ALTERNATIVES TO FORECLOSURE by Duane Duggan

Posted by DB Wilson on Tuesday, June 19th, 2012 at 12:30pm.

     When a homeowner gets behind in their payments, they usually don’t know what to do, so they do nothing.  In fact, over 70% of homeowners do just that, absolutely nothing, and walk away from their homes.  In reality, there are several options, with foreclosure being the last one.  A quick summary of some different options follow:

Reinstatement
Often, the reason the homeowner got behind on payments was only temporary.  The homeowner has to pay all the missed payments, any late fees and attorney fees in a lump sum payment.   After the homeowner is caught up, the loan continues as it was.

Repayment Plan or Forbearance
Sometimes the lender will take the missed payments, any late fees and attorney fees and divide them up over a payment plan or add the payments on to the end of the loan.  The homeowner will usually need to show the lender why they would now be able to handle the repayment plan suggested by the lender.

Sell the Property
The more equity a buyer has in their home, the more likely they will be able to sell the property and payoff the mortgage, and maybe even have something left over.
Some lenders may postpone foreclosure if they know the property is on the market or a contract is pending.

Rent the Property
The homeowner has to live somewhere.  However, if the homeowner can rent a different place for less, then rent the old home, close to the total mortgage Principal, interest, taxes and insurance payment, this could be a viable alternative.

Refinance
Usually when a homeowner is behind on the payments and don’t have a job, it is tough to get a new loan.  However, if there is enough equity, the credit has not been damaged too badly, and the problem that caused the late payments has gone away, then there is a chance a new lender will make a loan.

Modification of the Mortgage
A lender may agree to a variety of modifications.  Those modifications might include lowering the interest rate, extending the term of the loan, or adding the missed payments to the end of the loan. 

by Duane Duggan, RE/MAX of Boulder, Inc.

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