For homeowners facing financial crisis, the ability to avoid foreclosure is not always out of reach. Lesser known options can be a solution.
For homeowners facing financial crisis, the ability to avoid foreclosure is not always out of reach. Most real estate and finance industry professionals report that avoiding a large-scale foreclosure is not possible. However, there are solutions that allow the property owner to avoid further damage.
Foreclosure
Foreclosure is the process of a mortgage lender moving to recover the amount owed on a defaulted loan. To do this, the lender takes ownership of the mortgaged property and sells it. Default on the loan begins when the borrower misses a set amount of monthly payments or fails to meet other terms of the contract.
For homeowners looking to avoid foreclosure when their situation seems hopeless, there is hope. It is important to remember that mortgage lenders want to avoid the complicated and expensive proceedings of a full blown foreclosure. With your interests in line with your lender, there are a few solutions to help your situation.
How to Avoid Foreclosure
Reinstatement
Reinstatement is a solution that involves paying the overdue amount in full. This comes with various fees and costs that allow the borrower to stop the foreclosure in full. In Maryland, you are able to reinstate the loan up to 1 day before the scheduled auction date.
Loan Modification
Loan modification is another solution for homeowners wishing to avoid foreclosure. When the lender modifies a mortgage, they are changing some element of the loan agreement. Factors of the loan that can change in this case are crucial. These include interest rate, length of the loan, or forgiveness for part of the balance. Overall, the end is a lower monthly payment that may be more feasible for the borrower.
Deed-in-lieu of Foreclosure
A “Deed-in-lieu of foreclosure,” is a document that is necessary for the transfer of a title. In this case, the title changes from the property owner to their lender. This is in exchange for the lender relieving the debt of the borrower. This option is attractive because it is less financially damaging than going through traditional foreclosure steps.
Because of this, the deed-in-lieu of foreclosure is also known as a, “friendly foreclosure.” Like many last minute efforts to avoid foreclosure, this solution is a last resort to be taken when other options do not work. It is recommended to try loan modifications or short sale solutions before moving on to deed-in-lieu of foreclosure.
Short Sale
A short sale occurs when the homeowner and loan borrower sells their house for less than the amount due on the mortgage loan. In this case, the buyer is a third party and all proceeds go to the lender.
After this, the lender is allowed to forgive the remaining balance on the mortgage or use a deficiency judgement. This is when the property’s sale does not cover the debt in full. The court can allow the lender to collect additional money from the borrower to make up the difference.
What to Do When You Can’t Avoid Foreclosure
The option to sell the house for cash allows homeowners to get the burden of fighting a foreclosure off of their back. When selling to a cash buyer, you are able to avoid the potential legal entanglements and expenses that come with fighting the foreclosure. This option allows you to walk away with cash and save your credit while we work to stop the foreclosure for you.
