Loan Modification
Options
If early in the process, you should contact your lender or loan servicer as soon as you miss a payment. You may be able to as for a loan modification but you will still need to qualify. Other than reinstating you loan, modification is the best viable solution if you can qualify. This is a short term solution and only 4-5% of distressed homeowners will qualify and those who do, about 90% will still end up in foreclosure.
Talk to your lender ASAP!
Loan Forbearance
This option involves a temporary suspension or reduction of your monthly mortgage payments for a predetermined amount of time between you and your mortgage provider. By providing you some time to recover and bring your mortgage current, this alternative enables you to address your immediate financial issues. You may be required to pay all back payments at once.
Short Sale
A short sale in real estate is a request by the homeowner to sell a property for less than what is owed on the mortgage.
A short sale typically indicates a financially distressed homeowner who has to sell the house quickly to avoid having the lender foreclose on it.
A realtor specializing in Short Sales may be able to clear debt and liens that may allow you to qualify for a mortgage in 2-3 years. Will impact your credit but not as drastic as other posible outcomes.
The lender receives the entire sum of money from a short sale. The lender then has two options: either forgiving the remaining debt or seeking a deficiency judgment that calls on the former homeowner to make up the shortfall in full or in part.
Homeowner must owe more than the house is worth and prove financial difficulties.
It is treated by income by the IRS so there are tax implications.
Deed In Lieu Of Foreclosure
This is a drastic measure that will be on your credit 4-7 years and is typically only employed as a last resort after the property owner has exhausted all other possibilities (such a loan modification or a short sale) and has come to terms with the possibility that they will lose their house.
The homeowner will be freed from the debt even if they will have to give up their home and move. The property owner may be able to reduce their embarrassment and keep their predicament more private because this process is often carried out with less public attention than a foreclosure.
You can owe federal income tax on any forgiven shortfall if your lender accepts a transfer in lieu of foreclosure or a short sale. The lender will issue a Form 1099-C to the IRS , which discloses the forgiven debt to you as income.
Foreclosure is the legal process that lenders use to recoup the deed of the property after the homeowner as defaulted on the loan. This is used as last resort by the lender and has severe impact on the credit report for minimum of 7 years. Homeowner will be unable to buy another home for minimum of 7 years or even rent a home.
Foreclosure
Some provisions of the bankruptcy legislation may appear to be lifelines to homeowners trying to avoid the traumatic process of foreclosure. Bankruptcy is frequently considered as a last resort for persons who are deeply in debt and unable to pay it back. While Chapter 7 bankruptcy is meant to give people a method to sell their assets to pay off debt, Chapter 13 bankruptcy is intended to give you a way to maintain your property for the long term through a repayment plan.
Bankruptcy can remain on the credit report up to 10 years and may prevent a person from getting a mortgage or renting a home. It is a complicated and lengthy process as is suggested you consult a qualified attorney for legal advice and be aware of the severe financial consequences.
Sell With A Realtor
A real estate professional will help you sell the home traditionally and guide you with all the necessary processes to clear the debt.
Traditionally this process takes 35-60 days and may not provide sufficient time before the auction.
The realtor may be able to convince the trustee to provide more time to facilitate the sale.