Ways to Get Out of Foreclosure – An Overview

The main concern of most homeowners facing foreclosure is to save their home from auction by negotiating with the lender for a loan workout. Unfortunately, the vast majority of borrowers are unsuccessful in their attempts to negotiate for a workable solution to avoid the forced foreclosure, and lose their homes. The borrowers simply do not know how to proceed with their negotiations, since each option employed costs the homeowner money. This surprise and frustration is, in part, because of the lack of a clear and complete picture of the short sale process, and the damages the homeowner will suffer, if the property is auctioned. This article presents a simple summary of six ways a homeowner can get out of a forced foreclosure.

Homeowner A:

• The short sale allows the homeowner to walk away from the property with a Bankruptcy, the derogatory for the homeowner, because it will destroy their credit rating. The most obvious and immediate benefit of a short sale is that the homeowner will be paying the remaining mortgage balance on the property. Some lenders will not allow a short sale, even when the evidence of financial hardship to the Bank is established. In the majority of short sales, the homeowner will still be on the loan, and will pay the lender the monthly mortgage payments and add the shorted amount to the principal balance of the loan, loan.

• If the homeowner is in a negative equity position with respect to their home, they may decide not to short sell, and renegotiate with the lender. If they choose not to do this, the lender has no choice but to proceed with the foreclosure process, and will increase the debt owed on the property. On the other hand, if the lender does agree to a Short Sale, they will accept a lower payoff on the loan and release the homeowner of any further obligation for the balance. The lender losing money on the original loan is better than the lender losing money via the foreclosure process. In a foreclosure, the lender can usually r Grande the loan balance by as much as 90%, depending on other factors.

Homeowner B:

• Negotiating with the lender (Lender Rep.) to forgive the deficient sum. As is the case in the relatively few cases where the lender will accept a short sale, the lender will also accept a so-called Mortgage Forgiveness from the borrower. However, the Forgiveness of the debt does not happen in a Short Sale, the homeowner will still owe the lender the deficient balance. So, the lender will have to forgive the balance on the loan to have a complete forgiveness.

• The Mortgage Forgiveness may result in a tax deduction for the borrower, however, the IRS will only release the forgiven amount back to the borrower if the borrower signs IRS form 982. The borrower will pay income tax based on the amount of forgiven debt. The IRS allows a “principle Reduction” on the borrowers own income, if it is over $1,000,000, the borrower must sign IRS form 982, and the IRS will not release any of the forgiven money. Therefore, the borrower may be subject to income tax on the forgiven debt. The borrower can reduce their tax liability by negotiating with the lender.

• If a Mortgage Forgiveness happens, the homeowner may still owe the lender the deficiency balance on the loan, which includes the interest and late fees.

Homeowner C:

• Homeowner C could file a Chapter 13 case to stop foreclosure, however, their attorney will need to negotiate with the lender to negotiate forgiveness of debt and stop the foreclosure.

Homeowner D:

• Negotiating with the lender where the lender agrees to accept less than the full loan balance. Which will result in a short sale to a 3rd party. The short sales are usually handled by the lender’s Loss Mitigation Department. The lender is always more open to doing a short sale, because it is less expensive for the lender, and will not have to pay for the full legal fees. Homeowners are usually confused and overwhelmed by the real estate attorneys that are usually representing the desired parties doing a short sale.

• The Short Sale is much less stressful and much less time consuming for the homeowner, and the lender. The lender is normally headed by a Loss Mitigation Department.

Homeowners are usually in denial about their financial position, and think they are doomed, however with the 6 ways a homeowner can use to keep their home, and keep up their family life, a homeowner facing mortgage foreclosure should keep their wits about them, and investigate every available option. A short sale, which starts with a Homeowner AContact Bad credit in a short sale.

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