11 Options for Wilmington, NC area Homeowners to Avoid Foreclosure
1. Reinstatement
To reinstate a mortgage, the homeowner has to pay all missed payments, late fees and legal fees up to the date that the loan is reinstated, even up to the redemption period that extends beyond the date of the bank sale.
2. Forbearance or Re-Payment Plan
The lender allows the homeowner to pay the missed amount over a period of time, or they place the missed payments on the end of the scheduled loan amortization.
3. Sell the Property
If the homeowner has equity in their property, they can sell it and use the funds from their equity to prevent the foreclosure.
4. Rent the Property
In some cases a homeowner facing foreclosure will have payments low enough to allow them to rent the property and keep up the mortgage payments.
5. Short-Refi
This process involves the refinance of a home with a reduction in the principal balance and often the interest rate as well.
6. Mortgage Modification
A loan modification is very similar to a lower interest refinance where the lender lowers the interest rate on the existing loan in order to lower the payments and/or the lender lowering the principal balance on the loan.
7. Deed-in-Lieu of Foreclosure
Sometimes referred to as a friendly foreclosure since the homeowner essentially gives the deed back to the bank.
8. Refinance
If the homeowner has sufficient equity, income, their credit has not been too badly damaged, and the property in question can appraise for the refinance amount, they may be able to refinance.
9. Bankruptcy
Bankruptcy may stop a foreclosure and allow homeowners to reorganize their debt and keep their properties.
10. Service members Civil Relief Act (SCRA)
This law provides certain protection to military personnel that are in foreclosure in specific situations.
11. Short Sale
When a homeowner owes more on a property than it is currently worth, and one of the above solutions does not apply to their situation, there is the option of pursuing a short sale.
Benefits of a Short Sale
A short sale can be an excellent solution for homeowners who need to sell, and who owe more on their homes than they are worth. In the past, it was rare for a bank or lender to accept a short sale. Today, however, due to overwhelming market changes, banks and lenders have become much more negotiable when it comes to these transactions. Recent changes in corporate and government policies have also improved the chances of getting a short sale approved.
The best news about a successful short sale is your credit report does not show a foreclosure. It will show late payments and a “satisfied” debt. Even though late payments and satisfied debt are viewed negatively, the effect is approximately 50 basis points for two years and it could even be shorter if you are proactive in improving your credit score. Compare a short sale to a foreclosure where you will have a basis point drop of approximately 300 points. Plus a foreclosure stamped on your credit report for the next 10 years. A foreclosure is the most damaging report of all. Creditors know that everyone needs a place to live and if they abandoned their home how quickly would they walk away from a car payment, student loan, medical loan or credit card payment?
For a private confidential conversation about your options please contact the Mike Bain team at mike@bainrealty.com, (910)367-1671.