Assisting and advising sellers who are facing foreclosure is part of a real estate agent’s job. Before stepping into this arena, you need to know the options sellers have to prevent foreclosure. There are many options that do not include selling the home in which your seller may choose to keep their home, even after listing with you.
ProSchools has put together resources and information to assist you and your clients.
The government has a website: Make Home Affordable.gov. Call 1-888-995-HOPE (4673) for help with the Making Home Affordable Program and to speak with a HUD-approved housing counselor for free.
Foreclosure avoidance options include:
Leaving the home:
- Short Sale --- Realtor sells property.
A short sale is the sale of a home for less than the balance owed on a mortgage. Your mortgage company has to agree to pay off the balance with the “short” proceeds. Short sales are less damaging to your credit than a foreclosure. Short sales can be very time consuming and frustrating for all parties as the bank has to approve every detail.
- Deed-in-Lieu of Foreclosure --- Give it back.
With a Deed-in-Lieu of Foreclosure (DIL), you give the deed back to the bank in exchange for a release of obligation to pay the remaining balances on your mortgage. DIL’s are typically less damaging on a credit score than a foreclosure. Check with your attorney or tax advisor.
Staying in the home:
- Deed-for-Lease™ -- Give it back and rent it!
This is a new program that allows you to “temporarily” rent your home from the bank after you completed a Deed-in Lieu. Many times you can work out a more affordable rate and remain in the home until the home is sold. This is better on your credit than a foreclosure, but check with your attorney or tax advisor.
- Refinance – New loan and terms.
Even if your home value has decreased, you may be able to refinance your loan as part of the government’ Make Home Affordable Program (HARP). Refinance benefits include more affordable payments, no negative impact to credit score and you can stay in your home and avoid foreclosure
- Repayment Plan - Repay all monies owed.
This is a repayment agreement that allows you to pay the past due amount on your mortgage payments over a specified time period in order to bring your mortgage up to date. For struggling home owners, this is a difficult option that most can not meet.
- Forbearance – Time out!
Your bank my offer to temporarily suspend or reduce your monthly mortgage payments for a specified period of time to help you get back on your feet. This will effect your credit but is less damaging than a foreclosure.
- Loan Modification - Let’s redo our loan!
You may be eligible for the government’s Make Home Affordable Program (HAMP) created to help struggling homeowners. This may reduce monthly mortgage payments and is less damaging to credit than a foreclosure.
Fannie Mae announced they are going to make people who can make their payments and purposely default wait seven years before they can become eligible for a Fannie Mae loan. There are about 11 million homes across America under water and home owners are walking away from their mortgage that they could pay but have decided not to because they owe more than their house is worth. Fannie Mae stated that they will pursue deficiency judgments in states that allow this by law.
Fannie Mae will look at each hardship as it crosses it desk. A person with an acceptable hard ship or an approved short sale will only have to wait two years before obtaining a mortgage backed by Fannie Mae. Another option for home owners is to sign over their house in a "deed in lieu of foreclosure" to avoid a lengthy foreclosure process. A great resource is the Fannie Mae website and Fannie Mae’s Foreclosure Avoidance brochure.
HUD-approved housing counselor
A HUD counselor can advise you on preventing foreclosure, review your financial situation and assist you with planning for the future, buying a home, reverse mortgages, credit and more. The U.S. Department of Housing and Urban Development (HUD) sponsors housing counseling agencies throughout the country and in many languages.
Contact the Homeowner’s HOPE™ Hotline at 1-888-995-HOPE (4673). This hotline is staffed by HUD-approved credit counselors who can guide you through your options. The services are FREE. You do not need to pay a private company for counseling or foreclosure assistance.
Read the latest news on “OBAMA ADMINISTRATION APPROVES STATE PLANS FOR USE OF $1.5 BILLION IN 'HARDEST HIT FUND' FORECLOSURE-PREVENTION FUNDING”