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Mortgage Modification & Short Sales
Is your mortgage under pressure? There are alternatives to foreclosure |
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Are you like many homeowners who are finding it impossible to pay the mortgage, or who see a problem looming with a substantial increase in repayments as the mortgage rate re-sets? You may have borrowed unwisely, perhaps you have just been unlucky with reduced income through losing
a job, health problems, or other reasons.
You may be quite prepared to sell your home to solve the problem, but can't do so because the home's value is less than the amount you owe. You are "upside down" on your mortgage. Most homeowners in this position think that foreclosure is inevitable, and the only possible outcome. That's not necessarily so . . . There are several reasons why you should try to avoid foreclosure if at all possible . . . not only does a foreclosure do long term and substantial damage to your credit, but a foreclosure on your credit history can affect present and future employment, and security clearances even at lower levels.
If you are in this position and facing foreclosure, don't assume that there is no alternative. The sooner you act, the greater the chance of working out a way forward. There are two main options to pursue, but please note that they both require that you are genuinely suffering hardship and do not have the means to rectify the situation from your own resources.
Approach your mortgage lender to see if they are able to modify your mortgage terms, by refinancing at lower interest rates or providing other temporary or longer-term relief. Don't assume they won't listen - lenders are increasingly aware of the benefits of helping to prevent foreclosure if they see the opportunity. Of course, the proposal must be viable.
A short sale is the sale of a home where the net proceeds are insufficient to clear the mortgage(s), and the owner is unable to make up the shortfall from his own resources. Provided the owner is able to demonstrate appropriate hardship, the mortgage lender approves the sale contract and allows the sale to go through. Mortgage lenders are becoming very co-operative towards short sales, because if the only alternative is foreclosure, there are several reasons why they will lose less and benefit more from an agreed short sale. While a short sale will affect your credit, the impact is significantly less and for a shorter period than a foreclosure, and should not affect employment or security clearance issues.
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The government also announced a scheme earlier in 2009 which, in certain cases, will compel lenders to modify mortgages, and in doing so provided a framework which other lenders may wish to work with.
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