What To Do If You Are Facing Foreclosure

California has been severely affected in recent years by a decline in property values and an increase in foreclosures.  Many homeowners bought homes using financing options such as Adjustable Rate Mortgages (ARMs) that ended up being detrimental to them.  Their payments may have doubled.

Foreclosure proceedings will usually begin after the homeowner is delinquent on their mortgage payments for approximately 90 days.   At this point the mortgage company will a Notice of Default (NOD) with the court.   If the borrower does not cure this delinquency, the property will be sold at a public auction on a predetermined date. The Foreclosure Process.

What are a homeowner’s options when facing foreclosure?


The first option available is to attempt a loan modification. In this situation, the homeowner and lender agree to modify the terms of the mortgage contract.  The goal is to make the payments more manageable to the homeowner.  The homeowner will need to meet their lender’s requirements to be eligible.  Many times this does not happen. 
 
If a loan modification will not work, there are other options:
 
•    Sell the house – If there is enough equity in the home to pay off the existing mortgage, after selling costs, then a quick sale will be the best option.  The homeowner will keep their good credit, and will be in a good position to purchase another home in the future.

•    Short Sale the home -  A short sale is when the bank agrees to take less than what is owed on the home.  With a successful short sale, the homeowner may be eligible for a new home loan in as little as two years.  Many times a bank will not negotiate a short sale unless the homeowner is delinquent in payments -- being delinquent is what ends up hurting credit scores.

•    Deed in lieu of foreclosure- In this scenario, the homeowner basically gives ownership of the home to the mortgage company. This option may be a bit better than going through the foreclosure process.

•    File for Bankruptcy – A bankruptcy is usually considered as a last resort.  A bankruptcy can make life difficult in regards to creditors, assets, pensions, and life insurance policies.
 
•     Allow a foreclosure to proceed is  generally considered the worst choice.  This can negatively impact a person’s credit for 7 to 10 years.  It can prevent a person from obtaining credit, a mortgage, a car loan, and in some instances a job.
 

It is our goal to keep you in your home.  For FREE assistance with a loan modification or to discuss the other options that may be available to you when facing foreclosure, contact us at your earliest convenience.