Hi, I’m Derik Lewis with Lawyers Realty Group, Southern California’s leading short sale team. Today we’re discussing alternatives to foreclosure. The first question you need to ask yourself is whether you are trying to stay in the home or if you’ve accepted the fact if you need to leave. If you’d like to avoid the foreclosure process, you do have a few alternatives.
You have the right to cure the default. If you gather the money needed to pay the mortgage current and continue paying, you have the legal right to cure it.
You can also refinance your mortgage or do a reverse mortgage, however most people don’t have equity in their home, or if they do it’s not a lot. They may have a second lien that may bar the process.
Another option is if your hardship was a temporary hardship, such as unemployment, you may be able to go to the lender and ask for a deferment or forbearance and let them know that you will be able to catch up on your payments over the next couple of months.
The main option that most people choose is a loan modification, which hasn’t proven to be very successful. We have some resources on our website to let you know if you qualify for this or not.
Those are your options if you wanted to stay in your home. If you realize that you are going to have to leave your property, you need to look for alternatives to the foreclosure action. There is the possibility that you could do a deed in lieu which is simply telling the bank that you don’t want to go through the formal process of a foreclosure. You give them the keys to the house and a deed that transfers the property back to the bank.
You could also do a planned foreclosure; you know the foreclosure is coming, but you want to ensure that the lender is going through the process legally.
The main alternative to foreclosure, which gives you a lot more protection and ability to negotiate issues, is the short sale. What happens in a short sale is the lender is owed significantly more than the property is worth and the homeowner would like to sell the property in a regular transaction, but wants the lender to take less than the full payoff. Doing a short sale helps you avoid foreclosure and eviction and doesn’t affect your credit as much. Not only does a short sale give you the ability to negotiate with the lien holder, it also gives you more time.
A short sale is a very important and helpful alternative to foreclosure; the short sale process is significantly detailed on our website, so I encourage you to check it out. You can also check out our blog, or call or email me with any questions you may have about avoiding foreclosure and doing a short sale on your home.