Joe Hafner with our new Tuesday Morning Coffee segment Inside Distressed Properties. Today Joe is going to give a brief overview of the options that you can use to avoid foreclosure. 

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Transcript

JOE:  Hi, Joe Hafner here with another episode of Inside Distressed Properties.  Today, we’re going to be talking about what you do when you’ve fallen behind on your mortgage or you’re about to fall behind on your mortgage.  If you owe more than your house is worth and in you’re in a position where you just can’t afford to sell the house as a normal sale, there are some options you have available to you.  The first one is a loan modification.

 

If you’re behind on your mortgage or about to be behind on your mortgage, a loan modification is where the bank works with you to either lower your interest rate, lower your payment, take the late fees and the penalties that have been added in, maybe forgive some, maybe add some to the end of the mortgage and allow you to continue on paying.  A loan modification is a great option when you are behind on your mortgage because of a temporary loss of income. 

 

You’ve maybe lost a job and gotten a new one that pays well enough that you can afford the mortgage if you don’t have the big pile of back payments that are due and penalties.  Or perhaps you had an illness or a disability where you were out for a while and you’ve come back.  A loan modification is a good option in that situation.  The next one is a short sale.  A short sale is when you owe more than the house is worth and you sell the house and the bank agrees to take less than what is owed on the mortgage in order to release the mortgage from the house.

 

In a short sale, the bank is looking for a couple of things.  First off, they want to make sure that the house is worth less than what’s owed.  Second off, they want to make sure there’s what is called a “legitimate hardship.”  A legitimate hardship is a death in the family, an illness that has caused a loss of income, lowering of income or lowering of employment.  You’ve gone from full time to part time.  You’ve had your pay cut.

 

Another one is if you’ve been forced to move from the area for business purposes.  Your job has taken you out of the area.  Those are all legitimate hardships.  If you have a legitimate hardship and you owe more on the house than what it’s worth, odds are the bank is going to be willing to look at a short sale.  Another option is what’s called a deed in lieu of foreclosure.  A deed in lieu of foreclosure is when you say to the bank, “Hey listen, we’ve been unable to sell the home.  We owe more than it’s worth.  A foreclosure is eminent if we don’t do something.  Will you take the house back instead of having to go through the foreclosure process?”

 

And a deed in lieu of foreclosure, usually if a short sale doesn’t work, you go to the deed in lieu option and that allows you to get out from the house without having an actual foreclosure on your record.  Of course, a lot of people take the final option, which is doing nothing.  And if you do nothing, you’ve made a choice and a foreclosure is eventually going to happen.  Now a lot of the banks are postponing foreclosures and letting people stay in the house while they’re behind.  In most of these scenarios, you’ll be able to stay in the house until you’re able to do a sale, you’re able to do a deed in lieu.

 

The key is taking control of the situation because the longer you wait, the fewer the options you have.  So if you’re in a situation where you’re behind on your mortgage and you don’t know what to do, give us a call.  The number’s here at the bottom on the screen.  And we will sit down.  I’ll talk to you and figure out your situation and help you figure out what’s going to be the best move for you and your family.  Once again, thanks for watching our show and we’ll see you again next time.