FORECLOSURE ALTERNATIVES. ezestates.com


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ALTERNATIVES TO FORECLOSURE

What is foreclosure? Foreclosure is a process for a lender to sell the property to satisfy a defaulting borrower's debt secured by that property. If you received Notice of Default (NOD), your mortgage lender has started the FORECLOSURE process on your property. To avoid a foreclosure, consider the following alternatives:

1. LOAN WORKOUT. If you experience a temporary financial hardship, call your lender to negotiate for a short term reduction or suspension of your mortgage payment..

2. REFINANCE. Consult a loan officer or lender to see if you are qualified for a mortgage with better rate or term to reduce your monthly payment to an affordable amount.

3. LOAN MODIFICATION. Modify your loan terms to make your mortgage payment affordable. Call your lender directly and ask for helps. If you hire a service for negotiation, beware of the up front fees since the chance to get your loan modified is very small.

4. DEED-IN-LIEU. Give up the title to the property to the lender voluntarily.

5. BANKRUPTCY. Set your debts with your lender under a judge's supervision

2. SHORT SALE. A sale in which the proceeds from the sale is less than the mortgage balance. The lender agrees to discount a loan balance due to financial hardship on the part of the borrower.

What is the benefits of a Short Sale? When a short sale successes, you avoid foreclosure. That reduces Credit Damage, Avoids extra expenses, and future collection. Below is a Short Sale/Foreclosure comparison chart.

	SHORT SALE	FORECLOSURE
Credit	Less damage. Start to recover after 2 years. Can qualify for a mortgage loan to buy a home after 2 years.	Significant impact. Stay on record from 7 years. Can get a mortgage loan after 5 years.
Deficiency Judgment	Can negotiate with the lenders to fully discharge the loan.	The lenders may be permitted to collect their lost from you.
Cost	FREE to owner.	The lender may add all sale expenses to your responsibility.
Taxes	1. Cancellation of debt: The difference of your loan balance and your sale price. The cancellation of debt amount is your income. Certain exceptions apply such as bankruptcy, insolvency, non-recourse loans, and qualified principal resident indebtness. Please consult your tax specialist. Please consult with your tax specialist. 2. Capital gains: the diffirence of your sale price and your original purchase price including major improvement costs. If you used the property as your principal residence for at least 2 of the last 5 year, you do not have to pay tax on capital gain up to $250,000 (or $500,000 for a couple)	1. Cancellation of debt: The difference of your loan balance and the property fair market value at foreclosure. The cancellation of debt amount is your income. Certain exceptions apply such as bankruptcy, insolvency, non-recourse loans, and qualified principal resident indebtness. Please consult your tax specialist. Please consult with your tax specialist.. 2. Capital gains: the difference between your loan balance and your original purchase price including major improvement costs. If you used the property as your principal residence for at least 2 of the last 5 year, you do not have to pay tax on capital gain up to $250,000 (or $500,000 for a couple)

When will the lender allow a short sale? The bank allows a short sale if the owners can prove that they are unable to continue to pay their mortgage. Common acceptable reasons causing such hardship are Job loss, Demotion, Increased mortgage payment, Death of family member,...

How much will the owner get from a short sale? Since the net proceeds are not enough to cover all costs, the lender does not allow the owner to take any money from a short sale transaction. New law comes in effect on Apr 2010, requires the HAFA participated lender pays the homeowner $1500 after a short sale.

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