Oftentimes, as a Top New Jersey Real Estate agent, I help homeowners like you understand and evaluate their next move when it comes to falling behind on mortgage payments. Rest assured that foreclosure prevention is available and it comes in different forms. Please know that I understand what you are going through.
The market changed for me as well and even I have had to make some the same adjustments I recommend to clients.
I HAVE TO WARN YOU AHEAD OF TIME. THIS PAGE IS LONG BECAUSE WE HAVE OUTLINED YOUR OPTIONS FROM THE INITIAL STAGES OF FORECLOSURE PREVENTION TO SEVERAL MONTHS BEFORE AN ACTUAL SHERIFF SALE
FOR MORE IMMEDIATE SERVICE WE CAN BE REACHED AT 973-715-6210 or email me.
Here is a snapshot of the foreclosure prevention options that are available to you if you are in fact behind or delinquent on your mortgage payments. Each individual’s hardship situation is different and one foreclosure prevention option may or may not meet your needs or help you in the end. Selling your home isn’t always the only option. I know and understand that and for many sellers, it’s the last option, which I can appreciate your situation.
If I can help you save your home, I will. Why? Because I don’t mind being your real estate hero. Earning your trust and possibly earning future referrals from you is just as important to me and being able to help you move on, if you decide to pursue any of the options below.
Again, to discuss your specific hardship situation, please contact me immediately so that you can sleep easy knowing you are doing all that you can do to get through this difficult time. Without Further ado, here are your foreclosure prevention options.
Option 1: Inaction Leads to Foreclosure
Not an option, but as I mentioned above and for a second time. Occasionally I meet people who say to me they would rather foreclose. No one should ever want to foreclose. Next to bankruptcy, foreclosure is a difficult thing to recover from emotionally and financially. A foreclosure on your credit history can affect your ability to buy another home, finance a car and may even prevent you from getting a high paying job, especially the type of employment with security clearance. Many homeowners do nothing when it comes to falling behind on mortgage payments, especially in the early stages of default because it’s hard to admit that you may be in over your head. I know that part of doing nothing comes out of frustration from losing a job or divorce, sudden illness, death, or income reduction, lost of hope, depression or even buyer’s remorse. In my opinion “inaction” is never an option, but the decision to overtly ignore your situation happens more often than not. Many homeowners do not know how to seek help. My advice is to not ignore the situation. Ignoring only makes the process much worse, which will ultimately lead to foreclosure.
My suggestion is be proactive and contact your lender immediately even before you fall behind. Or call an real estate agent like me to discuss your foreclosure prevention options. Knowing what to say to your lender and having the right information to give to them when you call is just as important as simply making the call. But talk to me before you make the call. I can help you write your hardship letter if it helps.
Reminder: I don’t always advocate selling. In fact, one of my first questions when it comes to meeting you face to face is to ask: Do you want to keep your home? If you say yes to that question, I change gears and advise you on how to save your home. I make my income from when I introduce a willing and able buyer to a home seller for the purposes of transferring clear title of a home, but I don’t mind being the “hero” and helping you save your home if you so desire. In most cases, a homeowner shows gratitude for my assistance in the form of referrals, which I would be happy to accept.
Option 2: Refinance
Depending on when you purchased your home, your initial down payment or appreciation in your area, it is possible that you qualify to refinance or change the terms of your original loan. In fact, if you have been on time with your payments and your loan was FHA insured, you may qualify for an FHA Streamline REFI, which the term “streamline” refers only to the amount of documentation and underwriting that needs to be performed by the lender, and does not mean that there are no costs involved in the transaction. The goal of the REFI is to result lower your monthly principal and interest payments. Closing costs can be paid out of pocket or rolled into the loan for a higher interest rate.
Option 3: Loan Modification and Deferred Payment Plan
If you are struggling to make your mortgage payments or can’t take advantage of lower interest rates because your home has dropped in value, you may be eligible for the Making Home Affordable Program, which is the first loan modification program offered by many lenders. If you do no qualify for the Making Homes Affordable Plan, your lender may allow a temporary forbearance, a period of time in which you do not have to make payments – often referred to as a Deferred Payment Plan. Your lender may even help you devise a repayment schedule that will put you back on track assuming your hardship situation is temporary.
