Options to Avoid Foreclosure - Part 2

Millions of homeowners will have difficulty making their mortgage payments this year. If several months of missed payments go by then the mortgage lender will have the ability to take title to the home throughout the process of foreclosure. But, for those homeowners who recognise that they have a financial hardship early on (any time up to the trustee sale) there are several "better alternatives" to foreclosure. Remember to consult your tax and legal advisor to decide what the best course is.

Here is a list of options to AVOID FORECLOSURE AND KEEP YOUR HOUSE:

Refinance

A new loan—with new terms, interest rates and monthly payments—that completely replaces your current mortgage. Even if your home value has decreased or you owe more than your home is worth, you may be able to refinance your loan as part of the government’s Home Affordable Refinance Program (HARP).

■Make your payment more affordable by lowering your interest rate or adjusting the terms of your loan
■Creates no negative activity or event on your credit history
■Stay in your home and avoid foreclosure

Repayment Plan

An agreement between you and your mortgage company that lets you pay the past due amount—added on to your current mortgage payments—over a specified time period to bring your mortgage current.

■Resolve your delinquency
■Catch up on your past due payments over an extended period of time
■Less damaging to your credit score than a foreclosure
■Stay in your home and avoid foreclosure

Forbearance

An offer by your mortgage company to temporarily suspend or reduce your monthly mortgage payments for a specified period of time.

■Have time to improve your financial situation and get back on your feet
■Less damaging to your credit score than a foreclosure
■Stay in your home and avoid foreclosure

Modification

An agreement between you and your mortgage company to change the original terms of your mortgage—such as payment amount, length of loan, interest rate, etc. You may also be eligible for the government’s Home Affordable Modification Program (HAMP) created to help struggling homeowners.

■May reduce your monthly mortgage payments to a more affordable amount
■Less damaging to your credit score than a foreclosure
■Stay in your home and avoid foreclosure

Deed for Lease

A program that allows you to temporarily lease your home. You first transfer the ownership of your home to the mortgage company (called a Deed-in-Lieu of Foreclosure) in exchange for a release from your mortgage loan and payments. You can then rent the property back—at an affordable rate—and remain in the home as a tenant.

■Resolve your delinquency and avoid foreclosure
■Stay in your home and neighborhood—no need to move or relocate
■Lease at current market rate rent for up to 12 months with a possible option to extend the term
■Pay no security deposit
■Assistance for relocation may be available at the end of your lease
■Start repairing your credit sooner than if you went through a foreclosure
■Get a Fannie Mae mortgage to purchase a home sooner (in as little as 2 years) than if you went through foreclosure (at least 7 years)

If you want to pursue any of the above options, call your mortgage lender and ask about them. The lender should be contacted as early as possible, and frequently thereafter, in order to successfully negotiate a foreclosure alternative.


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can get you started and show you what information we need to effectively
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What are the tax consequenses of a short sale?

Federal and State laws have recently been enacted
that eliminate the tax consequences for most individuals who must
sell their house short of the full amount that they owe. As licensed
real estate professionals, we can help guide you to the appropriate
information and resources.

For more information about Tax Relief from debt cancellation in
your particular situation you should consult a tax professional
and refer to these government links:

IRS Mortgage Forgiveness Debt Relief Act

The Mortgage Forgiveness Debt Relief Act of 2007 generally allows
taxpayers to exclude income from the discharge of debt on their
principal residence. Debt reduced through mortgage restructuring,
as well as mortgage debt forgiven in connection with a foreclosure,
qualify for this relief. (from irs.gov

California Franchise Tax Board

On April 12, 2010, SB 401, the Conformity Act of 2010 was enacted.
It allows taxpayers who had all or part of the loan balance on their
principal residence forgiven by their lender to exclude the forgiven
debt from California gross income. The new law applies to discharges
of qualified principal residence indebtedness on or after January
1, 2009, and before January 1, 2013. (from ftb.ca.gov)


Our FREE INFORMATION PACKET
can get you started and show you what information we need to effectively
negotiate with your bank. We are licensed Real Estate Agents and
charge NO UPFRONT FEES.