If you talk to your lender as soon as you realize you are in financial trouble, you may be able to avoid foreclosure on your Downey home. There are several options that homeowners can take advantage of depending on their financial situation. The biggest mistake that many homeowners make is ignoring notices and letters from their lenders until it is too late. You may also want to contact a HUD housing counselor or a California foreclosure defense attorney for assistance as well.
Options to Stop Foreclosure
1. Refinance your existing mortgage. You need equity in order to refinance. The new loan pays off the existing loan. Generally when you refinance, it is because you are lowering your interest rate at least 2% to make your monthly mortgage payment more affordable. Borrowers with variable rate mortgages benefit the most from refinancing.
2. Mortgage Modification. Your lender will modify your current mortgage by extending the loan term, reducing the interest rate and reducing the principal in some instances. Mortgage modifications are used when the homeowner is upside down on their mortgage and owe more than the home is worth.
3. Deed in Lieu of Foreclosure. Signing over the deed and returning the home to the lender. Walking away owing nothing. Not all lenders accept deeds in lieu of foreclosure, you have to check with your lender.
4. Selling Your Home. Paying off your mortgage with the sale proceeds. You can then either rent or downscale to a smaller home that is more affordable for you.
5. Short Sale. Obtaining your lender’s approval to sell the home for less than you owe the lender and walking away owing nothing. There is no guarantee that a short sale will get approved, but it is worth trying to for if you are going to lose the home anyway. Going through a foreclosure is more costly and stressful and ruins your credit for seven years. With a short sale, you may be able to negotiate with the lender that the short sale proceeds satisfy the loan balance and have them report the sale as paid in full or satisfied.
6. Loan Rescission. You have three years from the time you discover predatory loan practices in which to file a legal action to rescind the loan. Having a real estate foreclosure defense attorney do a forensic loan audit to see if your lender committed any predatory loan practices or violated any lending laws is a good idea. Most people don’t actually rescind their loans, but the fact that the lender committed a violation is enough leverage to bargain and negotiate with for them to obtain a favorable loan modification or a short sale approved. Lenders face fines and penalties for these types of violations and would rather find a solution that helps you avoid foreclosure.
9. Reinstatement. Paying your default fees and costs and having the loan reinstated.
10. As a last resort you may need to file bankruptcy. Bankruptcy stops foreclosure. Talk to your bankruptcy attorney or foreclosure defense attorney to find out if you can keep your home.
Homeowners facing foreclosure in California do have options. If you want to keep your home, then a mortgage modification is probably the best option if you are upside down on your mortgage. If you cannot afford to make your reduced modification or refinance payments, then a short sale for upside down homeowners or selling your home if you have equity are the better options. Doing nothing will not make your problems go way. Be proactive and contact your lender to find a mutually agreeable solution for you to avoid foreclosure.
