Avoid Foreclosure Through Loan Modification, Short Sale

By Joanie Miller | December 11, 2008

Foreclosure. Yeah, you probably despise the word as much as the next person. However, the word can be both positive and negative. It’s all based on which side you’re on. For a homeowner, foreclosure is the last word they want to hear. On the flip, if you’re a buyer, well, you want to see every single one.

Today, we’re going to be talking to the homeowner. The person that may have lost their job, got divorced, or has too much debt that they have to liquidize their assets. In reality, most people don’t know that there is a possibility that they can avoid foreclosure. There are two main ways: the first is a loan modification, the second, a short sale.

Avoid Foreclosure With A Loan Modification.

With foreclosures on the rise, financial institutions are willing to work with homeowners to reduce their monthly payments to avoid the foreclosure process entirely. What? A bank willing to help? Say it ain’t so! All kidding aside, banks aren’t in the business to become property owners. It’s actually illegal. In addition, the foreclosure process can cost the bank enormous attorneys fees.

If you decide to try and contact your local financial institution, have a couple of documents ready. It will only speed the process.

A “hardship” letter – This letter explains to the bank why you’re in the predicament you’re in and why you are financially unable to pay the current monthly installments. This letter is also required on a short sale.
Pay Stubs, W-2′s, Income Tax Returns, Bank Statements
Utility Statements
Grocery Receipts
Any other expenses and/or payments you make.

If you want to stay in your current home this is the rout you need to try. There are banks that are required to modify loans to assist homeowners. One of those is Bank of America. Bank of America recently settled a lawsuit by agreeing to modify 400,000 loans after the state of Illinoi and California sued for deceptive mortgage practices (and won).

Avoid Foreclosure With A Short Sale

You may have heard bad things when it comes to short sales. But, when facing foreclosure, it is another option. If you’re unfamiliar with the term, learn about short sales. In simple terms, a lender agrees to accept a discounted payoff of a loan. For instance, if you bought your home for $300,000, a short sale would be you selling the home for $200,000 and not having to pay the rest of the $100,000 (that you still owe) to the bank.

If you’re thinking about doing a short sale, please contact us.

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