Foreclosure is one of the most devastating financial challenges that a family can face and one that many times can be avoided. The options available to Chicago-area residents for foreclosure are many. Following is a brief explanation of these solutions.
If the reason for missed payments is temporary and has been resolved, there is an option to reinstate the mortgage right up to the bank sale. The homeowner has to pay all missed payments, late fees, and legal fees that are due up to the date the loan is reinstated. A simple reinstatement requires a onetime payment of all delinquent funds.
2. Forbearance or Re-Payment Plan
Again, if the reason for missed payments was temporary, but the homeowner is not able to make a onetime payment, a forbearance or re-payment plan is a possibility. This usually requires income documentation showing the ability to comply with a re-payment plan. typically, the mortgage is not fully reinstated until all payments in the plan are paid in full.
3. Sell the Property
If there is plenty of equity in the property the homeowner can sell the property and pay off the mortgage.
4. Rent the Property
If the mortgage payment is low enough, the property can be rented with a positive cash flow allowing the mortgage payments to be kept up to date.
If there is sufficient equity and income and the credit hasn’t been too badly damaged refinancing at a lower interest rate may be an option.
6. Mortgage Modification
A mortgage modification is similar to a refinance. The lender agrees to a lower interest rate and sometimes a lower loan balance. The homeowner must qualify for the new loan and show proof of income and debt. Modifications are extremely difficult to negotiate.
7. Deed-in-Lieu of Foreclosure
In this option, the homeowner gives the deed back to the lender preventing a lengthy foreclosure process. Typically there is no additional recourse.
Bankruptcy temporarily stops a foreclosure allowing the homeowner to reorganize his debt. If the homeowner is not able to make payments after the bankruptcy foreclosure can happen anyway.
9. Service Members Civil Relief Act (SCRA)
If a member of the military is experiencing financial distress due to deployment, and that person can show that their debt was entered into prior to deployment, they may qualify for relief under this law.
10. Short Sale
If the homeowner owes more on the property than the property is worth a short sale is an option.
As a Certified Distressed Property Expert (CDPE), I have the training and knowledge needed to help you avoid foreclosure. Please contact me for a private consultation to review your options.