Should You Sign Your Home Over to the Lender
When you cannot – or have not – made any payments on your mortgage, and then your lender will serve you with a foreclosure notice. This will impact negatively on your credit score so should be avoided if possible.
Signing your home over to the lender is one option you could take to prevent foreclosure. It is called a Deed in Lieu. In other words, you sign the title of your home over to the lender instead of paying the mortgage. You must face facts; if you cannot pay the mortgage, then you will lose your home, so why not give it to the lender with a deed in lieu? Doing this will relieve you of all the debt that is associated with the loan.
It will prevent foreclosure and that bad credit score – although there may be some negative impact. But it will not be as much as it would in the case of a formal foreclosure. Before he agrees to a deed in lieu, your lender will need to know that there are no other liens on the property. He doesn‟t want to be responsible for any other debts as well as losing what he is owed on the property.
Because he wants to know that everything has been done to get the most money, he will usually want to see the property on the market for at least three months before he accepts the deed in lieu. He may also require an appraisal of the interior to make sure it is in good condition. There is a downside.
If the house does not sell for the amount owed on it, the lender may file a deficiency judgment against you to get the rest of the debt. While this is a possibility, most lenders don‟t take up the option because they know that in reality, it‟s not likely to get them any more money.
If you couldn‟t pay before, you won‟t be able to pay any more now. And it will cost them in legal fees. However, if you do have many other assets, it is a possibility. Both parties must enter a deed in lieu voluntarily and neither is legally obliged to go ahead with it until the final offer is settled. Usually, if the amount owed is more than the fair market value of the property, the lender will not agree to this procedure.
If this condition is met, then the lender may still require the borrower to apply for the deed in lieu in writing, stating that it has been entered into voluntarily. This will protect him from any later claim that he pressured the borrower into it.
How Bankruptcy May Stop a Foreclosure
Avoiding foreclosure is of prime importance as this will save your credit score from damage and may even save your home, but how can bankruptcy help? Bankruptcy is not good news and should only be considered as a last resort. It can help to prevent foreclosure only if the dates are right. That is, you can file for bankruptcy under Chapter 13 because once done, any action by creditors must be stopped.
This will give you a little bit of time that you can use to bring those payments up to date. If you know there is no hope of doing that, then filing for bankruptcy won‟t accomplish anything except perhaps allow you more time before being evicted. It is imperative to get all the help you can before filing for bankruptcy.
If the lender knows you are getting debt counseling from a HUD professional, they may be willing to wait before starting the foreclosure proceedings. This is always a better option than filing for bankruptcy. There are two types of bankruptcy for private borrowers; Chapter 7 and Chapter 13. If you file under a Chapter 7 plan, then you will lose everything, including any assets you have apart from the house/property.
All will be sold to satisfy the debt. But by using a Chapter 13 plan, you can still make regular payments on the debt and also you are given the chance to make good the payments you‟ve missed. This will, in effect, save your property, but you still must be in a position to pay the monthly payments.
However, the dates are important, because it takes time for both foreclosure and bankruptcy to be established. If the foreclosure is well advanced, the bankruptcy date may be after it, in which case, nothing will be gained. In fact you may end up in a worse state; you could lose your home and yet still be required to make the payments.
This is due to a law enacted in 2005 requiring 180 days of debt counseling before the bankruptcy can take effect. But the same law does not prevent the lender from making a move to collect his payments, so he can still proceed with the foreclosure.
This extra time means that your bankruptcy date will often fall after the foreclosure auction date. Rather than filing for bankruptcy, the better plan would be to work with the creditor for repayments you can afford, or refinancing of some kind. This is termed loss mitigation and is a better option by far than bankruptcy.
Are There Organizations That Can Help You
In a word – YES! There are many organizations that can help you resolve your difficulties with debt and help you to keep your house. Even if you don‟t yet have much difficulty, but think you may in the future, it is wise to start seeking help.
Your circumstances can change. You may know there is a health problem that requires surgery further down the track. Then You may suddenly have a child – or twins – that you had not factored into the debt equation. You may wreck your car – no one expects that to happen, yet it does happen on a regular basis.
There are many things that can happen to affect your ability to make those payments. Debt counseling is one way of getting through the tough times with your home and credit score still intact. You can actually get free counseling from HUD specialists and some charitable organizations, so don‟t make the mistake of paying for it.
If it‟s really too late for counseling, then there are still organizations that can help you. Look online or in the telephone directory for Foreclosure Assistance Centers near to you. They will help you to analyze your situation clearly and advise you what steps you need to take either during or to prevent foreclosure.
