SEVEN OWNER IN FORECLOSURE "OPTIONS"
This outlines the most "popular options" an owner will consider, when in default on their
loans. Also remember, that all these "options" will not be available to every seller
depending on the lender.
1. Forbearance:
Forbearance is an agreement between the lender and the borrower that reinstates the
delinquent loan through the payment of a lump sum or a schedule of payments over a
period of time. If a borrower is behind in his or her payment, (because of a lapse of
employment, and now has income coming in again) the lender may allow the borrower
to pay the money back through installment payments over six months. The lender may
decide, on the other hand, to allow the borrower to pay a reduced monthly payment
until the borrower has an opportunity to get back on his or her feet and pay any
remaining arrears in one lump sum. The forbearance may be an oral agreement or
written contract between the lender and the borrower. Generally these agreements will
not exceed more than 12 months.
2. Loan Modification:
A loan modification is a change in any of the terms of the original note. This includes
decreasing the interest rate, re-amortizing the remaining balance, extending the term of
the loan, or other options at the lender's discretion to assist the borrower through a
temporary set back. Generally a lender will consider a loan modification when
foreclosure is eminent and the borrower's income has been decreased or unable to
make the mortgage payments, but will be able to keep the loan current after the loan
modification.
3. Mortgage Refinancing:
Mortgage refinancing is an option where the existing lender (or a new lender) would
allow the borrower to refinance his or her existing mortgage, wrap in any late payments
and fees, and cash out part of his or her equity in the home to allow the borrower to
regain control of a debilitating financial situation.
Refinances are generally open to borrowers that face a temporary set back in their
financial situation, have shown outstanding credit history in the past, and can prove
that he or she can support the new mortgage payment.
4. Second Mortgage, Line of Credit:
The existing lender (or a new lender) may offer a second loan or junior lien (often
called a "hard money loan") to a borrower in order to make up any back payments, late
fees and other charges necessary to reinstate the loan. The borrower, in return, will be
required to make an additional mortgage payment to cover the principal and interest
payments on the second loan. Hard Money loan fees are typically 5-10 times the
average loan fees for an "A Credit" borrower. Plus interest rates often rival credit cards.
Use caution before you choose a "Hard Money Loan", as if you cannot make payments
on your current loan(s), how can you on a new more costly loan?
5. Sale of the Home:
If the owner has been unable to work with the existing lenders, or find new lenders to
complete a loan transaction in a TIMELY MANNER, it is time to get serious about
selling. The sooner the owner starts preparing their home for sale (and listing it for sale
with a Realtor) the better the chances are that the owner will get a fair market offer to
purchase their home.
However, most owners will wait for "their pending new/refinance loans" and by the time
they find out they cannot get financing; there is not enough time to "conventionally" sell
the house with a Realtor.
The longer they wait, the more likely they will need to sell their house to an investor who
offers "a quick closing, all cash transaction", and will pay significantly less than fair
market value for the property. In addition, typically the owner does not have the money
to repair the home and get top market value, and will have to "discount" their sales
price for any deferred repairs.
However; selling the home to an investor quickly, in "as is" condition allows the owner to
salvage his or her credit, pay off the loans, and retain any remaining equity in the home.
In certain cases, the lender may allow the borrower to sell the home when the proceeds
from the sale are not sufficient to pay off the existing loan. This is known as a short
sale. A borrower should check with his or her lender to discuss this option.
Furthermore, the borrower may have to pay taxes on any loss the lender writes off from
the short sale. A borrower should consult his or her tax professional before agreeing to
a short sale.
6. Deed-in-Lieu of Foreclosure (DIL):
A Deed-in-lieu of foreclosure is a voluntary conveyance of title to the lender. Generally
this is a last ditch effort by the borrower to avoid the negative consequences of
foreclosure. In return for the voluntary conveyance to the lender, the borrower is often
released of any personal responsibility for the mortgage.
In order to qualify for a DIL, most lenders state that there must NOT be a second
mortgage or junior liens on the property. Properties with values in excess of the amount
owed against the home (to include normal closing costs) should consider selling the
property before voluntarily conveying the home to the lender.
