Even with government programs such as the Home Affordable Refinance Program and HARP 2.0 refinance programs, people are still having trouble keeping up with their mortgage payments while the housing market remains a mess. Because the real estate market is still fairly shaky in many parts of the country, lenders are better off keeping homeowners in their homes rather than foreclosing on them when financial concerns result in difficulty making payments. This is especially true when you consider the fact that banks make their money in real estate by loaning money, not taking and holding properties or auctioning them off for less than they have owed to them. There are several options that homeowners have that can prevent foreclosure and it may even be possible to obtain such relief even if the lending institution has already started foreclosure proceedings.
Although it’s advised that those facing foreclosure review their options and communicate with their lenders as soon as they realize that a foreclosure might be forthcoming, some foreclosure prevention or delay tactics work even when the process is further along than the discovery stage.
Because lending institutions sometimes use demanding language when requesting payment, homeowners who are facing foreclosure are sometimes intimidated and frightened to the point where they stop communicating with the lender altogether. Non-communication is not recommended because it gives the impression of not caring or making any effort to live up to the obligation signed for when the mortgage was obtained. The lender can view it in a negative light when the homeowner is not willing to make any attempt to honor their responsibility-whether it be trying to negotiate a loan modification or other plan of resolution.
Some people respond quickly to signals that they may have difficulty meeting future mortgage payments by moving into less expensive accommodations and renting out their homes. This can work if the home can be rented out for enough to cover the payments, but that isn’t always possible. In areas where housing markets have improved since the economic devastation caused by the Great Recession, some homeowners may be able to avoid foreclosure by selling their homes.
Some lenders may agree to what is commonly termed a “short sale.” This is when the home is sold for less than the balance owed on the mortgage and the lender accepts the proceeds from the sale as full payment. Those who choose to go this route are advised to consult with real estate professionals in order to ensure that they fully understand the terms of the agreement. Lenders may also agree to what it called a “deed-in-lieu of foreclosure,” which simply means that the property is given to the lender in return for cancellation of further mortgage obligations.
Because foreclosure can substantially damage credit, it’s recommended that those who are facing it do everything in their power to find a way to successfully avoid it. Although this is easier to do when financial difficulties first develop, there are measures that can be taken when foreclosure is near or even after proceedings have started. It is important to keep in mind that not everyone can or will qualify for any particular alternative program and foreclosure may very well be the only option.
It is always best to speak with your financial advisor, tax accountant, or attorney to find out if any of these options would be more beneficial than letting the bank take the home.