sell your home at a discount to a friend, family member, or a real estate agent. You may not get $300,000 for your home, but maybe an offer of $225,000. In this situation, you could pay off the $100,000 balance, the $25,000 that is owed, and keep the difference.”
Remember that once you begin discussing foreclosure, everything is a negotiation. The lender will be acting in its own best interest. You may have to take on another job, or ask friends and family for a loan to keep your home.
If you come across a lender unwilling to set up a repayment plan, it may be best to take your losses by selling your home so that you can preserve your credit rating and purchase another, less expensive home down the line.
NEGOTIATING FORECLOSURE SOLUTIONS
Facing foreclosure is a serious situation, but if you remain calm and take action quickly, you can negotiate a settlement that will allow you to keep your home. J. David Washington, president and CEO of Forbes Capital Group, says education is the most powerful tool homeowners have. “Many in our community don’t understand how you go into foreclosure and don’t understand the banking terms that are important to prevent foreclosure.”
However you find yourself facing foreclosure, Washington says there are terms you should know that may help you negotiate a favorable outcome with your lender:
[Mortgage modification] The structure of a loan is changed to allow the arrearages to be attached to the end of the mortgage.
[Forbearance] Mortgage payments are suspended for a short period, with the understanding that an agreed upon solution to making up missed payments will go into effect after.
[Loan repayment plan] The lender agrees to allow the borrower to pay the current mortgage payments plus a certain percent of the missed mortgage payments. These simultaneous payments continue until the previously missed mortgage payments are paid off.
[Lump-sum payment] The lender may agree to give the borrower a specified amount of time to raise a lump-sum payment to cover missed payments.
[Bankruptcy] This is the least preferred option and should be considered a last resort because of the long-range negative effect it will have on the borrower’s ability to secure credit in the future. Due to recent changes in bankruptcy laws, filing is more rigorous and more expensive. It is more advantageous to negotiate a repayment agreement with the lender yourself rather than have one handed down through the courts.
“With Chapter 13 bankruptcy, you are allowed to pay off debts over time. Under certain circumstances you will pay your secured debt in full and may be able to pay unsecured debt for as little as pennies on the dollar,” says William C. Johnson Jr., a Washington, D.C., attorney specializing in consumer protection and civil rights.” Filing may allow you to keep your home and pay off missed mortgage payments and interest over time.
Johnson also explains that it is important for homeowners to understand that when they save their home from foreclosure through the courts, there will be other fees