Black and Buono Blog

So many borrowers have reached out for help navigating the bewildering and frustrating experience of trying to save their homes, but sadly, many call when it is too late and thousands more never call for help.

If you are struggling to pay the mortgage, here are some options that may be right for you. Alternatively, contact Black and Buono and we can help you determine the best solution for your situation.

1. Contact Your Lender

A lot of people lose homes to foreclosure out of sheer denial. Unfortunately, ignoring a foreclosure notice will not make the problem go away. In fact, the longer you wait, the more you reduce the options available. That’s why as soon as you run into trouble paying the mortgage, contact your lender to see if you can work something out.

According to the U.S. Consumer Financial Protection Bureau, you should be prepared to discuss why you can’t pay the mortgage, if the situation is temporary and details about your income. You can also contact the Consumer Financial Protection Bureau to talk to a housing counselor about your options.

2. Refinance

Refinancing a home can be an option, but only for buyers who aren’t already stretched to the max.

Keep in mind, however, that refinancing often includes some pretty hefty fees (for breaking your existing mortgage contract), and may also cost you more in interest over time. For those who are already overextended on the loan, refinancing may not be an option at all.

3. Apply for a Loan Modification

A loan modification is when a homeowner works with a lender to change the terms of the mortgage loan. This could mean a temporary or permanent change to the mortgage rate, term and/or monthly payment. This option is similar to refinancing, but it’s only open to those who can prove they’re facing great financial hardship — and who are willing to advocate for themselves to a lender that is probably receiving many other similar requests. Often a bankruptcy attorney can help.

This option is part of the Making Home Affordable Plan, which was designed to help offset some of the dishonest lending practices that left many homeowners in the lurch. However, it may take many months for borrowers to be approved for this program, so it’s hardly a quick fix.
 
4. Get Rid of Your House

Sometimes the best way to avoid foreclosure is to sell your home. Unfortunately, falling real estate values have taken that option away from many people whose mortgages are bigger than the market value of the property. If that’s the case for you, there are two key options:

Short Sale: This is when the bank agrees to let a homeowner sell the home for less than they owe on the mortgage. It’s up to the lender to decide whether allowing a short sale is in their best interest. This option may not be as damaging to the borrower’s credit as a foreclosure, but that’s only true if the creditor doesn’t report the debt reduction to credit reporting agencies.

Deed in Lieu of Foreclosure: In some cases, a lender will allow a struggling homeowner to sign their deed over to the bank instead of suffering a foreclosure. In this case, the borrower essentially turns the home over to the lender, who can then sell the home to recoup what they’re owed.

Note that both deed in lieu of foreclosure and short sale can have tax implications.

5. Declare Bankruptcy

Bankruptcy will destroy your credit and make it hard for you to borrow any money from anyone for many years. Depending on what type of job you hold, a personal bankruptcy can even be a bad career move. That said, in a Chapter 13 bankruptcy it is possible for owners to keep their homes, but only if they have a solid plan to repay at least some of their debts. Unlike Chapter 7 bankruptcy, Chapter 13 requires that borrowers make an attempt to repay some of what they owe before the slate is wiped clean.

6. Walk Away

During the height of the foreclosure crisis, lenders faced a phenomenon they came to refer to as “jingle mail.” Owners who could no longer make their mortgage payments and had little or no equity in the property would send their keys to the lender and walk away from their homes. For those who are upside down in their mortgage and who’ve been unable to work something out with the lender, allowing a foreclosure to happen may be the only choice.

In recent years, many borrowers in default have managed to stay in their homes for months or even years without making payments. That’s because completing a foreclosure takes more than a year, on average, in the U.S. Plus, if borrowers choose to fight their eviction in court, they may be able to stay even longer while the case works its way through the system. Some people will argue that this just isn’t fair, while others feel it’s the only choice they have.

For assistance in a short sale or for bankruptcy help, contact Black and Buono.

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