
  • Avoid being evicted from your home
  • Less potential tax liabilities
  • Easier to clean up your credit and reduce the time it takes to re-qualify for future homeownership
  • Get out from underneath a depreciating asset
  • Typically you don’t have to pay for normal and customary closing costs or real estate commissions
  • Can potentially avoid liability for their mortgage debt and negotiating on your own terms if the delinquency judgment applies.
  • Typically no out of pocket expenses unless requested by the bank
  • Homeowner education of know our options to avoid this situation in the future

What Resources are available for homeowners?

Beware of Foreclosure Rescue Scams

  • Scam artists are targeting struggling homeowners and are anxious to sell their homes
  • Beware of anyone who isn’t an attorney who asks for upfront money to work process modifications
  • Beware of people who pressure you into signing docs immediately or who try to convince you that they can “save” your home if you sign or transfer over the deed of your house.
  • Do not EVER sign the deed of your property to any organization or individual unless you are working directly with your mortgage company to forgive your debt and you have a commitment letter from the bank stating the approval of the transfer.
  • Never make a mortgage payment to anyone other than your mortgage company without their written approval.

REPORT These issues to HUD right away:

We obviously cannot answer all your questions especially since each situation is unique, always seek the advise of your legal counsel or your accountant before making any decisions regarding your specific situation.

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