They can tell you about all the options that you may not even be aware of. Better still, they can explain the ramifications of those options in a way that is easy to understand. Assistance Centers or counselors can usually help you to prioritize your debts and show you how to cut back on unnecessary spending.
And they will be able to help you prepare all the necessary information that your lender will require from you when you contact him. When you face foreclosure you become vulnerable to rescue scams, so be on the lookout for these unscrupulous people. They may charge a large up-front fee and abscond without helping you.
They can get you to sign over the title of your house to them on the pretext that you are giving them permission to act on your behalf. Also, They can also lead you to think it is possible to rent your home from them and eventually buy it back in that way. Don‟t be fooled by these scam artists.
Get that free or low-cost help from a professional you know you can trust. Even talking to your lender is better than getting supposed help from some scam artist. What they charge you a big fee for doing you can do yourself without too much hassle. 13. What Information Will You Need to Provide When you contact a reputable debt counselor you will certainly need to provide many pertinent details.
This information must be up to date and true, or you cannot expect their advice to be what is right for you. For a start, you‟ll need to provide them with photocopies of your loan documents. Only by looking at these, will the counselor be able to see what steps can be taken to prevent foreclosure. It‟s no good just telling them the details.
You can get things mixed up, or forget, especially when you are feeling stressed. They will also need to know what other debts you have. Never try to minimize these, or skip over them. If you are to get out of trouble, you need to be quite open and honest.
Money must be repaid or there will be trouble – and trouble is what you are trying to avoid, right? So you will need to provide invoices for your bills and also a statement of your bank accounts. A list of assets, both cash assets, investment assets such as stocks and bonds, and physical assets such as car, boat or other property will also be necessary.
Your current budget – if you have one – will help the counselor see what you are doing and how you could do it better. Simply dodging late fees by paying bills on time could free up enough money to pay off your mortgage.
Finding out the type of mortgage you have and how you pay it, may help to free up money that can then be used on the debt. It would be advantageous for you to sit down and write about your lifestyle too. While you may think that such detail is unnecessary, the debt counselor can easily spot ways in which you waste money.
Once you are aware of these things, it can help you to save money you never thought possible. Simply subscribing to magazines and buying a daily cappuccino costs more money over the course of the year than most people realize. Entertainment and restaurant meals are luxuries that can quickly make your money fly to other people.
How much better it is to deny yourself temporarily and use that money to save your home. So basically you need to provide all the information that the counselor asks for and more if you can think of it. Providing it up-front will save both you and them time and effort and get you sorted out much more quickly.
Getting Your Lender to HELP You
When a borrower is unable to pay off the mortgage, sometimes the last person they think to turn to for help is the lender. But just think; a lender is in the business of lending money, not real estate. He makes his profit by the interest that you pay. If he has to foreclose, he will be paying out money in court fees instead of making it in interest.
Not only that, but it is likely that the house he is then lumped with won‟t sell for enough to cover the debt, let alone make a profit. So the lender is one person who would be interested in helping you out when you have trouble making those payments.
Of course, he wants to know that he can trust the borrower before taking the time and trouble to change things in your favor. So the best way to get him on your side is to be honest with him right from the word go. Don‟t wait until he has sent out two or three late warnings before you contact him. Go to him before making any late payments; you must surely know ahead of time that you won‟t be able to afford that payment.
If you go to the lender and tell him that you are going to have trouble making the payment and ask him for help before it happens, then he will be much more likely to help you. So make sure you beat him to the phone. If you haven‟t been able to do that, then certainly you must be honest with him when he does call.
Let him know your exact situation. Tell him all the details he asks for and let him know exactly what you are doing about the situation. If you have asked for debt counseling, tell him that. If you haven‟t asked for it, he might suggest it. Ask him if he can advise you what to do. Make an appointment with him and make sure you keep it.
Arrive on time, or early. But if he suggests financial counseling through his organization, be sure to ask what costs are involved. No use in paying him for counseling that you could get for free elsewhere. Once you establish clear communication with the lender, he will be more amenable to granting you a grace period during which you can either come up with the payments or sell the house.
He may also offer a refinancing option. Remember that you would not want to do business with someone who was dishonest or elusive either, so make it easy for him to like you and see what happens.
Read Also :
- Benefits of refinancing Your Mortgage
- How to Refinance Your Mortgage
- Why Should You Refinance Your Home Mortgage?
- Understand Mortgage Refinancing & Home Equity Refinancing
- Selecting a Mortgage Refinancing Company : Mortgage refinancing tips
- Home with Bad Credit , Mortgage Refinancing after bankruptcy & scams
- How Much Mortgage You Can Afford : Motgage affordability
- Tips for first time home buyers : Home Mortgage Loan
- Shopping For a Mortgage : FInd Financing Online & Compare interest rates