Hi this is Derick Lewis with Lawyers Realty Group in Southern California and we’re discussing alternatives to foreclosure, like a short sale. 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 like to avoid the formal foreclosure and everything that comes with that.
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 pay the mortgage payment from then on. If you had a temporary problem and now have the financial ability, you have the legal right to cure the default.
You can also attempt to do a refinance of your mortgage or a reverse mortgage; something to pay off that first loan that’s in default. Most people don’t have a significant amount of equity in their homes. Another option is if your hardship was only temporary you may be able to go to the lender and ask for a deferment or forbearance. The big one that everyone goes after is a loan modification. It hasn’t been a very successful program, but we have some resources on our website for you.
These are basically the options if you want to stay in your home. If you’ve realized that you have to leave the property, now you’re looking for alternatives to that foreclosure action because this will damage you significantly. You could do a deed in lieu; this is when you tell the bank you know you’re going to lose your home so you give the bank a deed transferring the property back to them. The problem in California is that there are a lot of second liens or HELOCs on homes. You can do a planned foreclosure; this is a concept where you make sure the lender abides by the guidelines. The big alternative to foreclosure that gives you a lot more protection and ability to negotiate issues is a short sale. What we see in a short sale is the lender is owed more than what the property is worth, so they allow you to take less than the full payoff. The short sale process is detailed on our website significantly, but it does give you a lot of ability to negotiate with other lien holders and take more time in the process.
A short sale is a significant alternative to foreclosure and I suggest you look at more information about it on our website if you need to get out of your home. I will also briefly bring up bankruptcy, however the lender still has the right to foreclose on your home. Be sure to check out our website because it has significant resources involving alternatives to foreclosure, especially about short sales.