Behind on Payments?
At Garlandhousebuyer, our aim is to help homeowners with their difficult situations. We believe in treating each individual client with personalized services in solving their problems.
The process starts with understanding the unique situation of each client. We know how distressing it can be for homeowners to handle situations where there seems to be no solution at all. But it just a matter of realizing that with smart and innovative strategies, you can solve your issues without losing your house.
Homeowners, individual realtors, attorneys, and financial planners do not know all of the options available in today’s market. So, we have compiled here a comprehensive list of strategies for homeowners who are facing foreclosure.
Sometimes when a homeowner is behind on loan payment and is facing foreclosure, they have the option to declare bankruptcy. Declaring bankruptcy is a common strategy to temporarily stop foreclosure when a homeowner has unsustainable debt beyond the home mortgage. As a home in bankruptcy cannot be sold or foreclosed, the auction can be stopped or nullified until the lender stays lifted.
Bankruptcy is a big decision. It is always wise to explore other options that are more effective and sustainable for a longer run. There are advantages as well as disadvantages of declaring bankruptcy. The advantage that most often compels homeowners to go for bankruptcy is that it can be done at the last minute, just before the lender actually auctions off the home.
The disadvantage of declaring bankruptcy, on the other hand, is that the vast majority of homeowners that declare bankruptcy to avoid a foreclosure ends up getting a bankruptcy AND a foreclosure on their credit. This is because bankruptcy is an effective strategy to delay the foreclosure, not prevent it.
Temporary Restraining Orders
A temporary restraining order (TRO) is the best way to stop foreclosure (up to) the day before an auction when a homeowner does not want/need to declare bankruptcy. It is a legal order filed by an attorney on behalf of a homeowner against their lender. What it does is that it allows a brief time period for homeowners to sell a home using other strategies or catch up on the payments.
The best thing about TRO is that it can be done at the last minute, just before the auction. In addition, filing a TRO gives the homeowners the option not to declare bankruptcy and avoid bankruptcy and foreclosure.
TROs are a legal specialty that cost money and only provide a temporary solution to the problem of foreclosure. Before or in conjunction with exploring this option, it is advised to explore other options here on the website.
A deed in lieu of foreclosure is a potential option taken by mortgagor or homeowner who wants to avoid foreclosure in any way possible. It is a document that transfers the title of property from the property owner to their lender in exchange for being relieved of the mortgage debt. It is usually the last resort when the property owner has exhausted all other options to avoid/delay foreclosure.
There are benefits for both parties, including the opportunity to avoid time-consuming and costly foreclosure proceedings. On the other hand, the disadvantage is that most mainstream lenders will not accept a deed-in-lieu unless a homeowner tries to do a short sale first.
Forbearance plans are the best strategy when a homeowner has a temporary financial hardship and does not want to sell the home. It is an agreement made between a lender and the homeowner that allows the former to have a re-payment plan accepted by the lender. It can be structured in several ways, depending on the homeowner’s financial situations and the lender’s reservations.
Just like any other option, it has both advantages and disadvantages. One the main advantage of pursuing a forbearance plan is that it can avoid foreclosure and keep a homeowner in a home that they really can afford – if they can just be given time to catch up on their payments.
The disadvantage of a forbearance plan is that most people are not eligible for these plans. Some homeowners cannot ever catch up on the payments once the new structured payment-and-a-half payments period begins. Whether it is the new or continued plan, they just cannot afford the payments.
Load modification is the best option for homeowners who want to keep the home for the long term. This involves modifying one or more of the terms of the mortgage contract so that it is manageable for homeowners, given their current financial situation. It may include modifications such as reducing the interest rate, extending the term of the loan, or adding missed payments to the loan balance.
Loan modification has the biggest advantage of making an unaffordable loan affordable for homeowners who do not want to sell their homes because of the affordability problem. But the problem with a loan modification is that most of the time, homeowners want to pursue these in a helpful way for them to stay in the home. But they might not be approved or approved in a manner desired by the homeowners resulting in ultimate foreclosure.
The types of modifications that have a higher success rate involve converting an adjustable-rate loan to a fixed-rate loan or pushing out the interest rate adjustment for a couple of years. The types of modifications that have a lower success rate involve reducing the principal balance on loans. Because many homes are so far underwater that a workable loan modification are usually not achieved.
The last and the worst way to lose a home is through a foreclosure. It is called “the atomic bomb of credit scores” for a reason. It cuts the deepest and lasts the longest.
When a homeowner reaches the end of their patience after trying out every other option, they decide simply to walk away from a home, believing that foreclosure will be the end of their problems. But foreclosure is not a solution to the problem. It just starts an 8-10 year nightmare that can involve everything from eviction by the sheriff, embarrassment, battling creditors for years, deficiency judgments and lawsuits, possible tax ramifications that can even lead to garnished wages, and difficulty getting credit cards, car loans, or even many types of employment for up to a decade.