Question: What alternatives are there to foreclosure?
There are several alternatives to foreclosure. Careful consideration should be given to each as circumstances vary and lender approval must be obtained. The following is a brief description of each:
Forbearance/Formal Forbearance: A Forbearance Plan is a repayment agreement between you and the lender. They will review the documents supporting your monthly income and expenses. A plan will be developed and placed in writing providing for a payment of one full monthly payment and a portion of the delinquent amount due on your account. Or, it may allow for all delinquent payments and fees to be added to the end of your mortgage and you start making your payments as normal with no delinquent amounts due. The objective of the plan is to allow you to cure your default over a period of time, reinstating your mortgage, while allowing you to maintain your normal monthly living expenses.
Modification: In certain circumstances, the investor may allow the delinquent amount to be added to the loan balance, temporarily reduce the interest rate and/or your monthly payments to assist you in curing the default and restoring your credit status. You must qualify for the modification. In other words, if your interest rate is lowered, which lowers your monthly payment, you must have sufficient income to pay your new mortgage payment and your monthly expenses.
Short Sale/Pre-Foreclosure Sale: Frequently used by a mortgagor who, due to a change in employment or other life event, can no longer afford their home. The decision to sell your home under these circumstances is difficult; in addition, fluctuations in real estate markets may leave you in a situation where you have little or no equity or even a loss upon the sale of your home. A short sale occurs when you owe more than your home is worth. Investor approval is based upon your financial situation and the current market value of your home.
Deed in Lieu of Foreclosure: In the event you have decided you can no longer afford your home and do not want to go through marketing efforts or foreclosure, you may voluntarily return the property to the investor/lender. Your lender would need to verify they are the only lien holder on the property and they would need to perform a walk-through inspection of the property.
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Why should I call you, Gerard?
Because I've been there just like you. Yes, I'll talk about my experience with this process and why I'm doing this today!!!!