Avoiding Foreclosure
Are you behind in your mortgage payments, or concerned that you soon might be?
Have you received a preforeclosure letter from your lender?

Put your shame and blame aside. Many homeowners are in your situation. The loss of a job, a serious illness, or other life changing events may have changed your circumstances and put you in danger of foreclosure.

The economic downturn has led to many homeowners being "under water" in their loans, meaning they owe more than the home is worth, making it impossible to refinance. Foreclosure, and effects that usually follow, is not your last way out. Many options are out there, and your circumstances may make one of those options feasible and desirable for you. The earlier you confront your fears and take charge the more options will you have. Communicating with your lender, real estate professional, and senior mortgage loan officer are your first steps.

Our real estate agent of Hampton Roads Virginia, Aleksandra Peacock, is a trained expert in working with distressed properties, and will help you explore options other than foreclosure. Lenders take a large financial hit on a foreclosure and will rather avoid it by considering alternatives.

Loan Modification
While only certain homeowners will be able to take advantage of this alternative, it is your best option because it keeps you in your home and preserves your credit rating.

Your mortgage lender may be willing to modify the terms of the loan, whether this means reducing the principal, lowering the interest rate or other creative strategies to make the loan affordable for you. As part of the stimulus package, the U.S. government has programs to provide incentives for banks that use this strategy as an alternative to foreclosure.

Mortgage and foreclosure terms defined.  

Short Sales
This is the fastest-growing foreclosure alternative.  Many banks will allow a short sale, in which the home sells for less than the amount of the loan.  This is attractive for lenders because they lose less money than in a foreclosure.  Also, short sales generally take less time than foreclosures, so the banks don't have to carry the properties on their books as liabilities.

This is an attractive option for homeowners because the impact on their credit is far less than in a foreclosure.  It stays on their credit reports for only two years, as opposed to seven years for a foreclosure, and often isn't a barrier to purchasing another home.

Short sales are paperwork-intensive, and there are many, many details involved.  If you are considering this option, it is critical to work with a real estate agent experienced in short sales, who knows all the steps required to successfully complete such a transaction.

Gleason & Associates Realty, Inc.,  leads the real estate industry in agents who have completed training and are considered Distressed Property Experts (DPE). They understand the particulars of these transactions, and they will be able to advise you every step of the way.

Keep in mind that no matter which option you choose, there may be tax and other financial consequences. You should consult with a tax advisor or legal expert.

Foreclosure (Cash for Keys)

One of the biggest problems in foreclosures is that homeowners sometimes physically damage the property, or even sell some of the fixtures, before leaving. This is not a good idea. It may expose the homeowners to financial and legal liability. It also makes the properties much more difficult to sell, ultimetly leading you to have a greater charge off due to a lower loan to sales price ratio.

To prevent this, some lenders offer a program called "Cash for Keys." The homeowners receive a check for vacating the property within a certain predetermined time period and leaving it in good condition. If you have no alternative other than foreclosure, you should ask the bank about this option.

Tips From HUD

The U.S. Department of Housing and Urban Development has 10 tips for avoiding foreclosure:

1.      Don't ignore the problem.

2.      Contact your lender as soon as you realize you have a problem.

3.      Open and respond to all mail from your lender.

4.      Know your mortgage rights.

5.      Understand foreclosure prevention options.

6.      Contact a HUD-approved housing counselor.

7.      Prioritize your spending.

8.      Use your assets.

9.      Avoid foreclosure prevention companies.

10.    Don't lose your house to foreclosure recovery scams.

Read more from HUD about foreclosure.