Buying a home might be less difficult than it used to be, but paying for one still comes with challenges. If you lose your job or face an emergency, missing mortgage payments can have serious consequences. Your lender then has the right to repossess your home through foreclosure, a complex legal process; if the sale doesn’t cover the entire balance owed, you will still owe the lender the remainder due.
Lenders may be open to working something out if you foresee future financial challenges. Your Los Angeles foreclosure attorney can assist as well. Since foreclosure can lead to substantial losses and a major hit to your credit score, you may want to consider these following alternatives:
Be open about your financial situation and your lender may arrange a repayment plan. In some instances, you may qualify for a temporary reduction or suspension of payments. A sudden reduction of income or increase in living expenses may qualify you for such action if you can provide the lender with proof you can meet the new requirements.
Refinancing your debt can lower the interest rate and perhaps extend the term of your loan. By reducing the monthly payments, it can help you catch up. The lender will look at your financial situation and whether you can afford the new plan. You can apply for a loan modification before you default on mortgage payments.
Sell Your Property
You can avoid foreclosure with a pre-foreclosure sale. The amount you get for the home is typically less than what you need to pay off the loan. A mortgage can also be transferred to another party if the contract says it is assumable (it will have a due-on-sale clause). Federal law prohibits such a transaction in certain situations, such as transfers to a parent to child or those resulting from divorce or separation. If the mortgage is in default, the new owner will have to cure the default to prevent foreclosure.
If your lender is willing to do so, they can set up a claim with the FHA-insurance fund, which can result in a one-time payment to cover your deficiency. Your mortgage will then be current. To qualify for this option, you must prove you have the financial backing to start making full payments on your loan.
Deed-in-Lieu of Foreclosure
If in default, you can also voluntarily hand your property over to the lender. Although you won’t retain ownership, this can preserve your credit rating somewhat, especially if you’ve unsuccessfully tried to sell your house and don’t qualify for other options.
Right of Redemption
A foreclosure can be stopped by redeeming your home. The redemption period applies to borrowers in foreclosure. While some states provide for a redemption period after a foreclosure sale, all states allow property to be redeemed beforehand. To do so, you must request a payoff quote from the loan servicer to find out how much is required to satisfy your debt. Redemption is possible any time between when you receive a promissory note and the foreclosure sale.
Contact Oaktree Law
Oaktree Law provides foreclosure services in Los Angeles and Orange County. If you are facing foreclosure or concerned about paying your mortgage loan, we can provide you with advice on how to avoid losing your home. Our Orange County foreclosure attorney can review your situation and recommend numerous options that can prevent foreclosure and avoid a more difficult financial situation. Please call us today or request a free evaluation online.