Hi I’m Derik Lewis with Lawyers Realty Group, Southern California’s premiere short sale team. Today we’re discussing alternatives to foreclosure. The first question you need to ask yourself is whether you’re trying to stay in the home or whether you’ve accepted the fact that you need to leave the home but you’d rather avoid the formal foreclosure and everything that comes with that. So let’s analyze staying in the home first. You have the right to cure the default if you’re not too far in arrears and your late fees aren’t too big, you might be able to gather the money needed to pay the mortgage current and then continue to make your old mortgage payment if you had the ability to do that. So if you had a temporary problem and you have the financial ability, you have the legal right to cure.
You could also attempt to do a refinance of your mortgage, or maybe a reverse mortgage, something to pay off that first loan that’s in default. Most people don’t have equity in their homes, and if they do, there’s not significant equity or there may be a second lien or something else that would bar this process.
Another option is if your hardship was a temporary hardship, you might be able to go to that lender and say you simply need a deferment or a forbearance of the amount owed and you’ll be able to catch up in the next few months and be current. You can also tell them you’d like to put the arrearage on the back and continue to make your mortgage payments. The big one that everybody goes after is the loan modification. It’s not been very successful program. Take a look at our website for more information and resources.
If you realize you have to leave the property, now you are looking for alternatives to a foreclosure, because that will damage you significantly so there’s ways around that. You could do a deed in lieu. A deed in lieu of foreclosure is simply telling the bank you know you will lose it to foreclosure but you don’t want to go through the formal process. The problem in California is there are typically second liens, lines of credit, and HELOC loans. If there is something in addition to the one loan, typically the lender does not want to take possession of your property because they take it subject to all those other liens. They would rather foreclose and wipe them out.
You could do a planned foreclosure. You may even get something called cash for keys where they pay you to leave, so you can avoid the eviction process. The big alternative to foreclosure that gives you more protection and the ability to negotiate issues is the short sale. The lender will take less than the full pay off, and it would avoid foreclosure, eviction and essentially give you a lighter footprint on your credit report. We have a lot of information on short sales on our website. Short sales are a significant alternative to foreclosure and we suggest you look at some of our resources on the site. You can also send me a question directly, I answer those personally. The website is Lawyersrealtygroup.com, we are Southern California’s premiere short sale team. Remember, your lender has a lawyer and so should you.