“When a homeowner can no longer make their mortgage payments the foreclosure process is initiated by the bank. The home owner is left with a few options in order to stop foreclosure.”
Loan Modification- (a good option in the right situation)
Unfortunately most programs created to stabilize the economy have not performed as well as distressed home owners would have liked. Currently approximately 15 million homeowners are in a distressed situation. Approximately 10 million of those homeowners have applied for loan modifications with a continued success rate of only 152,289 which leaves the current success rate of distressed homeowners at about 1%.*
What you need to know when considering a loan modification
- No upfront fees can legally be charged for modifications. Beware of lawyers, loan officers and legal advisers who attempt to collect an upfront fee.
- Loan modifications have approximately a 1% success rate for distressed homeowners.
- Loan modifications even if approved are not always the best decision for the homeowner. You should consider principal amount owed in relation to current market value on your property. You should always attempt to get a principal reduction, but understand that it is rare.
- Loan Modifications will often require a substantial payment at the approval of the loan modification paid by the homeowner.
- Loan Modifications have a high fall out rate of approved modifications. This means that those homeowners that are able to receive a loan modification approval still run the risk to fall back into default.
Foreclosure- (the worst option)
Some homeowners find the pressure of making a mortgage payment too much and simply stop paying. This non payment often destroys their chances at a loan modification. As the pressure builds they do nothing and are then at the mercy of the bank. After the homeowner is late on their payments a NOD is filed. approximately 90 days later a NOT is filed. For a simplified foreclosure process explanation click here.
What you need to know when considering foreclosure
- Banks will pursue you for the amount owed and extra expenses accrued by the bank through the foreclosure process.
- Your credit will be effected negatively for approximately 7-10 years. This means you will not be able to purchase another home and have a difficult time being approved for any type of loan.
- Your property will be sold at a foreclosure auction and you will be evicted by the sheriff if you refuse to leave.
- The foreclosure process is public and information of the sale of your property will be made public so that investors will have the opportunity to bid on your property at the courthouse.
Short Sale- (the most common and often the best solution)
Short sales are quickly becoming the best alternative to foreclosure. A short sale is when the bank allows you to sell your house for less than it is worth. Since banks understand that the foreclosure process is expensive they are willing to work with distressed homeowners.
What you need to know when considering a short sale
- A submitted short sale package will stop your foreclosure if received with enough time before the notice of trustee sale.**
- Credit score is effected less then if you would have had a foreclosure. In fact you may be able to qualify for a new loan in as little as 2-3 years.
- Debts are usually forgiven and in most cases no deficiency judgement will be issued.
- Homeowners are allowed to remain in their house during the short sale negotiation which often takes several months. It is not uncommon for a short sale to take as long as 6 months or longer.
- Minimal effort is required of the homeowner if the process is negotiated with a experienced real estate professional.
Call or Email today for a free consultation. (323) 221-0020 We refer you to a loan modification or short sale expert. Stop your foreclosure sale today
*Statistics used were compiled from analyzing data from the New York Times, DS news, California Association of Realtors and other credible sources. All information is deemed reliable but readers are advised to consult a real estate professional. ** Banks are currently backed up due to the large amount of short sale applications. It is important to begin the short sale process with ample time before your trustee sale date in order to stop your foreclosure.