Foreclosure Options For Home Owners - Kansas Metro Area
Many distressed homeowners who are behind on their mortgage payments in the Kansas City area are not aware of what foreclosure options may be available to them. Very few of these distressed home owners are aware of the foreclosure options that the federal government has put in place as possible solutions to their mortgage issues.
In 2007, the federal government enacted H.R. 3648, the Mortgage Foregiveness Debt Relief Act, to help provide options to address the increasing number of foreclosures by removing the tax burden resulting from debt reduced through mortgage restructuring, as well as mortgage debt forgiven in connection with homeowners who conducted short sales. Recently, H.R. 3648 has been extended through 2012 under The Emergency Economic Stabilization Act, H.R. 1424. The Obama Administration has continued to pursue options to the foreclosure problem with the Financial Stability Plan that helps homeowners and lenders find solutions and options to foreclosure.
Foreclosure options typically available for distressed home owners that are not able to come current on their loans can be:
- Forbearance Agreement
- Loan modification
- Short Sale
- Deed-in-lieu of foreclosure
I encourage home owners who are behind on their payments to proactively communicate and explore foreclosure options with their lender(s) versus avoiding the lender (s) all together.
Home owners behind on their mortgage payments need to carefully consider the pro's and con's of each foreclosure option, which are briefly summarized below:
Foreclosure Option 1: Forbearance Agreement
When working with your lender under a forbearance agreement, your lender may allow you to reduce or suspend payments for a short period of time. At the end of the forbearance period, you will begin making regular payments plus an additional amount of the past due payments each month until you are caught up.
PRO: You are able to remain in your home and avoid foreclosure. A temporary reduced or suspended payment provides time needed to save money, pay off other bills, find employment or additional employment, or recover from injury or illness.
CON: At the end of the forbearance period, your payment will be higher due to the past due amounts owed. Your mortgage payments could be 20% - 25% higher for a period of 1-year or more.
Foreclosure Option 2: Loan Modification
If you can make payments on your loan, but don't have enough money to bring your account current, talk with your lender and see if they are able to change the terms of your original loan to absorb your delinquent payments and make the payments more affordable. Your loan could be permanently changed by adding the missed payments to the back end of the existing loan balance, lowering the interest rate or making an adjustable rate fixed, or extending the number of years you have to repay your loan.
PRO: You are able to remain in your home and avoid foreclosure.
CON: Because of additional debt such as credit cards, car payments, medical bills, and student loans, most people do not qualify for a loan modification. If you purchased your home with little or no money down or your home has depreciated in value at a rate at or near the national average, you may not quality.
If you cannot bring your loan current, afford to make payments moving forward, or are unable to sell the property for the full amount of the loan, your lender may accept less than the amount owed as full payment.
PRO: Under the terms of a short sale, your lender may forgive your mortgage debt in its entirety according to the terms outlined in The Mortgage Debt Relief Act of 2007. Fannie Mae has announced a reduced mandatory waiting period to establish credit history to 2 years after the completion of a short sale. This mandatory waiting period after a short sale is lower than the required 5-7 years following a foreclosure.
CON: You must sell your home.
Foreclosure Option 4: Deed-in-lieu of foreclosure
If you are unable to bring your loan current or sell your home in a reasonable amount of time, your lender may agree to have you voluntarily transfer the deed to the property to them to help avoid the impact of a foreclosure on your credit rating.
PRO: By voluntarily transferring the deed, you save your lender tens-of-thousands of dollars in foreclosure proceedings. If you are willing to do this, Fannie Mae has reduced the mandatory waiting period to establish credit history to a minimum of 4 years. This mandatory waiting period after a deed-in-lieu of foreclosure is lower than the required 5-7 years following a foreclosure.
CON: Although a deed-in-lieu of foreclosure may have less impact than an actual foreclosure on your ability to establish homeownership in the future, if you are going to cooperate with your lender and take a proactive approach, a short sale is generally the better option.
One of our goals at Team Gipple is help home owners avoid foreclosure and take advantage of the programs that have been instituted to help them. We realize that the only way that we accomplish this goal is to educate distressed homeowners who are behind on the mortgages and actively seeking foreclosure options and walk them through the process of working with their lender, and proactively remedying the mortgage problem.
If you or someone you know is facing a hardship in their lives and risk losing their home to foreclosure contact me today at 816-892-3550 or via e-mail at Gipple@KW.com. You may also find additional information at my website, http://markgipple.program3648.com
Time is of the essence when exploring your options and avoid foreclosure so contact me today!
Keller Williams Realty
Certified Short Sale Specialist