Loan modification can be negotiated by you and your lender without the help of a 3rd party negotiator. I wholeheartedly believe that to negotiate directly with your lender can be a mistake, especially without the assistance from an agent like me. Banks and lenders are in the business of making money and when you call to speak to your lender, you are immediately reminded that your bank or loan servicing company is there to collect a debt. The information you provide to them can be used to collect a that debt. Banks prefer that you do not have your own form of advocacy like a real estate agent or attorney because a strong advocate for you could impede their ability to seek favorable terms for themselves.
Oftentimes, loan modifications are temporary solutions. The principal balance is generally not forgiven. In fact, some loan modification programs have conditions such as increasing interests rates, balloon payments and may even have an acceleration clause that is meant keep you paying while your bank works to sell your loan or even start foreclosure proceeding. That’s where I come in. I often read the proposals given to you by the bank to help you evaluate how you should proceed.
One effective way to get a permanent loan modification is to do what we call a loan audit. Please check back to this page called options for delinquent homeowners for more information on loan audits. We will describe what it is and how you can obtain one in the next coming weeks.
I have other blog posts on njretoday about loan modifications and you can search for other articles on this blog using the keywords: Loan Modification in the search bar above.
Option 4: Pre-foreclosure Sale or Short Sale
If you cannot afford your home over the long term, you may need to sell the home and move to housing that you can afford. While this means giving up your home, you may still be able to avoid foreclosure. If you cannot sell your home for the amount necessary to pay off the mortgage loan, the loan servicing company may be willing to accept a payoff amount less than what you owe on the mortgage balance of which the difference i.e. the short may be handled in three different ways:
1. You may be expected to come to the settle table with the difference of what you would owe your mortgage company (not likely for many people, especially people with an unemployment hardship).
2. You may be responsible to pay a portion of the difference at settlement. Your lender may require you to hold a note and pay interests free installment payments over the course of X number of years, which becomes an unsecured note, which is similar to a trade line or line of credit .
3. You will have the claim the difference as income for the year in which you short sold. **Please speak to a tax consultant to verify how this difference could affect you-I am not a tax professional, but can refer you to one if you are affiliated with anyone at this time. The mortgage debt forgiveness act of 2007 might absolve you of having to repay taxes on the portion that is forgiven, which the IRS treats as income.
Option 5: Deed in Lieu of Foreclosure (friendly foreclosure)
If you cannot sell your home in a reasonable amount of time, your mortgage company may allow you to voluntarily transfer the deed to the property to the mortgage company. In which case, the house is sold and the same three conditions from option 4 may apply or affect you. Some banks or loan servicing companies may offer you cash for your keys. Foreclosure is a lengthy, costly process for lenders and in some cases, they would rather liquidate the home and provide you with moving money to get you out of the home, which is generally referred to as Cash for keys. Deed in lieu is not applicable on homes/properties with more than one lien holder.
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Option 6: Deed-for-Lease Program (D4L)
D4L allows eligible borrowers facing foreclosure (or their tenants) to stay in their primary residences Under D4L, the borrower transfers ownership of the property to the lender through a deed-in-lieu of foreclosure and the borrower (or the tenant) signs a lease for up to 12 months. The program is designed for borrowers who don’t qualify for other workout solutions, including modifications, or who do not meet their obligations under the modification. The purpose of the program is to minimize displacement of families and deterioration of neighborhoods that often occurs when homes are left vacant. The rent may not exceed 31 percent of the family’s gross income. Fannie reserves the right to market the property during the lease term and may sell it to an investor during leasing period.
Now What? Now that you have read all of the options above, you should contact me online or over the phone for a free comparative market analysis (CMA) so that you can know if your home has gone up or down in value. Second, we can discuss what your next move should be based on your desired results.