Are you having trouble making mortgage payments?
Have you fallen behind on your house payment?
Do you worry about losing your home to foreclosure?
Does someone you know suffer from any of these problems?
Know Your Options.
Life is full of change. Change can bring prosperity, happiness, accomplishment and fulfillment. Change can also bring stress, fatigue, unemployment and uncertainty.
If you find yourself in a financial hardship and are worried about making your next house payment, then the following information will help. Call 888-PAT OWEN (888-728-6936) and Pat will help explain any of the options described below.
Contact your lender: Many people live by the belief that “if you ignore it, it will go away.” This philosophy doesn’t work very well in life, but it absolutely doesn’t work when you get behind on mortgage payments.
Forbearance: If you have lost your job due to the pandemic, or if you can prove that the pandemic has caused a decrease in your income, you may be eligible for Mortgage Forbearance. Depending on the bank or servicer of your loan, forbearance allows you to stop making payments for a certain period of time. This time period is commonly six months, but it can be longer and there can be extensions. The money that you owe is not forgiven, but instead, is added to the principal of the loan. In some cases the borrower has to make payments on the arrears as soon as the loan comes out of forbearance. This is something that must be agreed upon before entering into an agreement.
Loan Modification: A Loan modification is a change made to the terms of an existing loan by the lender. It may involve a reduction in the interest rate, an extension of the length of time for repayment, a different type of loan, or sometimes a reduction in the principal balance. It could also be a combination of any of these things. There are several different types of Loan Modification programs. All of them require some type of financial hardship. Depending on the lender, you may be able to apply directly with little or no assistance. It is highly recommended that you seek out professional help from an experienced real estate broker, third party company or an attorney. Any of these options are great if you find someone that has real life experience in dealing with lenders. Many Realtors, attorneys and other third party companies will claim to have a great track record, but really don’t. In some cases an inexperienced firm will simply refer it out to someone that knows what they are doing, then collect a referral fee. Make sure that you do your diligence.
Repayment Plan: If you fell behind in payments and you’re in a better financial position than you were when you fell behind, your lender may be willing to create a payment plan with you. This plan would add a certain amount on top of your mortgage payment every month that will be applied to your arrears.
Payment Deferral: If you’ve fallen behind on your mortgage due to a short-term hardship that is now resolved, and you are able to resume your regular monthly payments, you may qualify for a payment deferral. This repayment option moves past-due amounts to the end of your loan term and immediately brings your loan to a current status. The deferred amount is due on your last mortgage payment date or earlier if you sell your home, refinance, or otherwise pay off your loan.
Refinance: If you are struggling to make your payment every month, but are still current on your mortgage you may be able to apply for a new loan with better terms and conditions than your present loan. If you are already behind on your payments, then this may not be an option.
Equity Sale: When the market is strong and has been appreciating for a long period of time, most homeowners have built a lot of equity in their real estate investments. Equity is defined as the amount of capital left over after selling the property and paying off all the mortgages. In Southern California, one of the most expensive real estate markets in the country, it is possible to gain as much as 20% equity in a year! For a $500,000 house, that would be a gain of $100,000 in a year. There is a philosophy that almost all wealthy people live by… Buy Low and Sell High. When the market is or has been extremely HOT, the amount of money that can be made by the average homeowner is astounding. What makes an equity sale even more attractive is that, in almost all cases, the profit from the sale of your personal residence is tax exempt. For a single person the tax exempt profit is up to $250,000. For a married couple the tax exempt profit is up to $500,000!!! How many investments can you think of that will give you that kind of return and pay little or no income tax?
If you’re behind on your payments with a lot of equity in your home, then you may benefit enormously by selling your house, getting caught up on your debt and putting money away in the bank (tax free) until the market is in the buyer’s favor again.
Don’t get caught up in the need to be a homeowner right away. If you just sold your home because you were behind on payments, it’s quite possible that qualifying for a new loan to buy another home may be difficult. This could be a blessing in disguise. In the time that it takes to rebuild your credit and raise you score the market conditions almost assuredly will change. In fact, you may end up being in a red hot buyer’s market! I’ve seen market conditions depreciate as much as 20-25% in a year. If that happens, then a house that was going for $500,000 before the market correction will sell for $375,000 to $400,000 after the depreciation. Now that’s worth waiting for!
If selling your home is on your mind just call 888-PAT OWEN (888-728-6936) TODAY! To find out what you can get for your home in today’s market go to my Home Value Tool.
Short Sale: In the event that none of the above solutions work and you fear that foreclosure is a real possibility, then a Short Sale is an excellent alternative. Entering into a short sale listing agreement will usually give you much more time to stay in your home before the bank forecloses. I’ve represented homeowners in foreclosure that gained an additional 12 to 16 months in their home by selling through a short sale. This also gives the homeowner plenty of time to decide where they are moving; and, more importantly, when they are moving. One of the worst scenarios for moving is when an eviction notice has been posted and you have to move within weeks, or sometimes, even days!
The majority of my clients have been able to move on their own terms, and in most cases, with a check from their bank or servicer to help with moving expenses. Depending on the value of the home and other factors, these checks can range from $1,000 to as much as $5,000!!!
Deed In Lieu: This is a last ditch effort to avoid foreclosure and eviction. A Deed In Lieu (DIL) is an agreement between the bank and the homeowner that allows the homeowner to give the property back to the bank and avoid foreclosure. It usually involves the bank sending a representative to inspect the property before the agreement is signed to assess any damage or missing fixtures. Occasionally, the bank will allow the homeowner to stay in the property for 60 days, but they typically want possession of the property in 30 days or less.
Beware of Scams!
Times of crisis and financial stress always bring out “bottom feeders” that prey on the desperate. These criminals will often present offers that sound too good to be true. They may tell you that they can guarantee that they can stop foreclosure against you, or that they can keep you in your home no matter what the bank tells you. Oftentimes, they will tell you to cease communication with your lender or servicer. Don’t fall for the bait. Protect yourself by asking questions, reading the materials provided to you by your lender, and avoiding any solicitations requiring up-front cash payments. The only time that you should ever consider paying up front money is if you hire an attorney and they require a retainer fee. Keep in mind, that an attorney is not usually needed to work out your situation with your lender, and should only be a last resort. In fact, there are some law firms that solicit homeowners that fall behind on their payments, so be very aware of their intentions.
Want more information on foreclosures and REO properties? Check out my REO Page.
