Foreclosure, Loan Modification & Short Sales

How to Prevent Foreclosure

If you're behind on your mortgage, it's possible to work with your lender to prevent foreclosure. It's also possible to keep your home when you can catch up on the mortgage payment to avoid a tax lien or home foreclosure. Below, we'll take a look at some of the options available to you if you're facing foreclosure:

  • Deed in Lieu - a deed in lieu is used in some cases to transfer the deed back to the lender in order to avoid the time and expense of foreclosure proceedings. Generally, the borrowers must have used their best efforts to sell the property at fair market value and be unable to afford the mortgage payment or make up the balance of what is owed.

  • Short Sale - a short sale is an agreement with a lender to allow a property to be sold for less than what is owed on the mortgage loan and release the borrower from a lien on the property. In a short sale agreement, it's important for the borrower to get the lender to agree not to seek a deficiency judgment for the balance owed.

  • Loan Modification - this is an agreement with the lender to refinance the mortgage payment or amount owed in order to avoid a bank foreclosure proceeding, trustee's sale, or non-judicial foreclosure.

  • Redemption - redemption is a right of the borrower to redeem the property before it's sold under a power of sale at a trustee's sale by paying the amount owed and costs.

Making Home Affordable (MHA) Program

This is a program created under the Obama administration to provide relief from foreclosures to struggling homeowners. Eligibility requirements vary by program and may not be available if your mortgage is owned or guaranteed by Fannie Mae or Freddie Mac. Some types of relief offered includes:

  • Home Affordable Modification Program (HAMP) - this is a government program designed to help homeowners get a loan modification.

  • Home Affordable Refinance Program (HARP) - this program is designed to help underwater borrowers refinance to a lower mortgage rate when they owe more than the home is worth.

  • Principal Reduction Alternative (PRA) - this program assists homeowners in getting the principal amount owed on the home reduced when they have insufficient income to pay on an underwater property.

Top Questions about Foreclosure, Loan Modification & Short Sales

  • Does a short sale stop a foreclosure?

    A short sale can prevent a foreclosure, but it depends on the timing and circumstances. If you successfully complete a short sale before the foreclosure process advances too far, you can sell your home and potentially settle your debt. However, it's crucial to communicate with your lender and understand their policies regarding short sales. Consulting resources like US Legal Forms can provide guidance on navigating this process effectively.

  • Do banks usually approve short sales?

    While approval rates vary, many banks are willing to approve short sales when they see a clear benefit, such as avoiding foreclosure costs. They evaluate the financial situation of the homeowner and weigh their options carefully. If you approach the bank with a well-documented proposal, you increase your chances of approval. Utilizing US Legal Forms can simplify the preparation of your case.

  • What comes first, short sale or foreclosure?

    Typically, a short sale occurs before foreclosure. When homeowners face financial difficulties, they often try to sell their property for less than what is owed on the mortgage, making it a short sale. This approach can help avoid the longer, more damaging process of foreclosure. Opting for a short sale can provide a faster resolution and less impact on your credit, compared to proceeding straight to foreclosure.

Tips for Preparing Foreclosure, Loan Modification & Short Sales

  1. Find the correct template. Choose the document sample that suits your state. US Legal Forms provides more than 85 thousand state-specific templates that you can download and submit. In addition, the platform provides you with an informative description of type of real estate contract and agreement to help you select the proper template.
  2. Specify parties and property. Start entering the names of both parties. You don't have to repeat these names more in the document. It is enough to determine them once and replace them with the terms Purchaser and Seller. Identify the address and legal information of the property in your Foreclosure, Loan Modification & Short Sales.
  3. State the terms and deadlines. The cost doesn't appear out of the blue. Determine how much your property may be worth and choose just how much you would like to get for it. Also, browse through the amount of earnest money and the time frame when you want to receive the rest. It is important to set down-to-earth due dates in the sales contract.
  4. Sign to enforce Foreclosure, Loan Modification & Short Sales. You together with another party must sign the contract so it will be valid. Do it in person or use a legally-binding eSignature. But to close the deal as a whole, you need to search for other real estate templates. Prevent wasting time on searching and select a ready-made package of documents with US Legal Forms.