Foreclosure A-Z


Bankruptcy ? This option can liquidate debt and/or allow more time. Bankruptcy law changes of 2005 now require more stringent filing rules. Debtors must qualify by meeting an "income means test" and complete pre and post petition trustee-approved credit and financial counseling courses. Certain debts such as student loans and some taxes cannot be liquidated.

·          Chapter 7 (Liquidation) Complete settlement of personal debt

·          Chapter 13 (Wage Earner Plan) Payments are made toward a plan to pay off debts in 3 ? 5 years.

Converting your ARM to a Fixed Rate ? Millions of adjustable rate mortgages that were initiated in 2004 and 2005 are adjusting at higher interest rates, causing increased mortgage payments that can significantly affect family budgets. Many lenders will convert homeowner rates to a fixed schedule.

Deed in Lieu of Foreclosure ? Give the property back to the bank instead of the bank foreclosing. Banks generally require the home be well maintained, all mortgage payments and taxes must be current. Most loan applications ask if this has ever happened.. 

Divorce ? The Colorado Divorce Online service was designed with one focus: to simplify the legal process involved in obtaining a Colorado divorce. While the divorce period itself can be disruptive, the complexities of the legal process are often unnecessarily overwhelming. Colorado Divorce Online helps couples who have already reached a decision about divorce to formally begin the dissolution process in Colorado. http://www.coloradodivorceonline.us/

Do Nothing ? If a homeowner does nothing, they most likely will lose their home at foreclosure auction. Loan applications generally ask if the applicant has ever been foreclosed upon. Credit reports also disclose this damaging information.

Foreclosure is the legal and professional proceeding in which a mortgagee, or other lienholder, usually a lender, obtains a court ordered termination of a mortgagor's equitable right of redemption. Usually a lender obtains a security interest from a borrower who mortgages or pledges an asset like a house to secure the loan. If the borrower defaults and the lender tries to repossess the property, courts of equity can grant the owner the right of redemption if the borrower repays the debt. When this equitable right exists, the lender cannot be sure that it can successfully repossess the property, thus the lender seeks to foreclose the equitable right of redemption. Other lienholders can and do use foreclosure, such as for overdue taxes, unpaid contractors' bills or overdue HOA dues or assessments.

Forbearance ? Lender may be able to arrange a repayment plan based on the homeowner´s financial situation. The lender may even be able to provide a temporary payment reduction or suspension of payments. Information will be required from the lender to show that you are able to meet the new payment plan requirements. Both loan modifications and special forbearance agreements are legal contracts so be sure you can meet the revised obligation or you can put yourself in jeopardy of renewed mortgage default proceedings.

  • Special Forbearance - This is where you will make no monthly payment or a reduced monthly payment. Sometimes, the lender will ask you to be put on a repayment plan when the forbearance has been finished to pay back what you missed, while other times they just modify your loan.[citation needed]

    Loan Modification ? Utilizing the existing mortgage company to change the interest rate, add missed payments to the balance or extend the terms of the loan. This option can be successful for homeowners who are just recently back on financial track due to say, re-employment. The lender will require a substantial down payment toward the total arrearage and then divide the remaining balance over 12 to 18 months. These payments will be required in addition to the original payments on the note.

    Loss mitigation [1]is used to describe a third party helping a homeowner, a division within a bank that mitigates the loss of the bank, or a firm that handles the process of negotiation between a homeowner and the homeowner's lender. Loss mitigation works to negotiate mortgage terms for the homeowner that will prevent foreclosure. These new terms are typically obtained through loan modification, short sale negotiation, short refinance negotiation, deed in lieu of foreclosure, cash-for-keys negotiation, or a partial claim loan or other loan work-out. All of the options serve the same purpose, to stabilize the risk of loss the lender (investor) is in danger of realizing. The different options are available to homeowners to try getting the homeowner to "perform" (pay timely) and cure the potential loss the lender/investor projects incurring through the foreclosure process[citation needed] and auction sale of the property.

    Notice of default is a notification given to a borrower stating that he or she has not made their payments by the predetermined deadline. It dictates that if the money owed (plus an additional legal fee) is not paid in a given time, the lender may choose to foreclose the borrower's property. Any other people whom may be affected by the foreclosure may also receive a copy of the notification.

    Partial Claim ? Offered on FHA loans of a second loan to include back payments, costs and fees.

    Payoff/Refinance ? Completely paying off the entire loan amount plus any default amount and fees. This is usually accomplished through a refinance of the debt. New debt is at a normally higher interest rate and there may be a prepayment penalty because of the recent default. With this option, there should be equity in the home.

    Reinstatement ? A lump sum payment by remitting the entire default amount plus interest, attorney fees, late fees and taxes. You can request an updated statement of total amount due to bring the loan current by contacting your lender.

    Sale ? Homeowner may sell the home without lender approval for a conventional home sale. If the property has equity (money left over after all loans and monetary encumbrances are paid), the homeowner will get cash from the sale. At the other end of the spectrum, a short sale, also known as a pre-foreclosure sale, can be negotiated with your lender by your real estate professional if what is owed on your home is more than the property´s value.

    Short sale occurs when the proceeds of a real estate sale fall short of the balance owed on the property.[1] In a short sale, the bank or mortgage lender agrees to discount a loan balance due to an economic or financial hardship on the part of the mortgagor. This negotiation is all done through communication with a bank's Loss mitigation department. The home owner/debtor sells the mortgaged property for less than the outstanding balance of the loan, and turns over the proceeds of the sale to the lender, sometimes (but not always) in full satisfaction of the debt. In such instances, the lender would have the right to approve or disapprove of a proposed sale. Most Short Sales leave a deficiency balance for which the Mortgagor / Borrower is still liable. In 99% of all cases it is not a settlement-in-full. A deficiency balance will remain while the mortgage broker, real estate agent / broker, loan officers, title and closing agents retain their profit. No regulatory agency governs this hybrid transaction. (read more) http://en.wikipedia.org/wiki/Short_sale_(real_estate)

    Talk to a Housing Counseling Agency ? Obtain a useful list of Housing Urban Development (HUD)-approved housing counseling agencies at 1-800-569-4287 or visit http://www.hud.gov/offices/hsg/sfh/hcc/hccprof14.cfm