Stop Foreclosure in Kansas City | Grassland Properties

Your Options in Foreclosure

posted by Seth Macchi on Monday, June 22, 2009

You just received a Notice of Default, delivered kindly by our cities finest. Now what? If you're anything like me, you probably just want to throw away this letter along with the latest pile of car ads, lawn mowing specials and credit card approval letters. But this is one action that requires a swift response on your part. The faster you contact the bank at this point, the more options will be available to you.


But what are you actually trying to accomplish when talking to the bank? Your mortgage is like a weight on your back, your house is worth less than when you bought it and now you're behind on your payments. What more is there to understand? Lots. Let's talk about your options...


Refinance: This is the holy grail of financial rescue to most people. Comments like "We're just gonna roll up all our debt and refinance our house and pay it all off". As if the bank is waiting to give "mini bailouts" to anyone with a door, window and roof. But that's just not the case.
This is a great option if you have equity in your house and you have good credit. If that's you, research this. It could work for you. But what about the rest of us? What now?...


Loan Modification: I would say that now, more than ever before, are banks willing to create a new payment structure to existing loans. If you can pay something a little less than your original payments, this is a great option. But don't expect a huge reduction in monthly payments. Also, this is only a solution if your situation that caused you to miss payments (divorce, loss of job, etc) has been resolved and you are able to resume a normal payment schedule.


Forbearance / Repayment Plan: Again, this is a great option if your hardship has been resolved. Here's how it works:
You would begin making payments again, however, the bank would also tack on the back payments and fees to your monthly payments until payed off. And they don't want you taking your time on this, you will have to pay it back in about a year or so.
So lets say you are behind $6000 and your monthly payments are normally $1000. The bank now wants you to repay the $6000 of missed payments and fees in 12 months. So your new monthly payment would be $1000 plus $500 ($6000 divided by 12 months) for a grand total of $1500 per month.
Now ask yourself, " Can I resume normal payments plus an extra $500?" If the answer is yes, then great. This could be your option.


Partial Claim: The bottom line on this option is that HUD will give you a one-time interest free loan to pay off your back payments and fees to bring your account current. They tack this amount to the back of your loan and it becomes a "2nd" mortgage on the property. Could be the option for you. You'll never know unless you ask...


Bankruptcy: You will probably be advised to use one of two bankruptcy options:
Chapter 13-which is a "re-organization" or repayment of sorts. This temporarily stops foreclosure
Chapter 7-which is a liquidation of assets. This temporarily stops foreclosure as well.
We advise you speak directly to a bankruptcy attorney on the matter as we are not attorneys. Just seek to understand what the result will be to you...for years to come.

Deed in Lieu: The bank will often say, "Hey, mister homeowner, how about we bypass all of this legal nonsence in a foreclosure and you just hand over the keys to the property." This option is a voluntary foreclosure with all of the baggage that goes along with it. This really works out great...for the bank, but still show as a "foreclosure" on your credit report. We feel that there are better options out there.


Sell: Yes, my friend, you still have the option to sell. "But what if my house isn't worth what I owe? I don't have any cash to bring to closing!"...We hear you and would like you to look at Short Sales.
A short sale is when a lender will take less than what is owed on a property as a full payoff on what is owed. This means that, if you can find a person experienced in negotiating a short sale with banks, they can buy it from you for less than your loan.
You will not make any money on the deal, but what you get is the ability to get out from under a loan that has become a weight to you and your family. You also get to move on and apply for a home loan much faster than if you had been foreclosed on and, in many cases, the bank will not seek a deficiency judgment against you for the loss that they took on your defaulted loan. If your house is sold at Foreclosure Auction the chances are much greater that the bank will pursue you for a deficiency judgment.



We always advise people to start their quest for options at the HUD website. It is rich with content and resources for people in pre-foreclosure. Start there.


Please understand that we are not a counseling agency nor do we ever pretend to be lawyers (ok, maybe sometimes we like to imagine what it would be like to make a lawyers salary) but we deal with people facing foreclosure all the time and would like to help other avoid the mistakes that we have seen.


The most important aspect in this whole process is TIME. respond quickly to the bank. This will actually buy you the TIME you need to make the right decision for you and your family.

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