Foreclosure help: 7 best options for homeowners explained
Foreclosure help for homeowners and even investors of single family homes is available among the 7 options discussed below.
Foreclosure Help: Options To Stop Foreclosure
Option #1: Little-known government program that stops a foreclosure in less than a day (Read all the details here)
FYI: If you really want to keep your home, you can use this option in a few ways:
1. As a last-ditch effort when all other options won’t work
2. As a precautionary step to keep the bank from auctioning your home or foreclosing even if they have agreed to a loan modification or short sale.
3. To protect yourself if your lender is dragging their buns approving your request and the clock is ticking.
4. You hired a loan modification company or attorney and they turned out to be one of many scammers and just took your money and ran and you need time to work out another solution.
Note: This has happened to countless other homeowners. Here are two recent horror stories:
- Mark and Brenda Kohn of Thousand Oaks had an approved short sale and GMAC still sold their home at auction without notice
- Arizona couple was approved for a loan modification by Chase Bank and they still foreclosed on their home
To emphasize, if you find yourself with your back against a wall because all your other options like a loan modification, a short sale and the like are taking too long and the clock is ticking towards your foreclosure sale date…
Or a loan modification or short sale are not options you can utilize…
Or because you are currently unemployed…
Or you have a second or third lien, like one of those piggy-back loans you got to buy the house, or a home equity loan and you need time to get rid of those liens in bankruptcy court, if allowed in your state…
there is a little-known government program you can use that will immediately stop the foreclosure process. It’s something you can do yourself, without hiring an expensive attorney. The strategy used has helped countless homeowners across the country.
Option #2 Loan Modification
The government program, Home Affordable Modification Program, called HAMP for short, is available to primary homeowners with loans that are insured by FannieMae or FreddieMac. You can negotiate your loan terms for a lower interest rate to meet the income and debt ratio criteria. For more details on this program including a loan lookup to verify if you have a Fannie or Freddie loan click here.
If you do not qualify for the HAMP program, for example because you obtained a sub-prime loan or a loan for a non-owner occupied home, you can still request a loan modification from your bank or loan servicer. One of the best online sources for more details on getting a loan modification is found by clicking here.
Option #3: Get a Partial Claim to bring your loan current
You may be able to obtain an interest-free loan from the U.S. Department of Housing and Urban Development (HUD) to bring your mortgage current. You may qualify if your loan is at least four months delinquent, but no more than 12 months delinquent, and you are able to begin making full mortgage payments. If your loan is in foreclosure, the servicer could take it out of foreclosure to do a partial claim.
When you lender files a partial claim, HUD will pay your servicer the amount necessary to bring your mortgage current. You must execute a promissory note, placing a lien on your property until the note is paid in full. The note is interest-free and is due if you sell or leave your property or when your mortgage matures.
Click here for more details on getting a partial claim
Option #4 HAS Program for FannieMae-insured Loans
HomeSaver Advance™ (HSA) is an unsecured personal loan, up to the lesser of $15,000 or 15% of the original UPB, designed to help eligible borrowers cure their first lien mortgage loan delinquencies. It provides funds to cure arrearages of principal, interest, taxes, and insurance (PITI), as well as other advances and fees. HomeSaver Advance is documented by a borrower-signed promissory note, payable over 15 years at a fixed rate of 5% with no payments or interest accrual for the first six months. Click here for more details on fanniemae’s website.
Option #5 Bankruptcy protection
Filing for bankruptcy will temporarily suspend the foreclosure proceedings. This can buy you some time to negotiate with your lender a loan modification or short sale.
The downside to filing for bankruptcy protection is:
- There will be a bankruptcy on your record for 10 years
- The mortgage company can work around the bankruptcy and still foreclose
- You lose any leverage and control you once had
- A deal must still be worked out with the Mortgage Company to repay the past due amount
- If you are 1 day late on any trustee payments your case “may” be dismissed, the stay will be lifted and you will be back in foreclosure
I recommend the faster, cheaper and effective solution to buy some time and force the bank/servicer is to negotiate with you is to use Option #4 mentioned above, the little-known government program you can do yourself to stop the foreclosure in less than a day.
If you feel that bankruptcy protection is your only option, review this workbook on getting the maximum benefits under Chapter 7 and 13 written by a bankruptcy attorney with 25 years of experience who has helped 5,000 clients.
Click here for more details
Foreclosure Help Options If You DO NOT Want To Keep Your Home
Option #6 Short sale
This will allow you to sell your property and pay off your mortgage loan for less than you owe, to avoid foreclosure and damage to your credit rating. You may qualify if:
- The “as is” appraised value is at least 70% of the amount you owe and the sales price is 95% of the appraised value
- The loan is at least 2 months delinquent prior to the pre- foreclosure sale closing date
- You are able to sell your house within 3 to 5 months (depending on what your mortgage company agrees to)
- An additional benefit to this option is the assistance you will receive with the Seller-paid closing costs
Make sure you hire a Realtor who has plenty of experience in selling short sale properties.
FYI: The “hardship letter” you will have to write to your lender is crucial to get right. It will determine whether or not your short sale request will be approved or denied.
Many homeowners are having great results with the help of a workbook to write the short sale hardship letter. Click here for more details
Option #7 Deed in Lieu of Foreclosure
Deed in lieu of foreclosure is a process in which you give away your property to the lender because you just can’t pay any more. The lender then sells off the property in order to retrieve a part or whole of the loan balance you owe.
When you go for a deed in lieu in order to avoid foreclosure, you need to sign legal documents such as the Agreement in Lieu of Foreclosure and a Warranty deed, quit claim deed or a grant deed. The first document reveals the terms and conditions of the deed-in-lieu, and is signed by both the lender and borrower. The second document, which is the deed, conveys legal ownership of the property to the lender.
The lender marks the borrower’s note as “paid” and provides the latter with two forms – one which states that the debt is canceled and the other which refers to the waiver of the right to a deficiency judgment (the lender’s right to ask for the unpaid debt amount if it is not recovered totally by the property-sale).
The agreement for deed in lieu of foreclosure is executed through an escrow company which receives the borrower’s note (marked as “paid”) from the lender. The escrow then records the deed used for transferring legal ownership of the mortgaged property and sends the note to the borrower. The borrower is thus released from the liability of the mortgage payments.
Before letting a bank force you out of your home, you may want to obtain some coaching on how to stop the foreclosure process dead in its tracts and buy some time to make your next move
If you’re interested, you can check out the website for more information here
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