UTAH REAL ESTATE INVESTOR

“How do I stop the foreclosure?” This is a question that I’m being asked more and more as the economic recession progresses. There are several options that are available to most people but it comes down to 2 basic actions: 1 – become current with the mortgage or 2 – settle and close the account. Those are the only 2 ways to stop a foreclosure. In all fairness, there are a few other options that will stall a foreclosure (such as bankruptcy or other legal proceedings) but these don’t actually stop the foreclosure process.

Most homeowners who contact me are looking for ways to keep their homes. This means they are looking for option #1, how can I become current with my mortgage even though I am currently (or will soon be) behind in my payments? The average homeowner has a few options available in this case.
1. Refinance the home…if the home owner’s credit has been to badly damaged they may be able to refinance their home. Consider an FHA loan which allows a much lower credit score but still has competitive loan rates (some loan limits may apply).
2. Loan modification…contact your lender and ask them about options for loan modification. This is only realistic if your payment is about 1/3 of your total monthly income. If the payment is greater than 1/3 then a loan modification is simply delaying the inevitable (future foreclosure). Be careful when modifying your loan. If the lender simply adds all your back-payments and fees into the mortgage then your mortgage payment will go up and you won’t have done yourself any favors. You need a reduction in monthly payment either through a lower interest rate or reduced principle balance owed (or both).
3. Loan rescission…if the loan is for your personal residence and the loan is less than 3 years old, you may qualify for an extended right of rescission. Through this legal process you can force the lender to modify your loan to much more favorable terms that will be affordable to you. Since this process can take up to 1 year, you may also qualify for free housing during that year (at the lender’s expense).

If you already know that keeping the house isn’t going to be a possibility there are several more options for selling the home, even in today’s market, with terms that are acceptable to your lenders.
1. Short sale…selling you home to a buyer for less than you owe the lender. Most lenders are very willing to consider a short sale because they actually will make more money than if they foreclose. You should only proceed with a short sale with someone who is knowledgeable and experienced with the short sale process. Most mistakes in the short sale process are made in the early stages of the process and once these mistakes are made they usually can’t be undone and you could end up with a foreclosure anyway.
2. Seller financing…a simple way of saying that someone else with take over your responsibility to make the payments to the lender. This is a great way to sell a home but you need to make sure that the buyer is able and willing to make those payments on your behalf. If they don’t make the payments it is your credit on the line.
3. Assumptive short sale…a combination of options #1 & #2, this process will usually settle the 2nd mortgage for a discount (usually under $3,000) and may modify or simply reinstate the 1st mortgage after which the buyer will service the 1st mortgage on your behalf.
4. Mortgage rescission…cancelling the mortgage and enforcing the rescission through legal options will force the lender to take the property back with no further negative credit reporting. Because the mortgage is cancelled there can be no foreclosure, no deficiency judgement and no 1099 tax reporting.

While this list certainly isn’t exhaustive, it represents the top 7 options that most homeowner are utilizing in today’s market. For a more extensive list you can read my short consumer report by visiting me at my website at http://khayyamjones.com.