Whether it be from job loss, divorce, medical issues or the death of a spouse, many American homeowners may find they are unable to debt service their monthly mortgage payment. The good news is most lenders offer a variety of options to address financial hardship issues for borrowers. If you are currently unable to make your monthly mortgage payment, you should immediately call your lender to discuss what options they have available for your circumstances.
Typically, most lenders offer the following options: forbearance, loan modification, interest-only payments for a period of time, short sale or deed in lieu of foreclosure. Under a forbearance agreement, you typically do not make the regular monthly payments for a period of time while you are experiencing financial hardship. It is important to note that during this forbearance period, interest will typically continue to accrue. Forbearance is a good option when a temporary fix is needed. Loan modification involves modifying the terms of your home loan including possible lowering of the interest rate or extending the term of the mortgage. Sometimes without doing a formal loan modification, a lender may simply allow you to make interest-only payments for a limited period of time.
If a forbearance or loan modification will not help you and you want to avoid a foreclosure, then short sale, private sale or deed in lieu may be the best options for you to explore. In a short sale, typically the property is sold for less than what is owed on the loan and the lender agrees to take a reduced payoff. Please note if you have other junior mortgages, those lenders will also have to agree to the short sale. Typically, a lender will require you to submit a hardship package of documents that includes bank statements, tax returns, and pay stubs. If you do not have any junior mortgage holders and are just dealing with one lender, you may want to do a simple deed in lieu of foreclosure where the property is simply deeded back to the lender. A deed in lieu is typically a good option if there is no equity in your home. If you have equity in your home, typically marketing the property privately for a period of three to six months yields the highest return on the property. Whatever option you want to explore with your lender, you need to promptly call them and advise them of your financial situation so that something can be worked out prior to the commencement of foreclosure proceedings.
About DelCotto Law Group
DelCotto Law Group is Kentucky’s asset protection law firm known for its commitment to the lifetime success of its clients. With offices located in Lexington, Louisville and Danville, DLG serves Kentuckians with complicated financial matters, especially in the areas of bankruptcy, complex litigation, and estate planning. For more information about filing bankruptcy or DelCotto Law Group, please call (859) 231-5800 or email [email protected].