Your Options When Facing Foreclosure

By St. Louis Foreclosure Lawyer Tobias Licker

Being faced with foreclosure is a situation no one wants to be faced with.  If you know your options and act quickly you may be able to save your home.  The following are some of the options you have to avert losing your home.

  1. Reinstatement – Reinstating your loan means that you make up the deficiency plus interest payments.  Most lenders would rather work with you to become current rather than foreclose.  If you cannot make your payments already, then most likely this is not a viable option for you.  Looking to a Chapter 13 bankruptcy may be the most likely option.  We will discuss this below.
  2. Negotiate Workout– In this instance you would work with a HUD (Housing and Urban Development) Counselor to get:
    1. Forbearance – relief from making monthly payments for a period of time.
    2. Plan – a plan to make up the late payments.
    3. Interest rate reduction.
    4. Reduction in loan balance.

If you are under a time crunch this option may not be applicable.

  1. Refinance – This would decrease your interest rate on your mortgage, but is difficult to complete in this economy.  First, you must have equity in your home.  Second, the home values in your area must be on an upswing, which is not the trend in most areas.  This would be an option if you were not underwater on your mortgage.
  2. Reverse Mortgage – A reverse mortgage utilizes the equity in your home to get a loan.  The money does not need to be paid back as long as you live in the house, but will need to be paid if you sell the house.  The catch is you need equity in your home and must be over the age of 62 to qualify.
  3. Walk Away – In this option you lose your house, but in the months it takes for the foreclosure process complete you make no mortgage payments.  You essentially build a little savings that enables you to find other housing options.  The downside is that the mortgage company may be able to sue for the difference between what you owe on the loan and the price at which they sell the home.
  4. Short Sale – In this option you work with the lender to sell the property for less than the loan is worth.
  5. Hand Over without Foreclosure – This is also referred to as deed in lieu of foreclosure.  You give the property to the lender.  When doing this you will want to get in writing an assurance that the lender will not come after you for the delinquency.
  6. Chapter 13 Bankruptcy – In a chapter 13 bankruptcies a plan is made in which you make regular monthly payments to pay off the arrears, or amount you are delinquent.  This is a simplified explanation; please click here for a more in depth information about chapter 13.
  7. Chapter 7 bankruptcy – This is a good option if you are current or close to current on your mortgage, but are finding it hard to keep up on future payments.  In a chapter 7 you essentially wipe out your unsecured debts (credit card, medical bills, personal loans) allowing you to free up more income to pay your mortgage.  This is not a good option if you have built up lots of equity in your home.  If the equity is not exemptible you would be required to pay that amount to the trustee or even face having to sell your home to pay off your unsecured creditors.  For more information on chapter 7 bankruptcies please click here.

In deciding your next move you must take into account your current situation and where you want to be in the future.  Not all of these options are applicable or practical for every situation.   It is best to talk to a professional who can help you understand the pros and cons.  Watch out for predatory companies that look to take advantage of your situation and promise far reaching results.  If it sound too good to be true, it probably is.  Foreclosure is not a desirable situation to be in, it can happen to anyone and will take work to get through.

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