The COVID-19 pandemic has ravaged homeowners and business owners alike and has placed many in fear of losing their homes or operating spaces. Throughout the country, the delinquency rate currently stands at 6.3 percent, nearly double the 3.8 percent rate the country saw just one year ago. However, experts are saying that the pandemic has acted as a stress test for the economy and for homeowners. The Great Recession of 2008, it seems, greatly prepared both homeowners and banks, and it is expected the country will emerge from the pandemic far better than it did during the recession.
Still, that brings little hope to homeowners and business owners who are currently facing foreclosure. If you are in fear of losing your home or business, you may be considering refinancing your mortgage. Now is a great time to do it, as interest rates are extremely low. However, you likely have a lot of questions about the process. Below are some of the most frequently asked questions about refinancing to avoid foreclosure, and the answers to them.
Are Foreclosure and Loan Default the Same Thing?
Many people confuse the terms foreclosure and loan default and believe they are the same thing. They are not. Loan default is a breach of your mortgage contract. Once you miss even one mortgage payment, you are in loan default. However, it is unlikely that you would face foreclosure at that point. Typically, a lender will wait until you have missed two or three mortgage payments before starting the foreclosure process.
A loan default will lead to a foreclosure if you do not bring the loan into good standing. Foreclosure is the process of the lender taking control of your home, selling it, and evicting any occupants within it.
Can I Refinance if I am in Foreclosure?
If the lender has already started foreclosure proceedings, you cannot refinance your mortgage. To refinance your mortgage is to renegotiate the terms of your loan with your lender. You can change the interest rate, the principle, the length of the loan, and more. Regardless of what you change in your mortgage loan, you must still negotiate with the lender, which requires a bit of cooperation on their part. If they have started foreclosure proceedings, they are no longer willing to negotiate and will continue on with the foreclosure instead.
What is Pre-Foreclosure?
Florida is a judicial foreclosure state. That means that in order to foreclose on a home, the lender must file a lawsuit in the court. They must also argue their case and the judge must grant them a foreclosure. In Florida, the pre-foreclosure process begins on the first day you miss a loan payment and ends once the lender files their lawsuit. During the pre-foreclosure stage, you will likely receive notice about a potential foreclosure. It is important to work with the servicer or lender at this stage to learn more about your options and how to prevent the foreclosure from happening.
What is a Loan Modification?
Consumers often confuse the terms ‘loan modification’ and ‘refinancing’ and, sometimes, the two are used interchangeably. While both a loan modification and refinancing your mortgage hold many of the same benefits, they do have some differences. A loan modification will change certain terms of your original loan. Through a modification, you can lower your interest rate, extend the term of the loan, and even have some of your principal forgiven.
A loan modification may or may not affect your credit score, depending on the circumstances surrounding it. If a disaster has impacted your ability to repay the loan, you may find the servicer is more lenient to working out a loan modification for you. The servicer must agree to a loan modification and if you can show financial hardship, it will greatly increase your chances of approval.
To qualify for a loan modification, you should speak with a foreclosure defense lawyer who can help you through the process. The application process varies depending on the reason for requesting the modification. In most cases though, you should be prepared to submit income documentation, your regular expenses, information about your assets, and any information surrounding your financial hardship.
What Is Financial Hardship?
Financial hardship is the inability to repay your loans and other debts when they are due. Some common examples of financial hardship include:
- Increased medical expenses due to illness or injury
- Long-term or permanent disability
The pandemic has thrown many people into financial hardship, particularly if they or a family member has contracted the virus, or if they have lost their job or had to shutter their business.
What is Refinancing?
Refinancing brings many of the same benefits as a loan modification. However, instead of slightly changing certain terms, you are essentially replacing your existing mortgage with a new loan. This can make it more affordable to pay your mortgage and perhaps even access some of the equity in your home. Qualifying for refinancing largely depends on the equity within your home. You generally do not have to show financial hardship to qualify.
What Is a Short Refinance?
A short refinance works very similarly to a short sale but the difference is that you can stay in your home. During a short refinance, the lender will agree to refinance the home for its current value and will forgive any portion of the balance that is over that amount. A short refinance will still affect your credit since you are not paying off the full balance of the initial loan. However, it will not hurt your credit as much as a foreclosure and you may not have to wait as long to get another mortgage.
Do I Need a Florida Foreclosure Defense Lawyer?
Any time you are having trouble making your mortgage payments, you should speak with a Fort Lauderdale foreclosure defense lawyer. The foreclosure process can happen quickly, and an attorney can advise you of your options and help you stay in your home. If you are facing foreclosure, do not hesitate to contact our experienced attorneys at Loan Lawyers. After reviewing your case free of charge, we will advise on the best solution and help you throughout the entire process. Call us today at (954) 807-1361 or contact us online to schedule a meeting with one of our lawyers today.
Loan Lawyers has helped over 5,000 South Florida homeowners and consumers with their debt problems, we have saved over 2,000 homes from foreclosure, eliminated more than $100,000,000 in mortgage principal and consumer debt, and have recovered over $10,000,000 on behalf of our clients due to bank, loan servicer, and debt collector violations. Contact us for a free consultation to see how we may be able to help you.