It's back to school time. Kids are getting on the bus, going to class, and doing homework after school, and hopefully you'll find some time to handle your own homework.
If you've missed mortgage payments, there's no better time than now to try to repair your finances.
If you do your homework, you could ace foreclosure avoidance and keep your home. So sharpen your number two pencils, grab a fidget spinner if you must, and let's do some foreclosure avoidance homework.
Homework Assignment #1: Discover Your Options
In school and in the real world, success depends on good information. So your first homework assignment is to educate yourself on the options available to you.
When you stop paying your mortgage, you have to find a solution to or else you will eventually lose your home to foreclosure. There are a number of loss mitigation options that could help you avoid that, including:
A loan modification is a permanent change to one or more of the terms of your mortgage, such as the term length, interest rate, monthly payment, or principal balance. If a homeowner who is behind on their mortgage gets approved for a permanent loan modification, their mortgage will be reinstated and returned to normal servicing with modified terms. For many homeowners, a loan modification is the only option they have to keep their home and avoid foreclosure.
While your lender won't let you resume making mortgage payments after you've defaulted, they will let you reinstate your mortgage if you pay for all the missed payments plus fees. Depending on how long you've been in default, that could be many thousands of dollars. Most people don't have the money to reinstate or else they wouldn't have fallen behind in the first place.
A short sale is when a home is sold for less than what is owed on the loan. You need your lender's permission to execute a short sale.
Deed In Lieu of Foreclosure
A deed in lieu of foreclosure is when you give your house back to the bank in exchange for not foreclosing on you. Sometimes the bank will even give you a few thousand dollars for your relocation expenses if you leave the home in good condition by an agreed upon date.
Homework Assignment #2: Apply For What You Want
When you know what you want to do, you need to contact your mortgage servicer and see what's required to apply for the loss mitigation option you want to pursue. That's when the real work starts.
Loan modifications, for example, are notoriously difficult to get approved. Borrowers have to submit all of their financial documents, often multiple times, as part of their Request for Mortgage Assistance (RMA). Applications for a loan modification are frequently denied.
Short sales and deeds in lieu of foreclosure can also be difficult to get the bank to sign off on. It takes negotiation. Sometimes the bank is determined to go through with a foreclosure sale and doesn't care that you want something else.
Homework Assignment #3: Get Legal Help
Many homeowners are unable to get the results they want on their own. They do their best applying for a loan modification, but are denied. An experienced professional could give you better odds of getting the loss mitigation option you want approved. If you aren't experienced, you don't know what the bank needs to see to approve you, but someone who's done many will.
If you hire an attorney to help you with your loan modification, they should also help you with foreclosure defense while you're working toward a permanent solution. Effective foreclosure defense includes answering the summons and complaint when you are served, which involves denying the bank's charges and raising affirmative defenses. It can also include attending case management conferences and efforts to get sale dates canceled.
Do your homework and you could end up with an A+ for foreclosure avoidance!