The following is not to be construed as legal advice. Consult an attorney today to learn more about your rights. Some options you may have when faced with foreclosure include:
- Short Sale
- Litigation
- Loan Modification
- Bankruptcy
- Deed in Lieu of Foreclosure (DIL)
- Reinstatement and Payoff
SHORT SALE – A short sale is a sale of real estate in which the sale proceeds “fall short” of the balance owed on the note and deed of trust. The note holder or “investor” has been granted a secured interest in the property through the deed of trust. The deed of trust is recorded with the Register of Deeds in the county in which the secured property is situated. Many times, banks have incentive to accept a short sale offer, because the bank knows from experience that a “market price” short sale offer will save them the time and expense of a foreclosure; which includes the trouble and expense of taking title to the property after a foreclosure and selling it through their REO (Real Estate Owned) department. Banks are also aware that proceeding via short sale will usually bring 15% to 20% more than if the loan goes through foreclosure.
LITIGATION – As with many types of litigation, foreclosure litigation can be time consuming and expensive. Foreclosure defense attorneys can use a number of strategies to help fight foreclosure. Motions can be filed challenging a lender’s right to foreclose, and a foreclosure defense attorney can appear in court to argue the case on your behalf for court hearings set by the lender’s attorneys. Many times, however, while attorneys are doing their best to advocate for their client’s rights, the end result of the litigation is simply that a lender’s right to foreclosure is recognized by the courts and property owners are forced to then pursue one of the other avenues to avoid foreclosure from the list above. This is all after an individual has paid his or her attorney a retainer from which the attorney collects an hourly fee, a flat fee in advance, or an agreed to monthly fee. While foreclosure attorneys do their best to protect their clients’ interests, a true avoidance of foreclosure via foreclosure defense litigation, without use of one of the other foreclosure avoidance options, is a rarity.
LOAN MODIFICATION – A loan modification is another way to avoid foreclosure. In a loan modification, banks work with borrowers to reduce monthly payments to a reasonable amount that a borrower can now afford based on his or her changed financial situation. There are guidelines that borrowers are required to meet to qualify for federal modification plans and internal modification plans created by the banks themselves. Qualification for a loan modification is not a guarantee and this process takes time. Many times a healthy stable income must be shown. Also many times when a loan modification is approved, banks will require borrowers to contribute a “down payment” to begin the modification. During these economically depressed times, many people who are happy to learn they have been approved for a loan modification are disappointed to learn that they must put an amount down to start the plan that they are in no way able to afford. Another factor individuals must consider when pursuing a loan modification is the possibility that the reduced amount of payment now will result in a longer loan life as the current mortgage payment amounts in delinquency are many times added on to the back end of the loan. This means years could be added to the amount of time you originally expected to be paying back the original loan.
BANKRUPTCY – Filing for personal bankruptcy under Federal Laws is yet another option for those who are in the foreclosure process. The two types of bankruptcies commonly used by consumers are Chapter 7 and Chapter 13 Bankruptcies. Chapter 7 Bankruptcy is a complete liquidation of assets. The debtor in a Chapter 7 Bankruptcy is discharged from all dischargeable debts as defined in The United States Bankruptcy Code, but must turn over all nonexempt property to the assigned Bankruptcy Trustee. (Some property is exempted from liquidation. Consult a licensed Bankruptcy attorney to learn your rights) There are also financial guidelines an individual must meet to qualify for Chapter 7 Bankruptcy. While filing a bankruptcy can serve to stay a foreclosure proceeding (put a foreclosure proceeding on hold), lenders can file a motion in the Bankruptcy Court to lift the stay so that the foreclosure proceeding can continue. There is also the possibility of negative consequences to an individual’s credit in filing a bankruptcy that subsequently results in foreclosure. In a Chapter 13 Bankruptcy there is a formation of a repayment plan to pay back all or part of the debts an individual has. The repayment plans typically last three to five years. In a Chapter 13 Bankruptcy, borrowers will many times choose to remain in the home and have that debt added onto the repayment plan. A monthly payment is calculated based on the amount of debt an individual has, their typical expenses and their expected regular income. In pursuing a Chapter 13 Bankruptcy many times people are unaware that when the repayment plan is over, normal mortgage payment schedules will resume. This means that if an individual’s financial situation has not improved by the end of the Chapter 13 plan, there is a possibility that the foreclosure process can be restarted if they are again unable to afford the monthly mortgage payment.
DEED IN LIEU OF FORECLOSURE (DIL) – A deed in lieu of foreclosure involves borrowers voluntarily transferring ownership of the property to the lender to satisfy the total amount due on the mortgage. As in a short sale, lenders many times see this as a favorable route since they avoid the expenses associated with continuing the foreclosure process and taking title to the property. Also like a short sale, this is a process with many steps and possible dead ends. This is why when pursuing a deed in lieu it is helpful to consult with experienced professionals like the attorneys at Wilde Law Firm, PLLC to make sure that your goals are met before time expires and the property is sold as a foreclosure sale. Remember that while possible workout options are being discussed with your lender, the foreclosure process is continuing. This is why time matters in the negotiation and workout process, and why experience and familiarity with lenders’ loss mitigation procedures is key.
REINSTATEMENT AND PAYOFF – Reinstatement and Payoff procedures can be worked out with lenders or lenders’ attorneys when a property has gone into the foreclosure process. In a payoff, the borrowers agree to pay the remaining balance owed and all delinquent payments to the lender. The obstacle here is that most individuals are unable to afford to pay off the balance of their loan. Reinstatement procedure involves paying the lender delinquent payments to get the mortgage loan up to date. This reinstates the loan and ceases the foreclosure process. When pursuing reinstatement, a reinstatement figures will need to be requested from the bank. These figures many times shock borrowers when they return, as the amount owed now includes interest, various internal fees and the bank’s attorney’s fees. When the foreclosure process begins, banks as business entities must hire attorneys to represent them in the foreclosure process. The amount that banks pay to their foreclosure attorneys are almost always added onto reinstatement figures given to borrowers to make the loan current and avoid foreclosure. In addition to new fees and costs a borrower must pay to reinstate this loan, there is the question of whether or not the property is an investment the borrower wants to continue making payments on. With many homes being “upside down” (the amount of the loan is greatly in excess of the value of the property) in today’s market reinstating a loan may not be the best way to meet your goals. Which option is your best option? There are many options one may pursue when a person is in the foreclosure process. Please consult with one of the attorneys at Wilde Law Firm, PLLC so that we can discuss with you today why a short sale of your property may be your best option. The Wilde Law Firm, PLLC has North Carolina’s most experienced short sale lawyers and they are ready to use their legal training and skill to guide you towards a successful short sale. “Let us concentrate on what we do best…short sales…so you can concentrate on what you do best…sell real estate.” Contact the attorneys at Wilde Law Firm, PLLC, your North Carolina Short Sale Attorneys today.