HOMEOWNER MORTGAGE FINANCIAL OPTIONS

There are various options available to you that you should review before deciding which strategy makes the most sense for you.

Repayment Plan
In the event that you have missed a mortgage payment for various reasons, you may be able to arrange a Repayment Plan with your lender, whereby a portion of your missed payment(s) will be added to your future monthly mortgage until the past due amount is repaid. This option, along with most, will require proof of hardship and other financial history to be submitted to your lender.

Loan Modification
A Loan Modification is a change in one or more of the terms of your loan allowing the loan to be restructured, resulting in a lower payment that you can afford. Loan modification (sometimes called Loan Litigation or Loss Mitigation) is the process that allows an individual or professional company to negotiate with the homeowners lender to lower their monthly payments, by reducing their interest rate, extending the term of the loan, reducing their principal balance, or any combination of these.

A loan modification restructures the terms of a loan without actually refinancing the property it secures. It is an agreement between the lender and the borrower which stipulates a short or long term relief from unfavorable loan terms. Skilled home modification specialists work on behalf of borrowers with the lender to achieve the solution of a loan modification by reduced mortgage payments.

Special Forbearance
Another possible option for some individuals in times of temporary financial hardship is a Special Forbearance. You may be allowed to make reduced or possibly no payments at all for an agreed period of time until your financial situation occurs. Of course, during this time, interest will continue to accrue and the missed payments, or discounted amount, may simply be added to the end of your loan. This is another great option for those of you who simply need a little break from your monthly budget in a time of need.

Partial Claim
If you do not qualify for a Repayment Plan or a Special Forbearance you may still be eligible for a Partial Claim. This allows your past due payments to be placed in an interest free second mortgage with HUD. You do not pay on this loan until your first mortgage is paid for and cannot contain less than four months, or more than twelve months, of past due payments from your original loan. This option may only be viable if your current loan is an FHA loan or a specific Freddie Mac loan. Again, proof of financial stability is necessary. This option will allow you to continue, once again, on your normal budget as before as your subordinate loan will only be payable after your original loan is satisfied.

VA Loan Modification / Refunding
If you have a loan through the Veterans Administration, your home has been financed 100% so as to save you the added cost of paying mortgage insurance. They have also set limits on the types of fees your lender charged you during your loan origination. It is sometimes possible to do a Loan Modification on a VA loan.

If your Lender cannot or will not perform a Loan Modification, the VA has an option, called "re-funding". When the VA re-funds a loan under 38 U.S.C. 36.4318, it purchases your loan from the original lender, adds any delinquent payments to the principal balance and re-amortizes the loan to lower your monthly payment to one you can afford.

Short Sale/Short Payoff
Short sale is when a bank or mortgage lender agrees to discount a loan balance due to an economic hardship on the part of the borrower. The homeowner sells the mortgaged property for less than the outstanding balance of the loan, and turns over the proceeds of the sale to the lender, in full satisfaction of the debt. In such instances, the lender would have the right to approve or disapprove of a proposed sale. In the case of a short sale, the homeowner is not allowed to receive any of the proceeds of the sale.

A short sale in real estate occurs when the outstanding obligations (loans) against a property are greater than what the property can be sold for. Short sales are a way for homeowners to avoid foreclosure on their homes and still be able to pay off their loan by settling with your lender.

Deed in lieu of Foreclosure
If you have run out of options and a short sale is taking too long, or if the home is in poor condition and the offers are too low—and the foreclosure process has not been stopped by the lender, the next step may be a way to resolve the situation.

Deed in lieu of foreclosure is a consensual transaction between you and your lender. Typically, the lender draws up the Deed in Lieu of Foreclosure Agreement. Under a Deed in Lieu of Foreclosure, the homeowner avoids foreclosure by signing or deeding the home back to the lender in exchange for the release of all obligations under the mortgage. In some cases, if the home is delivered to the lender in good condition and the lender can sell the home quickly, the borrower may not owe the bank the difference. In addition, the borrower avoids Foreclosure and the impact on this may have on their credit rating.