Facing Foreclosure or Just Upside Down in My Home...what are my options?

We have helped many home owners avoid foreclosure or get out of upside down mortgages. This is what we have learned. If you are facing foreclosure there are four questions you need to be asking or researching.

There is a ton of information on the Internet, in terms of buying another home a short sale is like to allow you to buy another home in two to three years and a foreclosure is like to allow you to buy a house after five  years.  Someone once compared a short sale to a fender bender and a foreclosure to totally destroying a car.  The effects will likely change as time goes on and the lending rules change.

http://www.videocreditscore.com/foreclosure-impact-my-credit-score/

You will be issued a 1099C statement on the difference and will have to treat it as phantom income. However, the new Mortgage Forgiveness Debt Relief Act of 2007 provides a way to for you to exclude the income. Go to this link for more details from the IRS...

http://www.irs.gov/individuals/article/0,,id=179414,00.html

A couple of different things can happen. The lender may agree to short pay of and a full release of any underlying debt. They may ask that you sign a promissory note for the difference. They may ask that you pay part of the difference. They may reserve the right to come after you for the difference.  The rules of the law depend on what kind of a loan you have.  Typically in California the lender is limited to taking the home back.  However, in certain circumstances they could go after the borrower for the difference.

Deed in Lieu of Foreclosure: You basically give title back to the bank.

Forbearance: Temporarily freezing the monthly payment due on your mortgage.

Loan Modification: The bank changes the terms of the loan.  Recently bank's found that over 50% of loans that were modified end up in foreclosure within 6 months.  Based on this banks are only doing loan modifications in cases where they can be 100% sure that the loan will not end up in foreclosure again.  The bottom line is that it is getting harder to get a loan modification.

Here is something we found on the internet that is relevant here:

The best way to go is to ensure people actually qualify for a loan and have enough income to pay off the loan at some point. Modifications cannot save everyone, especially the option arms because they were stated, sold on minimum payment with NO hope of ever making the fully amortized rate. Buy what you can afford is the best way to avoid foreclosure.

Also, many of these people will need a law firm to submit the modifications because they've participated in the fraud on the over embellished stated income and some prosecutors are going after borrowers while banks have six years or more from the point of discovery to go after a fraud claim and now you've just handed them the smoking gun; unless you have the attorney/client privilege over the submission.

This is from Attorney James Burns http://www.jamesgburns.com

Short Sale: You sell the home at a market price and the bank agrees to the sale with conditions.

Foreclosure: You stop making the your mortgage payments and the bank auctions off your home.

Refinance: No explanation needed.

Reinstate Your Loan: Pay all your back mortgage payments, plus late fees and legal fees.

We hope this was helpful for you if you are facing the difficult and stressful situation of a foreclosure or are upside down (owe more then it is worth) in your home.

"We are never to busy for your Short Sale referrals"

We are not an Attorney or Tax Professional. Any information we provide is based on our experience when representing clients in Short Sale Real Estate transactions. If you need Legal or Tax advice please seek the appropriate licensed professional. We make no guarantees or promises of the outcome of any Foreclosure or Short Sale. All information provided by us to any and all parties is to the best of our knowledge and is deemed reliable but not guaranteed.