Home Foreclosure

Are you facing difficulty in making payments toward your mortgage? Have your lenders called you up? Are you getting tensed on these default consequences? Then you should have some basic knowledge on home foreclosure and its features.

Facts about Foreclosures

If you are missing your mortgage monthly payments, your lenders may take help of some legal means. Home Foreclosures are those legal ways, using which, lenders usually take repossession of the home. If there is an order of foreclosure, you need to move out of your home.

If your home equity is less than the outstanding amount you owe to the lender, a deficiency judgment could also be pursued. In this case, along with your house, you will also owe an additional amount to the HUD.

How to avoid foreclosure

If you don’t want your dwelling place to be regarded as a “home on foreclosure”, you should follow the steps mentioned below:

1.Contact your lenders: On several defaults (non-payments), the lenders usually file a notice of default to protect their interests. However, you should not let that happen, and contact them before they file any such notice. As soon as you have some problems in making the payments, you should call up or send written mails and contact your lenders to let them know about your financial condition. If there is any change in your monthly income and expenses, due to divorce, job loss, unexpected death, and such other reasons, you should also mention that.

2.Contact a counseling agency: You should contact a HUD approved housing counseling agency. They will analyze your current financial condition and may offer you credit counseling free of cost.

3.Some other alternatives: In order to stop foreclosure, you may think of some alternatives, as follows:

Special forbearance Deed-in-lieu of foreclosure Partial claim Mortgage modification Pre-foreclosure sale Short sale

Is Bankruptcy a Good Way to Avoid Foreclosure?

According to the new bankruptcy law of 2005, you have to attend a credit counseling session that normally lasts for 180 days, before you can file for bankruptcy. If your foreclosure date lies within this 180 days period, then it may not stop your house from getting foreclosed.

If you find that you are in no way able to make payments towards your debts you may file for bankruptcy. When you are filing for bankruptcy, you are having one advantage, and that is automatic stay. It will help delaying the foreclosure process. However, if your lender files for relief from the automatic stay, the foreclosure process will immediately get started. If only you can afford to pay off your debts, then foreclosure could be avoided. If you are totally unable to make payments, bankruptcy can only defer the foreclosure process, but cannot stop it.

Can Bankruptcy or Foreclosure Affect credit score?

Whether you are filing for bankruptcy or facing foreclosure, your credit score will receive a hard blow. If you file for a Chapter 13 bankruptcy will stay on your credit report for 7 years, whereas, a Chapter 7 bankruptcy, it will stay on your credit report for 10 years. In the same way, if you face foreclosure, it will stay on your credit report for 7 years.

Prior to making any hasty decision, you should consult a professional lawyer to choose any option from bankruptcy and foreclosure, and take the correct steps to pay off your debts.

Ways to Avoid Foreclosure

Prior to know about foreclosure, you should know if there is any way to avoid it. If you are unable to repay your monthly mortgage and have already missed two or more payments, you can take advantage of short refinance loan and save your house from getting foreclosed.

Short Refinance Loan – What it means?

This has been introduced by the government in the year 2008. To save homeowners like you from getting your houses foreclosed, the HOPE for Homeowners (H4H) program was started by the government on October 1, 2008 and it is coming to an end on September 30, 2011. All the new mortgages issued within this period of time are insured by the Federal Housing Administration (FHA). The maximum mortgage amount you will get is $ 550,440. Maximum loan to value on this loan is 105% of your home appraisal value.

For getting this facility, you need to negotiate with your lender and ask him to refinance your existing loan. The new loan amount will be less than your outstanding loan balance and the shorted amount will be forgiven by your lender. You will have lower interest rate, better loan terms and conditions and you can convert your adjustable-rate mortgage to a fixed rate one.

Documents needed for short refinance

To get a short refinance loan, you need to furnish the following documents:

Salary stubs of last 30 days W-2s of 2006-2007 Tax returns of 2006-2007 Copy of homeowner’s insurance policy Drivers’ license Copy of Social Security Card and ID Bank statements of last 2 months 1st and 2nd current Mortgage statements Original 1st and 2nd mortgage note (what you signed at the time of closing) Most recent statements of any investment accounts (IRA, CD, pension, etc) Eligibility criteria for short refinancing

To be eligible to get a short refinance, you need to fulfill the following requirements:

You should have a low FICO score, not less than 500 Your net income is not more than $1,000,000 You should be delinquent on your mortgage Your mortgage payment must be more than 31% of your gross income You should not have any savings or reserves If there is any co-borrower, he/she will not live in your home Your current mortgage is an adjustable-rate one The mortgage property should be your primary residence Your lender should have agreed to a principal write down You have not gone bankrupt within last 2 years Your mortgage must have originated before January, 2008