Avoid Foreclosure!
by Jean Frost, Realtor
No community is immune to the mortgage meltdown, and to be honest, our nine DECA neighborhoods have been fortunate with only 10 in 2008. The reality of foreclosure can bring on many emotions and is no doubt one of the most stressful situations you may have to deal with. As such many homeowners faced with this dilemma simply turn a blind eye, hoping it will go away. It doesn’t. You have to deal with it. It’s better to take the bull by the horns than let the big powerful lending institutions treat you like a number. The key is to contact your lending institution as soon as you know you are in trouble.
Forbearance – stop or decrease payments for a short time period. This benefits everyone. It allows the homeowner to keep property, equity and interest write offs, and the bank does not end up with another piece of inventory. The homeowner may have an increased principle balance and/or larger payments in the future to make up for the missed ones, and it does adversely affect the homeowner’s credit.
Short Sale – the lending institution accepts less than what they are owed. The homeowner will incur about an 80 to 100 FICA point drop, but avoids a massive credit hit of 200 to 300 points of a foreclosure. The owner has more control over the vacate date, and it’s possible to negotiate upfront to be fully released from all lender debt. The lender pays for all costs including cost of sale, repairs, title and escrow fees.
FHA Secure Loan – as of 1/1/2008, if a home owner falls behind STRICTLY due to interest rate increases on a variable rate mortgage, FHA allows the homeowner to refinance the balance, including arrearages. The owner keeps the home, but will take a hit to the credit score.
Deed in Lieu of Foreclosure – (prior to auction sale) the homeowner voluntarily transfers the property back to the lender. The lender often forgives debt or deficiency, and the homeowner not only avoids public notice of foreclosure, but may also receive more generous terms than a formal foreclosure.
Foreclosure – the final option. It takes a minimum of 45 days to foreclose on a home in Georgia. DO NOT LET IT GET TO THIS POINT! The banks want to avoid it as much as you do. Pick up the phone and call!
Things NOT to DO!!!!
*Do not deed property to third party – without absolute confirmation that the loan has been paid off.
*Don’t sell at a huge discount – without working with the lender – if someone is pushing you to sell to them – beware!
*NEVER allow a prospective buyer to deal directly with your lender – If they can not get the terms they want, they WILL leave you in the dust – with little or no time to work with the lender to protect yourself.
*Do NOT pay upfront fees to anyone! You do not need to pay professional service or consulting fees to anyone. Pick up the phone and call your lender.
*Do NOT do nothing! Don’t accept the inevitable. Explore your options! Call your lender!
