Attention sellers in North San Diego County: If you live in Escondido, San Marcos, Vista, Oceanside and beyond and you are having trouble making ends meet, it is important to face facts and know your options.
In the last few months, I have met many folks who might be facing foreclosure who feel scared to open their mail, to contact their lender, and to face the reality of their situation. If you are having trouble making ends meet and making those mortgage payments, know that you have options. BUT… you have many more options available to you if you do not wait until the eleventh hour.
The foreclosure process in California can take anywhere from 3 months, 3 weeks to one year or more. Here are the options that may be available to you. (Disclaimer: I am not a lawyer or an accountant, nor do I play one on t.v. So please consult with the appropriate professional before making a decision about the option that is best for you.)
- Do Nothing. If a homeowner does nothing, the most likely result will be loss of the home through foreclosure auction. Loan applications generally ask if the applicant has ever been foreclosed upon. Credit reports also disclose this damaging information for several years.
- Payoff/Refinance. Pay off the entire loan amount plus any default amount and fees. This is usually accomplished through a refinance of the debt. New debt is at a normally higher interest rate and there may be a prepayment penalty because of the recent default. This option is only viable if there is equity in the home.
- Reinstatement. Pay the entire default amount plus interest, attorney fees, late fees, taxes, missed payments and fees.
- Loan Modification. Utilize the existing mortgage company to refinance the debt or extend the terms of the loan. This may allow the homeowner to catch up at a more affordable level. To qualify, you must prove to the lender you have fixed the problem that caused the late payment. There is no need to pay anyone to help you with a loan modification.
- Forbearance. Lender arranges a repayment plan based on the homeowner’s financial situation. The lender may even be able to provide a temporary payment reduction or suspension of payments. Information will be required from the lender to show that you are able to meet the new payment plan requirements.
- Partial Claim. The lender makes a 2nd loan to include back payments, costs, and fees.
- Deed in Lieu of Foreclosure. Give the property back to the bank instead of the bank foreclosing. Banks generally require the home be well-maintained, all mortgage payment and taxes must be current. Most loan applications ask if this has ever happened.
- Service Members Civil Relief Act (SCRA). The SCRA is a bill that was signed into law (Public Law 108-189) on December 19, 2003. The law provides certain protection to military personnel that are in foreclosure in specific situations. The law also provides service members other protections.
- Bankruptcy. This option can liquidate debt and/or allow more time. Always consult with a qualified bankruptcy attorney.
- Chapter 7 (Liquidation) To completely settle personal debt.
- Chapter 13 (Wage Earner Plan) Payments are made toward a plan to pay off debts in 3-5 years.
- Chapter 11 (Business Reorganization) A business debt solution.
- Sale. If the property has equity, the homeowner may sell the home without lender approval through a conventional home sale. In this case, the homeowner will get cash from the sale. On the other hand, a short sale, also known as a short pay resolution or pre-foreclosure sale, can be negotiated with your lender by a qualified Real Estate Professional. In this case, the lender agrees to accept less than the debt owed.
If you are unable to consult with an attorney or an accountant, then you should consider contacting our office. We can provide you with a list of HUD-approved counselors who can best advise you about important steps to take in your particular situations.
