Solutions If You Cannot Keep Your Home
If you have already defaulted on your loan it doesn’t mean that you have to go through foreclosure
. You have other options available to stop foreclosure. Sometimes you can keep your home by working with your lender. Even if walking away from your home is the best financial decision for you, there are a few strategies you can use to stop foreclosure process. You have other options such as a short sale or a deed in lieu of foreclosure, or you could just let the foreclosure happen. Last but not least, don't overlook the Mortgage Modification Mediation Program (MMMP)
As the entire foreclosure process is costly to both borrowers and lenders, it would be in their interest to renegotiating mortgages rather than pursue a judicial foreclosure.
Short Sale to stop foreclosure
A short sale also known as a pre-foreclosure sale is a sale of a property for less than the amount the current owner owes the mortgage company. The mortgage lender will write off the portion of your mortgage that exceeds the net proceeds from the sale.
A short sale can help the seller avoid having a full foreclosure on his or her credit record. In addition, the terms of every short sale are negotiated with the lender so he usually agrees to accept the sale proceeds and release the lien on the property while in a foreclosure, the lender can pursue the borrower for a deficiency judgment to recover the deficiency. In case your lender refuses to waive the deficiency, you can try making a settlement offer proposing to settle the deficiency for a smaller amount.
A few states, however, do prohibit deficiencies after a short sale, such as Nevada, California, Arizona, and Oregon.
To get a deficiency judgment, the mortgage lender must sue you first. As lawsuits are pricey they will only sue for a deficiency judgment if the mortgage lender considers that you have enough assets or funds to repay the outstanding amount. If this is not the case it is possible that your lender will not file a lawsuit.
If you choose to short sale your property you will be able to get a Fannie Mae mortgage to purchase a home in as little as 2 years while if you went through the foreclosure process it would have taken up to 7 years.
Deed in Lieu of Foreclosure
Another option to avoid foreclosure is a deed in lieu of foreclosure. The lender may accept the voluntary transfer of the title of the home back to them in exchange for the cancellation of your mortgage debt.
The first step in obtaining a deed in lieu of foreclosure is for the borrower to submit a loss mitigation application, to the lender. Usually, the borrower has to prove that he has tried to sell the property for at least 90 days before for the lender to consider accepting a deed in lieu. You will be asked for a copy of the listing agreement as proof.
The main disadvantage to the borrower is the loss of the property, as well as the investment in the property. In addition, the conveyance of the property is also taxable.
If approved, you will receive from the lender a deed that transfers ownership of the property and an estoppel affidavit also known as an estoppel certificate. This certificate protects the party accepting the Deed-in-Lieu from a future bankruptcy or claims from the borrower.
Usually, the entirety of the debt is excused in exchange for the Deed-in-Lieu. However, there may be some exceptional cases when the borrower has to pay an additional amount to the lender or the other way around in case there is a large difference between the debt and the market value.
A deed in lieu of foreclosure is definitely not the best way, but it can be much better than going all the way through the foreclosure process.
Chapter 13 bankruptcy to stop foreclosure
Another option to save your home would be through a Chapter 13 bankruptcy filing. This way you can successfully modify your mortgage while reorganizing your debt under the bankruptcy code.
Mortgage Modification Mediation Program
The United States Bankruptcy Court for the District of Nevada has enabled mortgage modifications and confirmation of Chapter 13 Plan. An Administrative Order effective January 1, 2016 implements the Mortgage Modification Mediation Program (MMMP) in Las Vegas.
The program has been designed to address those facing foreclosure and to help keep families in their homes. Homeowners in bankruptcy face many challenges when trying to restructure debts associated with their main residence. Even if their struggles are successful, the fees and costs incurred could lead to a different financial distress.
The main purpose of the MMM Program is to help both property owners and lenders to reach an agreement. In doing so the mediator assists in attaining an agreement that is feasible and beneficial to both parties.
The loan may be altered in the following way:
- Interest rate reduction
- Extending the length of the loan; such as extending the mortgage payoff from 30 years to 40 years
- Change the type of mortgage (e.g. ARM to Fixed)
Before you decide what to do, think seriously about your situation. Make sure you understand all of your options and their consequences.
Here at All Western Mortgage, we can help sellers throughout Nevada, Las Vegas and beyond. Call to discuss your situation to avoid foreclosure. I will personally take the time to discuss my knowledge for free. I will do so by providing guidance and assisting you in getting the best mortgage loan terms possible. A free consult may also prepare yourself for homeownership in the future.