Know the Facts, Understand the Effects, Know Your Choices, Make your plan, Take Charge
Foreclosure is the process where a lender recovers the amount owed on a defaulted loan by selling or taking ownership of the property securing the loan. The process begins when the borrower/owner defaults on loan payments and the lender files a public default notice called a Notice of Default or Lis Pendens.
Possible Foreclosure Outcomes:
The borrower/owner can reinstate or renegotiate the loan terms during the pre-foreclosure period.
The borrower/owner can sell the home to a third party during pre-foreclosure using the proceeds to payoff the loan and avoid foreclosure.
The lender can take ownership either through default or failure to sell.
The best defense in a foreclosure is finding the right people who can help you make the best and most informed decision for your situation. We specialize in solving real estate problems and will assist you with finding answers to the real estate dilemmas you have encountered.
Here is a short list of issues we can help with:
Purchase your home directly from you with no realtor commission, in “As Is” condition for cash.
Short Sale Programs:
Work with homeowners who are over leveraged to sell properties and avoid a foreclosure judgment.
HouseSold Real Estate LLC’s Network of Professional Referrals:
Work with lenders who specialize in helping homeowners who are behind in payments.
Work with homeowners to get back on track with their current mortgage.
Work with homeowners to repair or improve credit scores following unfortunate financial events.
Work with homeowners to clearly understand their options to and ramifications of foreclosure.
OPTIONS TO AVOID FORECLOSURE
You have multiple options to consider, to avoid a forced foreclosure sale. Some options can allow you to keep your home and credit rating intact, others may involve selling your home to preserve your credit rating. Knowing your options can help you choose the best plan for your situation.
Your lender may be able to arrange a repayment plan if you recently lost a job, source of income or have incurred extraordinary expenses. You would need to show proof of your ability to meet the revised payment schedule.
You may be able to refinance the debt and/or extend the term of your mortgage loan. This may provide needed relief by reducing monthly payments to a more affordable amount.
Your lender may be able to work with you to obtain an interest free loan from HUD to bring your loan current, if you are a qualified borrower.
Selling Prior to Foreclosure
You can sell your property and payoff your mortgage loan to avoid foreclosure and damage to your credit rating.
Deed-In-Lieu of Foreclosure
As a last resort you may be able to ‘give back’ your property to the lender. It will not save your house but, if you qualify, may save your credit rating.
Comparing Options: Foreclosure vs. Short Sale
|Issue||Foreclosure||Successful Short Sale|
|Future Fannie Mae Loan – Primary Residence||A homeowner who loses a home to Foreclosure is ineligible for a Fannie Mae backed mortgage for a period of 5 years.||A homeowner who successfully negotiates and closes a short sale will be eligible for a Fannie Mae backed mortgage after only 2 years.|
|Future Loan with any Mortgage Company||On any future 1003 application, a prospective borrower will have to answer YES to question C in Section VIII of the standard 1003 will affect future rates.||There is no similar declaration or question regarding a short sale.|
|Credit Score||Score may be lowered anywhere from 250 to over 300 points. Typically will affect score for over 3 years.||In some cases only late payments on mortgage will show and after sale mortgage will be reported as paid or negotiated. This may lower the score as little as 50 points if all other payments are being made.|
|Credit History||Foreclosure will remain as a public record on a person’s credit history for 10 years or more.||A Short Sale is not reported on a persons credit history. There is no specific reporting item for ’short sale’. In most cases a loan is typically reported ‘paid in full, settled’ or ‘paid as negotiated’.|
|Employment||Employers have the right to regularly check credit history of all employees who are in sensitive positions. A foreclosure in many cases is ground for immediate reassignment or termination and may challenge employment opportunities.||A short sale is not reported on a credit report and is therefore not a challenge to employment.|
|Deficiency Judgment||In 100% of foreclosures (except in those states where there is no deficiency) the bank has the right to pursue a deficiency judgment.||In some successful short sales it is possible to convince the lender to give up the right to pursue a deficiency judgment against the homeowner.|
|Deficiency Judgment (amount)||In a foreclosure the home will have to go through an REO process if it does not sell at auction. In most cases this will result in a lower sales price and longer time to sale in a declining market. This will result in a higher possible deficiency judgment.||In a properly managed short sale the home is sold at a price that should be close to market value and in almost all cases will be better than an REO sale resulting in a lower deficiency.|