6 Options When You can’t make Your Mortgage Payment

choices

If no longer being able to make your mortgage payment is a reality for you, here are 6 of the most commonly practiced and accepted options for any homeowner in this position.

  1. Loan or Mortgage Modification. This is a good place to start when you feel the mortgage payment growing to a place you can no longer handle it. Whatever you do at this point, DON’T WAIT!! As soon as you know your mortgage is too much for you, contact your lender. Rest assured, the lender does not want your house. They are in the lending business, not the real estate business. They will work with you even when you are still current on your payments.With a loan mod, they may refinance the debt, extend the term of your loan or even reduce your monthly payments to an affordable level.Your loan could be permanently changed by adding what you’re not paying currently to the back end of the existing loan balance, lowering the interest rate, making an adjustable rate fixed, or extending the number of years you have to repay your loan.

    Why would the lender want to do this? It keeps them from losing the loan payments and gaining a house and, ultimately, they will make more from you over time because it will take you longer to pay off the loan.

    Why would you want to do this? This allows you to keep the house and keep your credit in tact. It gives you time to wait until the market turns around, house values begin to climb and you can sell for a profit.

  2. Forbearance - Read more…

10 Options for Sellers facing Foreclosure

Labirinth

Understanding the different options a seller may be considering is important when negotiating.  Here are 10 of the most common options for sellers in default or anticipating being in default.

1. Reinstatement of Loan (Cure): Paying the lender everything that is owed in one lump sum including missed payments, any late fees associated with these payments, foreclosure fees, legal fees and the principal owed during the delinquency. A cure may involve the seller curing or deeding it to the investor “subject to” the existing loans, and the investor will then cure.  Risk to the seller includes that the lender may accelerate the loan because of the due-on-sale clause, the seller no longer owns the property and the seller has no recourse if the investor doesn’t pay the loans.

2. Repayment Plan: A written agreement between the lender and the homeowner. These plans require higher payments than the regular monthly mortgage amount for a period of time until the loan is brought up-to-date.

3. Loan Modification: Involves changing one or more terms of a mortgage. Modifications may be considered to reduce the interest rate of the mortgage, change the mortgage product (i.e., from an adjustable rate to a fixed rate), extend the term of the mortgage or capitalize delinquent payments (add delinquent payments to the mortgage balance-only available in extreme hardship situations). Modifications are NOT easily granted and there must be strong, justifiable reasons for the request.

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Loan Modifications Increasing

FannieMae

photo by futureatlas.com

Fannie Mae and Freddie Mac modified nearly 24,000 loans during the 4th quarter of 2008, an increase of 76% over the third quarter. The modifications, along with suspension of foreclosures that began November 26, reduced the number of foreclosures by nearly 27% during the quarter.

Foreclosure prevention options include *forbearance plans, payment plans, delinquency advances and loan modifications.

*Forbearance – postponement of loan payments for a temporary period of time (usually up to one year)
*Payment plans – schedule of payments may be modified (from monthly to weekly or bi-weekly, increased to add on and catch up arrearages, etc.)
*Delinquency advance -promise to pay at a later date (moving delinquencies, possibly to the back end of the loan)
*Loan Modifications – modifying the existing loan by reducing the interest rate, extending the term of the loan, changing to a different type of loan or any combination of the three

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