Presently, home owners are discovering that their property is not worth as much as they owe on the mortgage, after the period of greatest inflation in property prices came to an end. The recent economic crisis along with job loss have caused earnings to dwindle which means people are not earning as much as they did when they used the mortgages to buy a home.
This double whammy has created an economic calamity as record numbers of homeowners, now unable to afford their homes, are filing for foreclosure. A foreclosure occurs when mortgage payments are more than ninety days in arrears, and the mortgage loan is in default. The lender takes ownership of the home, issues a notice of default, and initiates foreclosure proceedings. The lender sells the home to the highest bidder in order to recoup their loan money.
In many cases, there are steps you can take to keep your home. However, most lenders will not initiate these steps on the homeowner’s behalf. Therefore, to avoid foreclosure, do not wait until your payments are late before contacting the lender. These options, collectively called foreclosure loss mitigation options, include forbearance, forgiveness, repayment plans, loan modification, refinancing, partial claims, and short sales.
Free from mortgage payments, a forbearance provides a grace period. A late payment is waived as a forgiveness is provided. As repayment plans are allowed missed payments will be added to the regular payments, they will then be stretched out over a long period of time. Freezing the interest rates is what usually happens with the modification of the loan terms as well as sometimes adding length of the mortgage.
The complete re-amortization of the loan under different terms is called refinancing. Taking another loan from a different source to repay the missed mortgage payments is called a partial claim. The last option, called the short sale, results in the loss of the home to the lender, but under terms often much less onerous than a foreclosure.
Each of these options must be granted by the lender. However, because a lender has refused to grant a particular option does not mean you will not qualify for a different foreclosure loss mitigation option. If you are experiencing financial difficulty paying your mortgage, the next step is to contact your lender, and thoroughly research all of the available foreclosure loss mitigation options.
Following the unprecedented time of property price inflation, a lot of us are discovering that our homes are worth less than what we still owe on our mortgages. You may think there is nothing that you can do to keep your home, but there are actions you can take. Lenders are unlikely to initiate these actions on your behalf, so it is important to be proactive. Don’t wait until you’re close to foreclosure due to late payments. Contact your lender and find out if you can initiate one of the following options: refinancing, a loan modification, foreclosure loss mitigation, forbearance, partial claim, or short sales.
- jason ciment
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