Reducing the effects of losing a home is a daunting, thought to every homeowner. After attempts at a loan modification or refinancing fail, feelings of hopelessness, despair, and surrender are much more pervasive than thoughts attempting to achieve some degree of damage control. However, there are alternatives to assist homeowners which allow for loss mitigation in the event of a looming foreclosure that include:
- Short sale
- Deed-in-lieu of foreclosure (DIL)
- Chapter 13 bankruptcy
A short sale is a viable alternative when a home is worth less than the total principal balance of a mortgage loan. A short sale occurs when a lender agrees to release a borrower from a mortgage in exchange for the proceeds from the sale of the home. There is no statutory right to a short sale, and such a sale must be approved by a mortgage lender.
A deed-in-lieu-of-foreclosure may be used if a lender agrees to accept a deed to the property “in lieu of foreclosing” in return for title to the home. A lender may require a homeowner to vacate the property in return for a cash payment to the homeowner. Like a short sale or loan modification, a lender must approve a deed-in-lieu-of-foreclosure.
Lenders are not prohibited from pursuing a deficiency judgment following a short sale or DIL. The deficiency is limited to the difference between the outstanding debt and the fair market value of the property if the property. A lender has one year to pursue a deficiency judgment after accepting a deed-in-lieu-of-foreclosure.
To avoid a deficiency judgment when utilizing a short sale or deed-lieu-of-foreclosure, an agreement must be negotiated that expressly states the waiver of a lender’s right to the deficiency. The qualified and experienced attorneys at Loan Lawyers may help any borrower negotiate an agreement which waives the lender’s right to a deficiency judgment.
A loan forbearance of a loan by a lender is an agreement by the lender to not pursue foreclosure for a set, pre-established period of time and reduces monthly mortgage payments. A forbearance must include a repayment plan to repay any mortgage payment reduction. More importantly, to qualify for a forbearance, a borrower must have experienced some hardship from a temporary illness or injury that prevents work and consequently the ability to earn income.
A homeowner may file a Chapter 13 bankruptcy to reorganize debts and liabilities, which may include a plan to delay foreclosure until a better solution is found, like a loan refinancing or modification. Chapter 13 debtors may reorganize mortgage debt by paying mortgage loan arrearages in a Chapter 13 plan. However, Chapter 13 debtors may not modify the terms of a mortgage loan in a Chapter 13 bankruptcy case.
At Loan Lawyers, our Fort Lauderdale bankruptcy attorneys help individuals with problems related to the payment of their debts. If you are facing foreclosure and require assistance with a loan modification or other form of loss mitigation, contact our office today by calling 954-523-HELP (4357).