SCM Property Management, LLC
8145 Rushing Road
Denham Springs, LA 70726
(225) 791-2930
Options when facing a Foreclosure
1. Loan modification
2. Forbearance agreement
3. Refinance your mortgage
4. Deed in lieu of foreclosure
5. Sell your home to a realtor
6. Sell your home to a cash buyer
7. Sell your home Subject to
8. Do nothing and lose your home
1. LOAN MODIFICATION
A loan modification simply means to change or modify the terms of your original loan.
Loan modifications are not automatic and you have to qualify to receive one. You may be contacted by various entities that want to “help” you get a loan modification. Virtually, all of them charge an upfront fee that may range up to thousands of dollars, with no guarantee that you will actually receive the modification. You should avoid dealing with such people at all costs. They are out to take your money and NOT help you.
Remember, only a small percentage of loan modification applicants receive an approval. In the unlikely event you are approved for a loan modification, there is a 5 to 6 month trial process. During this time, if you are even 1 day late or $1 short, you will be immediately accelerated back into foreclosure.
2. FORBEARANCE AGREEMENT
If you don’t qualify for a loan modification, then the Forbearance Agreement may be better for you. The Forbearance Agreement is a worked out agreement with the bank. Here is how a forbearance agreement works. The bank will ask for attorney fees and then approximately 40% to 50% of the back payments. The remaining back payments will be equally divided between the next 6 to 12 payments, raising your monthly payment for that 6 to 12 month time. At that time, the payments will return to their former lower payments.
Remember these 2 important points:
1. 90% of homeowners fall out of their forbearance agreement in the first 2 to 3 months because of failure to pay.
2. Just because you worked out a deal with the bank, doesn’t mean you’re out of foreclosure. You are still in foreclosure until your increased payments are made. Then and only then, will you receive a foreclosure withdrawal letter from the bank, stating your loan is current. In the meantime, the bank will keep extending the foreclosure sale date every month.
3. REFINANCE YOUR MORTGAGE
It is impossible to refinance your mortgage if have been late on payments or in foreclosure. However, sometimes the mortgage broker is not completely honest. They might charge you appraisal fees, loan fees, and broker fees before letting you know that you do not qualify.
4. DEED IN LIEU OF FORECLOSURE
The deed in lieu of foreclosure is when you give ownership of your home and deed it back to the bank. The bank will always accept this. However, it is not a good option for you. In most cases, the bank will place a foreclosure on your credit and you could end up with a 1099-C sent to the IRS for additional income, if the bank sells the property for less than what you owe.
5. SELL YOUR HOME TO A REAL ESTATE AGENT
Remember, you have to disclose to your listing agent that you are behind in payments or in foreclosure. Even if your listing agent got a contract on your house today, it will take 30 to 45 days to close in most cases. If your foreclosure date is before that, then this will not be an option for you. Listing your home with an agent right now may not be an option, unless you’re willing to sell it well below market value. Even at below market value, it will still take 30 day to close.
Sometimes, realtors can be helpful they will come to you and say they have a buyer for your home. If they say this, it is okay to give them a 24-hour listing. You give them the 24-hour listing so that they can bring the buyer by that they have promised you. This is the safest way for you to not be tied up in a long-term listing.
Overall, you need to be careful.
Make sure that everyone you work with puts everything in writing, including a way you could get out of the contract without any further damage to you or your situation.
6. SELL YOUR HOME TO A CASH BUYER
This could be one of your best options. We will buy your home outright. We will buy your home from you, pay off the balance and all late back payments, place cash in your hands and relieve you from your dilemma.
7. SELL YOUR HOME SUBJECT TO
This is another great option. You, the homeowner, will convey the property to the investor by Warranty Deed. In exchange, the investor will pay all of your late payments to make the mortgage current. They will make the monthly mortgage payments until the property is sold or refinanced, whichever comes first. Then, they will file the deed at the courthouse to protect the their interests and yours. They will pay you an agreed-upon amount of money when the property is deeded over to them and pick a date for you to vacate the premises. The objective of this method is for someone to take over the existing loans, bring the payments current, keep them current for the length of the agreement, and therefore relieving you of the monthly debt.
The longer the payments are made for you, the better your credit will become. In every option, including this one, make sure that all parties involved are made aware of the details in this transaction. Remember, your name will remain on the mortgage and the buyer will be making the mortgage payments on your behalf.
8. DO NOTHING AND LOSE YOUR HOME
This does not sound like an option however, we must present all options to you. In a foreclosure, your home will end up at a local option. Shortly after your home is sold at the auction, a Sheriff Deputy will show up to your house to remove you, your family, and all your belongings to the curb. A foreclosure is essentially dropping an atomic bomb on your credit. This hit to your credit will most likely disqualify you from acquiring new credit cards, possibly getting a new job, a new car, purchasing another home, and even renting an apartment. A foreclosure will remain on your credit for 7 to 10 years.
(Article from REI mentor)
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