Loan Modification / Mortgage Modification
Burrowers experiencing a financial hardship, such as a reduction in family income or increase in expenses, may be able to request a lender to reduce mortgage payment by a reducing either the interest rate on the loan, the principal balance of the loan, the term of the loan, or any combination of these.
Reinstatement of the Loan
Burrowers may request a lender to reinstate the loan, or pay the amount owed to the bank (arrearage) in a lump-sum payment, and continue with their regular mortgage payments. Reinstating the loan sounds simple, but is often unattainable, especially when the lender adds other fees and costs to the amounts owed.
Burrowers may request a lender for a repayment plan on missed payments. Typically, the burrower makes their current mortgage payment in addition to a scheduled payment to help the burrower become current on their missed payments.
Burrowers may request a lender for a forbearance plan, or an agreement that allows a borrower to either suspend making monthly payments for a specified period of time. If agreed to by all the parties, the lender may agree to delay foreclosure or other legal action in return for the burrower’s promise to pay the arrearage or full unpaid principal balance by a specific date.
Deed-in-Lieu of Foreclosure
Burrowers may request a lender for a Deed-in-Lieu of foreclosure, or “gives” their property to the bank, instead of going through the foreclosure process wherein the bank files a court action that results in a judgment and judicial sale of the home. The lender’s approval is required for this option. Lenders usually require that the homeowner first make reasonable efforts to sell the property and that there not be any other issues relating to the legal title of the property, such as other liens or encumbrances. Having attorney representation is essential to negotiate with the lender so the lender waives their right to sue you for any deficiency.
Burrowers may request a lender for a short sale when the mortgage debt is more than the value of the property. When a homeowner owes more than their property is worth, this is commonly referred as to “being underwater.” Burrowers may request that the lender allow them to sell their property and accept less than the amount owed. Lenders require an extensive application, which is often a tedious, complicated and bureaucratic process where one mistake can cause the rejection of the entire application.
Selling the Property
Selling the property might be an option when the homeowner’s mortgage debt is less than the value of property.
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