If you're a Crofton or Anne Arundel County resident and behind in your mortgage payments, the #1 piece of advice I have for you is this: OPEN YOUR MAIL!
Avoiding notices from your lender is one of the surest ways to find yourself in foreclosure, because you may overlook proposals from your lender for alternative solutions to your delinquent payments or notices of pending action against you, which you should be aware of.
Please don't "give up" and assume that foreclosure is inevitable if your payments have been late recently or the amount of your loan balance is greater than today's market value.
If you're 30 days or more behind in your mortgage payment on your Anne Arundel County home, CONTACT YOUR LENDER with your account number in hand and ask about these possible ways of avoiding foreclosure:
1. PAY THE DELINQUENCY
Your lender may or may not accept payment in certified funds for any delinquency, including legal fees, to avoid foreclosure. But you should ASK. (According to the VA website, VA loan holders are required to accept payment of the full delinquency and reinstate the loan.)
2. FORBEARANCE/REPAYMENT SCHEDULE
The most common way of resolving a loan default may be to work out a plan with your lender which will let you repay part of the delinquency each month, along with your regular monthly installment. If you are temporarily unable to meet your monthly mortgage obligation, your holder may extend forbearance by agreeing to suspend payments or accept partial payments for a limited period of time until you will be able to begin a repayment schedule.
Many State and local governments, as well as private charitable organizations, have programs which will pay all or part of your mortgage obligation for a fixed period of time.
4. RE-AMORTIZATION
If your loan is re-amortized, the delinquency is added to the loan balance in order to bring your payments up to date. This increases your loan amount and will also increase your monthly payments unless you also request and receive an extension of your loan.
5. PRIVATE SALE
Put your home on the market for sale at market value, or less for a faster sale. Be sure your property is listed on your local MLS, at competitive terms that will encourage agents to show and sell your home. Listing at a rock-bottom commission won't help if your home doesn't sell because no one shows it! Remember PEOPLE sell homes.
If you do not believe you will be able to bring your loan current, a private sale of the property will enable you to meet your obligations and receive any equity you may have. Most private sales net the seller more than the amount owed on the loan.
If the buyer is assuming your current VA loan, be sure to read this brochure to find out how to obtain a release of liability.
6. SHORT SALE / VA COMPROMISE
If your property cannot be sold for an amount equal to or greater than you owe on the loan, it is considered a "short sale". Your lender may or may not agree to accept less than you owe and forgive the difference, but each lender will have its own policies regarding this. You should contact the lender before you put the property on the market to find out what the policy is, and the procedure for getting their approval. Be sure to tell your real estate agent that this will be a short sale, and authorize him/her to disclose that in the listing.
If you have a VA loan, and your balance is greater than or equal to what you owe on the loan, you may be eligible for a VA Compromise, in which VA pays a "compromise claim" for the difference to help you complete the short sale. You must contact VA to obtain prior approval for a sale with a compromise claim. (loans made before 1989 or loans made after 1989).
Note: Some mortgage companies are authorized by VA to approve a sale with a compromise claim.
There was good news last month in the form of Tax Relief for Short Sales - You no longer have to pay federal income tax on the amount forgiven.
7. DEED IN LIEU OF FORECLOSURE:
If a private sale does not appear realistic, the mortgage company may consider accepting a deed in lieu of foreclosure. If there are no liens on the property, and the mortgage company agrees to accept a deed, you will have to sign legal papers transferring ownership to the mortgage company.
If you have a VA loan, VA often pays the mortgage company a claim for the difference between the value of the property and the amount you owe on the loan. If a deed is accepted, you may be released from all further liability or you may be asked to agree to repay the Government all or part of the amount paid to the mortgage company. Request the VA form for Deed in Lieu of Foreclosure.
Please note that your mortgage company will usually report "voluntary foreclosure" on your credit report instead of "foreclosure." Lenders will see this when you apply for credit in the future.
8. REFUNDING
If you have a VA loan, do you know that VA has the discretionary authority to buy it from the holder and take over the servicing? This is called "refunding". VA considers this alternative for every loan before foreclosure is completed. If you have the ability to make mortgage payments on your VA loan, or will have the ability in the near future, but your loan holder has decided it cannot extend further forbearance or a repayment plan, you may qualify for refunding.
If your VA loan is in default and you are not able to repay the loan according to the lender's terms, you should download the following forms: VA Form 20-5655, 26-6807a, and Refunding Information List. Submit these forms to the VA Regional office in Roanoke, which services Maryland VA loans, along with a letter stating the reason for default and that you would like to be considered for VA refunding to VA. If refunding is appropriate, VA will notify you.
BEWARE OF ANYONE WHO PROMISES A QUICK AND EASY SOLUTION.
There is no such thing! Resolving your situation will probably require a LOT of follow-up BY YOU with your lender, possibly including hours "on hold" and being transferred from one department to another, without getting any answers. You just have to hang in there until you reach that one person who seems to care AND knows how to help you. If you don't find that person on your first call, try again!
In addition to reading your mail and talking with your lender about possible solutions, another thing you can do to address this situation is to work with a REALTOR who "gets" this market and has experience helping people in default on their mortgages. At least find out what your home is worth in today's market, the estimated time to sell and close, what your net proceeds from sale will be, if any, and explore your options of where to live if you do sell your home or lose it in foreclosure.
No amount of magic will erase this situation, but you can minimize the unpleasantness by facing it head on, whether you live in Crofton or anywhere in Anne Arundel County, Maryland.
RELATED LINKS:
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www.HopeNow.com (Or call 1-888-995-4673 for a HUD-approved counselor affiliated with the non-profit Homeownership Now Foundation. This is a voluntary accord entered into by some lenders, loan servicers, and mortgage investors to help borrowers who face default when their sub-prime adjustable rate mortgage resets at a higher rate. The most prominent part of the initiative is an interest rate freeze that would give borrowers facing an interest rate hike the time to work out a solution.)
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