Not Keeping Your Home
The following summarizes the ways to avoid foreclosure but not keep the home. Even though you may not be able to keep your home, it is important to work with your servicer during this process. Walking away from your home without consulting with your servicer may result in a foreclosure reported in your credit file, tax consequences, and/or a deficiency balance for loan proceeds not recovered in a foreclosure sale. If keeping your home is not a viable option, your loan servicer may have alternatives available to absolve the mortgage and home.
• Sell the property – This is the best option if you cannot afford the mortgage payment and if there is equity in the home (the value is more than the amount owed). Other considerations when deciding to sell the home include the condition of the home and how much time you have.
• Assumption - If allowed by the loan documents and if you find another borrower willing and qualified to take over your mortgage, they may assume your mortgage. The new borrower must meet the lender’s criteria.
• Short Sale – If the market value is less than total amount owed, a short sale allows the borrower to sell their home and use the proceeds to pay the mortgage even though the proceeds will not be sufficient to pay off the outstanding balance. The investor and mortgage insurer must agree to this option.
• Deed-In-Lieu of Foreclosure – The borrower transfers the property to the servicer if the home cannot be sold at market value. This option requires that the property be listed for a specified period of time, generally 90 days. There may be tax consequences.
• BANKRUPTCY- A homeowner filing a Chapter 7 Bankruptcy will forfeit property and eliminate any potential deficiency. Chapter 13 Bankruptcy provides the homeowner the ability to cure the default over an extended period of time (30-60 months) while maintaining the current monthly payment. However, this does not change the terms of the mortgage, and since the homeowner cannot afford the current regular monthly payment, they may not be able to afford the current payment plus the delinquency amount.
Sometimes foreclosure is the only option for a borrower. If so, you will want to work closely with a certified housing counselor who can devise a plan of action on how to appropriately transition into alternative housing, liquidate unsecured debts, budget and save for future moving costs, and obtain tips on how to reestablish your credit rating.
Important Notice: Renown Real Estate Services is not associated with the government, and our service is not approved by the government or your lender. Even if you accept this offer and use our service, your lender may not agree to change your loan. If you stop paying your mortgage, you could lose your home and damage your credit rating.Renown Real Estate Services and licensee Richard Beach are not engaged in the practice of law, legal advice, or tax advice. Renown Real Estate Services and licensee Richard Beach do not attest to the accuracy of this information and assume no responsibility for the actions of the recipients. The pre-ceeding is for informational purposes only and the recipient is urged to seek professional legal and tax counsel.
