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Foreclosure Options
The thought of losing your home can place undue stress and hardship on your entire family. As outlined in recent media reports, many homeowners are faced with increased financial burdens due to job loss or large mortgage payments beyond their current budget. These burdens have many feeling that they are unable to address the problem and will ultimately face foreclosure. Recent surveys by government agencies also indicate that many homeowners are not aware of available workout options to avoid foreclosure.
Homeowner Options to Avoid Foreclosure
- Contact Your Bank - Your lender will often work with you to help your keep your home with mortgage loan workout options. These options will require that you seek the advice of your attorney, who can advise you on any loan modifications. Make sure you contact your lender as soon as possible when you cannot make or miss payments.
- Review Your Options - Before placing a lien on your property, the lender may contact you by mail or with phone calls. Communicate with the bank or mortgage servicing company to explain your situation and seek information on available options. Typically, they will work with you to avoid foreclosure, since in New Jersey the process can last for several months in state courts.
Possible Options Available:
- Refinancing - If you are current with your mortgage payments, you may want to take advantage of current mortgage rates. Recently, under the Making Home Affordable initiative, homeowners were given the ability to refinance with a 15 or 30 year fixed rate loan. For more information visit www.MakingHomeAffordable.gov.
- Deed in Lieu of Foreclosure - This occurs when you offer to trade your property to the lender in exchange for cancellation of your debt. A word of caution. Not all lenders may entirely forgive your debt if the property has declined substantially in market value. Homeowners should consult an attorney for legal counsel and advice.
- Mortgage Loan Workout - Lenders may consider different workout options to aid distressed homeowners. These could include letting the homeowner make partial payments if there is a plan to catch up, forgiving back payments or adding them to the loan amount, or possibly recasting the entire loan giving you more years to pay off the loan and lowering your monthly payment. Any of these options require that you consult with an attorney or accountant.
- Short Sale - A short sale is a situation where you owe more on the loan than what the sale of the property will produce. Additionally, distressed homeowners will be required to produce a hardship case for their lender, including background documentation on their current financial condition. In this option, the lender must approve the contract of sale since it only partially meets the debt obligation on the property. Since lenders differ in how they may treat a "short sale", homeowners should seek the advice of an attorney.
Recently, the Federal Trade Commission issued a warning regarding companies claiming they can help distressed homeowners stop a foreclosure. These warnings include any company asking that you sign a quitclaim deed for the property, not to contact your lender, requiring that you pay for services upfront, and telling you to send them the mortgage payment. Since these are considered rescue scams, you should always seek the counsel of your attorney regarding any foreclosure rescue program. |
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