Nine Alternatives to Foreclosure in San Diego Real Estate are often talked about in random ways, and I wanted to write this to clear up some of the misconceptions, to get as much relevant information to the consumer as possible.
With the current state of the economy one thing is clear... there is disagreement as to where we are headed from intelligent people on both sides of the argument. Reports across the internet state that foreclosures are down for the seventh straight months nationwide, so that should be good news.... right?
I guess it depends on whether you've heard of the "shadow inventory" that banks are holding onto at the moment.... and why... and the current turn toward short sales as a means for lenders to work out their loans with struggling homeowners.
Regardless, the Nine Alternatives to Foreclosure in San Diego are worth knowing about... and certainly worth understanding if you or a loved one find themselves in need of help.
1. Forbearance – The first of the nine alternatives to foreclosure in San Diego, the "Forebearance" option happens when a lender will negotiate with a homeowner to pay less than their full mortgage payment... for a limited time period, or maybe paying nothing at all during the “forbearance period”. Lenders will often consider a forbearance period when a homeowner proves that funds from some kind of windfall, be it a tax refund or bonus or some other source, is due to arrive at a certain time in the near future to bring the mortgage payments up to date.
2. Reinstatement – This form of foreclosure relief occurs when a homeowner pays a lender the total amount they are behind in a lump sum payment, by a specified date in the future. It happens that reinstatement is often combined with the forbearance agreement.
3. The Repayment plan – is an agreement with a lender that gives a homeowner/borrower a fixed amount of time to repay - or to catch up - the amount they are behind on their mortgage. Lenders do this when they combine the homeowner/borrower's delinquent payments and their regular monthly mortgage payments. At the close of a repayment period, the homeowner will have paid back the delinquent mortgage and be current - that is, up to date.
4. The Loan Modification – Of the Nine Alternatives to Foreclosure in San Diego, the loan modification is the most widely known term, is certainly the most talked about. Loan Modification is a written agreement between a lender and homeowner that changes the terms of the original note, permanently. Lenders will enter into this agreement to make payments more affordable to a qualified candidate. Loan modifications may include:
a. Adding missed payments to the existing payments
b. Changing an adjustable rate mortgage into a fixed rate
c. Extending the number of years the homeowner/borrower has to repay the loan - that is, extending the loan term
5. Refinance – As in the case of the Loan Modification, a lender will refinance a loan after requiring income, credit, and equity to support a new mortgage agreement or deed of trust. If at present the borrower's income does not support paying the mortgage, it is difficult, if not impossible to convince lenders to offer loans with more reasonable interest rates and terms. Today's stricter and stricter lending standards and qualifying terms for loan applications, make refinance in today’s market less and less likely.
6. Short Refinance – The Short refinance is one of the latest trends lenders are using to work with delinquent homeowners/borrowers to avoid the costs and damage of foreclosure. In a case where a short refinance was warranted a lender would agree to refinance the home with a reduction in the principle balance. Sometimes lenders will reduce interest rates on a new loan. Borrowers would need proof of a “hardship” and would have to fully and completely document their ability to pay the new mortgage.
7. Bankruptcy – Of the Nine Alternatives to Foreclosure in San Diego, the Bankruptcy is the most misunderstood in it's scope and consequences. A good disclaimer time - I am not a tax attorney nor do I offer advice on legal matters. Seeking appropriate legal counsel for all decisions of this magnitude is advised. With that said, currently on the rise, bankruptcies might allow a homeowner to reorganize and even discharge some debts and keep the home. However, if a homeowner doesn't make house payments after bankruptcy, foreclosure will occur.
8. Short Sale – If the home is sold and the proceeds are less than the amount owed to the bank, the lender may agree to a short sale payoff or “short sale”, and write off the portion of the home owners debt owed to the bank - the portion that exceeds the proceeds from the sale.
9. Deed-in-lieu of Foreclosure: If a homeowner cannot sell their home in a reasonable amount of time, in certain cases a bank may allow a transfer of title, the actual deed of the property to the lender.
Those are the Nine Alternatives to Foreclosure in San Diego.
If you need more answers, more explanations or have questions, call me directly at (619) 928-9829 or send me an email at vincemceveety@gmail.com
More information is available at www.vincemceveety.com
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