Home Foreclosure Assistance

Loss mitigation covers the many options available to both lenders and borrowers looking for ways to avoid foreclosure. Loss mitigation can be initiated by either the lender or the borrow and negotiated directly between the parties, or by a professional third party working in the best interest of the homeowner. The main goal of loss mitigation is for the homeowner to keep their property and for the bank to minimize their losses. Typically it is necessary for the borrower to arrange a way to pay off their mortgage plus any late payments that may have accrued. The repayment plan is arranged so that the payments are realistic for the homeowner to actually pay off.

Below are some of the loss mitigation options available to borrowers:

• Loan Modification
• Short Sale Negotiation
• Short Refinance Negotiation
• Deed in Lieu of Foreclosure
• Cash for Keys

If your house has declined in value and you owe more on the loan than the property is worth, a short sale might be an option to help you stop foreclosure. With a short sale, a lender agrees to accept the market value of the home as payoff for the mortgage loan, even if the market value does not cover the amount of the note

A short sale can help the homeowner to relieve the stress of foreclosure and reduce any ongoing credit damage. Here are some simple steps to follow when choosing Short Sale as an option:

1. Verify the value of the property—Preferrably through a real estate agent , but personal research and analysis into the real estate market around you to may also suffice. This is a very important part of the process, because if you do not know the value, you do not have anything to go off of when trying to process the short sale.
2. Add up all the costs of selling the property. If you are using the services of a real estate broker, the broker will provide an estimate of closing costs. If you are selling the property on your own (for sale by owner), contact someone specializing in this area and ask them as a seller, what the closing costs will be.
3. Determine the amount owed against the property. This will be the total of all loans against the property.
4. Do the calculations. Subtract the total amount owed against the property from the estimated proceeds of the sale. On a short sale, this will be a negative number.
5. Contact the lender or lenders. Never try to take care of a short sale on your own, there is always someone who knows more about a situation such as this and that is willing to help you.
6. Sell the property.

When thinking about Short Sale as an option, remember that it is an alternative option to foreclosure and made instead of having to foreclose your house. It can typically be closed faster and be less expensive than a foreclosure. If the bank is open to a short sale negotiation and the borrower wants to keep the house, then the bank may also consider a short-refinance.

A short-refinance is a loan agreed to by a lender for a borrower currently behind on their mortgage payments. The short-refinance (also known as a short payoff) is usually initiated to Avoid Foreclosure. In this situation, the new loan amount is typically set at the current market value of the home, which is often less than the existing loan amount. In most cases the lender forgives the difference between the new and old loan. A lender will often agree to a short-refinance in order to keep a borrower in the house, as it is generally more cost effective than proceeding with a foreclosure. However, if the market value of the house has dropped dramatically lower the amount still owed on the mortgage, the borrower should consider other loss mitigation options such as a loan modification.

A typical foreclosure can cost a lender $50,000 or more. Therefore, the foreclosure process is usually an undesirable solution for both the lender and the borrower. In the foreclosure process, the lender may be forced to maintain and sell the house, may not receive any payments for up to a year, and be forced to spend time and money associated with the legal aspects of carrying out a foreclosure. The foreclosure process also often ends with the borrower losing their home. With a short-refinance, the lender does lose out on a large sum of money and the borrower is able to keep their house. It is recommended that homeowners contact an experienced professional or real estate attorney before proceeding with a short-refinance request.

A Deed in Lieu of Foreclosure is an option that can be taken to avoid foreclosure. The process requires the borrower turn over the property to the lender, thereby releasing any obligations the borrower may have under the mortgage. Both the lender and the borrower must enter in this process voluntarily. Typically, the process begins when the borrower sends a letter to the lender requesting that they enter into negotiations.

A Deed in Lieu of Foreclosure can offer advantages to both the borrower and the lender. Upon completion of the process, the borrower is immediately free of the debt connected to the defaulted loan. The borrower is able to avoid the foreclosure, and they are often given more generous terms then they would typically receive in a formal foreclosure process. A Deed in Lieu of Foreclosure can be advantageous to the lender because it saves the lender the time and cost associated with repossessing the property (this is also the reasoning behind cash for keys).

While a deed a lieu of foreclosure can be a great way for a borrower to remove themselves form a bad sitation, there are risks involed. Often, a lender may not be willing to proceed with a Deed in Lieu of Foreclosure if the outstanding amount of the loan exceeds the current market value of the property Additionally, junior creditors might hold liens on the property which could compliacte the process. It is reccommended that homeowners contact an experienced professional or real estate attorney before proceeding with a Deed in Lieu of Foreclosure.

The cash for keys strategy to avoid foreclosure has been around for years, but has recently hit the spotlight with the exponential rise in foreclosures. Typically, this strategy is used when a landlord defaults on his mortgage and there are renters still in the home. Under a cash for keys arrangement, the bank makes a deal with the occupants of a home that is about to fall into foreclosure and gives the renters 30 days to leave the home. In return, the bank gives the renters a cash settlement to vacate the property in good condition. Checks can average several thousand dollars. As the market increasingly worsens and lenders have become more desperate, the checks have become larger.

The cash for keys strategy is a huge help for the bank as it saves them thousands of dollars in eviction and clean up costs, and allows them to put the house on the market quickly. It is also often a boost for the occupants or renters of the home who are unable to get their deposit back from the landlord that has fallen behind on the mortgage payments.

There are times when the occupants of the house are the borrowers as opposed to renters. In this circumstance, if the lender is offering cash for keys, it's likely that the foreclosure process has already been completed and the bank is only looking to get the occupants out quickly and peacefully. A similar, peaceful parting of ways called deed in lieu of foreclosure can be initiated by the borrower to avoid the finality of the foreclosure process.

Cash for keys is meant to help the occupants, but there are times when the bank takes it too far. There have been reports of threats being made if the occupants do not agree to go along with the plan. If you have been approached with a cash for keys offer, it is reccommended that you contact an experienced professional or real estate attorney before accepting.