7. Bankruptcy Filing:
Bankruptcy is a way for people who owe more money than they can pay right now,
("debtors"), to either work out a plan to repay the money over time in a chapter 11,
chapter 12, or chapter 13 cases, or wipe out ("discharge") most of their bills in a
chapter 7 case. While either the debtor is working out a plan or the trustee is gathering
the available assets to sell, the Bankruptcy Code provides that creditors must stop all
collection efforts against the debtor. When the bankruptcy petition is stamped "Relief
Ordered" upon filing, you are immediately protected from your creditors.
What chapter you choose to file under, what bills can be eliminated, how long payments
can be stretched out, and what possessions you can keep, and the Bankruptcy Code
and the Federal Rules of Bankruptcy Procedure control other details. These are
federal laws, which mean they apply all over the United States. The Code and Rules
are found in Title 11 of the United States Code.
Think carefully before you choose Bankruptcy, as it will have serious financial
implications to your life for the next 10 years!
The bankruptcy petition, schedules and plan are public documents and are available to
the general public for viewing. Credit reporting agencies regularly collect information
from the petitions filed and report the information on their credit reporting services.
Bankruptcies normally will remain on your credit report for up to ten (10) years and will
be taken into consideration by any person reviewing a credit report for the purpose of
extending credit in the future. The decision whether to grant you credit in the future is
strictly up to the creditor and varies from creditor to creditor depending on the type of
credit requested. There is no law, which prevents anyone from extending credit to you
immediately after the filing of a neither bankruptcy nor are creditors required to extend
you credit.
The best way for you to obtain credit in the future is to generate an adequate and
regular income and pay all of your financial obligations in a timely and responsible
manner. Many creditors will not deal with you in the future unless you have already
established credit with someone else and demonstrate that you are a reliable debtor. In
general it is recommended that, after the filing of a bankruptcy, one learn to live within
his/her income and not request credit, which is not absolutely necessary.
Many owners, who file bankruptcy and then later realize that they cannot keep their
home and must sell it, find it impossible to find a place to rent. Oftentimes after a
bankruptcy filing and a foreclosure, getting a landlord to accept you, as a tenant, is an
almost impossible task.
Call us today and we will gladly discuss any of the above options with you.
Daryl White
661.296.1523
daryl@whiteroque.com
loans. Also remember, that all these "options" will not be available to every seller
depending on the lender.
1. Forbearance:
Forbearance is an agreement between the lender and the borrower that reinstates the
delinquent loan through the payment of a lump sum or a schedule of payments over a
period of time. If a borrower is behind in his or her payment, (because of a lapse of
employment, and now has income coming in again) the lender may allow the borrower
to pay the money back through installment payments over six months. The lender may
decide, on the other hand, to allow the borrower to pay a reduced monthly payment
until the borrower has an opportunity to get back on his or her feet and pay any
remaining arrears in one lump sum. The forbearance may be an oral agreement or
written contract between the lender and the borrower. Generally these agreements will
not exceed more than 12 months.
2. Loan Modification:
A loan modification is a change in any of the terms of the original note. This includes
decreasing the interest rate, re-amortizing the remaining balance, extending the term of
the loan, or other options at the lender's discretion to assist the borrower through a
temporary set back. Generally a lender will consider a loan modification when
foreclosure is eminent and the borrower's income has been decreased or unable to
make the mortgage payments, but will be able to keep the loan current after the loan
modification.
3. Mortgage Refinancing:
Mortgage refinancing is an option where the existing lender (or a new lender) would
allow the borrower to refinance his or her existing mortgage, wrap in any late payments
and fees, and cash out part of his or her equity in the home to allow the borrower to
regain control of a debilitating financial situation.
Refinances are generally open to borrowers that face a temporary set back in their
financial situation, have shown outstanding credit history in the past, and can prove
that he or she can support the new mortgage payment.
4. Second Mortgage, Line of Credit:
The existing lender (or a new lender) may offer a second loan or junior lien (often
called a "hard money loan") to a borrower in order to make up any back payments, late
fees and other charges necessary to reinstate the loan. The borrower, in return, will be
required to make an additional mortgage payment to cover the principal and interest
payments on the second loan. Hard Money loan fees are typically 5-10 times the
average loan fees for an "A Credit" borrower. Plus interest rates often rival credit cards.
Use caution before you choose a "Hard Money Loan", as if you cannot make payments
on your current loan(s), how can you on a new more costly loan?
