Foreclosure Trouble? Knowing Your Options Can Save Your Credit Or Your Home
By alyssa collins
If you have missed a mortgage payment or payments you'll need to act fast to lessen the damage so you can either salvage your credit or possibly keep your home.
If you are currently in pre-foreclosure or have already been issued NOD (notice of default) you are no doubt stressed, overwhelmed and even angry. You must put those feelings aside and deal with reality now, as TIME is your worst enemy. There are effective ways to stop foreclosure.
As mortgage holder, you need to decide (hopefully within 30 days) if you are experiencing only a temporary cash flow issue and will be able to continue making payments.
Retention Strategies - These help you keep your home. You need to contact the loss mitigation department of your lender ASAP. You will need to know what types of loan modification or reinstatement options are available to you.
Sell The Home - If you honestly believe your cash flow situation will not improve you will have no option other than a liquidation strategy - selling the house. If you have some equity in the home this may be the best option for you to stop foreclosure.
Remember "best" actually means least damaging to your finances, family and personal well-being. Selling your home may salvage what's left of your credit score and you'll walk away with some cash as well as stop foreclosure on your property. You also will be in better shape to apply for a mortgage in the future. This is the least damaging option.
Of course the quick sale contract will typically cover the amount of the payoff plus whatever is negotiated with the foreclosure investor. They'll want to purchase your home for under market value so be prepared. Remember, time is your enemy so selling low believe it or not, creates a win-win for you and the foreclosure investor. It's wise to accept a reasonable offer and move on. The benefit here is you stop foreclosure and will be assured some exit cash.
Short sale - If you have no equity and actually owe more than the home is worth, a short sale may be an option. The lender will accept a settlement for less than the payoff and the foreclosure process stops. Your troubles are not over however - you will still have a tax consequence because the IRS views the amount "forgiven" as a taxable event. For example if the payoff is $260,000 and the lender accepts $240,000 - you will be taxed on the $20G. Plus your credit score will be further damaged. This will stop foreclosure but with negative consequences.
Deed in lieu of foreclosure - If you can't sell the house for enough to cover the payoff your lender may agree to accept a deed in lieu of foreclosure. You merely turn over title of the home to the lender. This is a viable way to stop foreclosure. You must first prove unavoidable hardship to even be considered for this.
Proceed with foreclosure - The worst situation would be to let the foreclosure proceed. You will completely decimate your credit as well as lose your home.
As devastating as foreclosure is you can bounce back - the damage need not be permanent. There are steps you can take to stop foreclosure or if it’s too late, rebuild your credit slowly but surely and qualify for home ownership after foreclosure.
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