5. Sale of the Home:
If the owner has been unable to work with the existing lenders, or find new lenders to
complete a loan transaction in a TIMELY MANNER, it is time to get serious about
selling. The sooner the owner starts preparing their home for sale (and listing it for sale
with a Realtor) the better the chances are that the owner will get a fair market offer to
purchase their home.
However, most owners will wait for "their pending new/refinance loans" and by the time
they find out they cannot get financing; there is not enough time to "conventionally" sell
the house with a Realtor.
The longer they wait, the more likely they will need to sell their house to an investor who
offers "a quick closing, all cash transaction", and will pay significantly less than fair
market value for the property. In addition, typically the owner does not have the money
to repair the home and get top market value, and will have to "discount" their sales
price for any deferred repairs.
However; selling the home to an investor quickly, in "as is" condition allows the owner to
salvage his or her credit, pay off the loans, and retain any remaining equity in the home.
In certain cases, the lender may allow the borrower to sell the home when the proceeds
from the sale are not sufficient to pay off the existing loan. This is known as a short
sale. A borrower should check with his or her lender to discuss this option.
Furthermore, the borrower may have to pay taxes on any loss the lender writes off from
the short sale. A borrower should consult his or her tax professional before agreeing to
a short sale.
6. Deed-in-Lieu of Foreclosure (DIL):
A Deed-in-lieu of foreclosure is a voluntary conveyance of title to the lender. Generally
this is a last ditch effort by the borrower to avoid the negative consequences of
foreclosure. In return for the voluntary conveyance to the lender, the borrower is often
released of any personal responsibility for the mortgage.
In order to qualify for a DIL, most lenders state that there must NOT be a second
mortgage or junior liens on the property. Properties with values in excess of the amount
owed against the home (to include normal closing costs) should consider selling the
property before voluntarily conveying the home to the lender.
7. Bankruptcy Filing:
Bankruptcy is a way for people who owe more money than they can pay right now,
("debtors"), to either work out a plan to repay the money over time in a chapter 11,
chapter 12, or chapter 13 cases, or wipe out ("discharge") most of their bills in a
chapter 7 case. While either the debtor is working out a plan or the trustee is gathering
the available assets to sell, the Bankruptcy Code provides that creditors must stop all
collection efforts against the debtor. When the bankruptcy petition is stamped "Relief
Ordered" upon filing, you are immediately protected from your creditors.
What chapter you choose to file under, what bills can be eliminated, how long payments
can be stretched out, and what possessions you can keep, and the Bankruptcy Code
and the Federal Rules of Bankruptcy Procedure control other details. These are
federal laws, which mean they apply all over the United States. The Code and Rules
are found in Title 11 of the United States Code.
Think carefully before you choose Bankruptcy, as it will have serious financial
implications to your life for the next 10 years!
The bankruptcy petition, schedules and plan are public documents and are available to
the general public for viewing. Credit reporting agencies regularly collect information
from the petitions filed and report the information on their credit reporting services.
Bankruptcies normally will remain on your credit report for up to ten (10) years and will
be taken into consideration by any person reviewing a credit report for the purpose of
extending credit in the future. The decision whether to grant you credit in the future is
strictly up to the creditor and varies from creditor to creditor depending on the type of
credit requested. There is no law, which prevents anyone from extending credit to you
immediately after the filing of a neither bankruptcy nor are creditors required to extend
you credit.
The best way for you to obtain credit in the future is to generate an adequate and
regular income and pay all of your financial obligations in a timely and responsible
manner. Many creditors will not deal with you in the future unless you have already
established credit with someone else and demonstrate that you are a reliable debtor. In
general it is recommended that, after the filing of a bankruptcy, one learn to live within
his/her income and not request credit, which is not absolutely necessary.
Many owners, who file bankruptcy and then later realize that they cannot keep their
home and must sell it, find it impossible to find a place to rent. Oftentimes after a
bankruptcy filing and a foreclosure, getting a landlord to accept you, as a tenant, is an
almost impossible task.
Call us today and we will gladly discuss any of the above options with you.
Daryl White
661.296.1523
daryl@whiteroque.com
| Daryl White |
| 661.296.1523 |
WhiteRoque Home Solutions, LLC.
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