Mortgage Assistance is a term used to describe various programs designed to help a home owner avoid foreclosure because of default on a loan. Many homeowners have found themselves at a financial crossroad in regards to the equity position of their home or property.

 

What are your Mortgage Assistance Options?

There are various programs that exist designed to help the individual avoid foreclosure.  The most common are as follows:

  • Loan Modification
  • Mortgage Resolution (Litigation)
  • Investor Short Sale
  • Short Refinance
  • “Deed-in-Lieu”

 

Mortgage Resolution (Litigation)

 

Mortgage litigation is the examination of loan documents for the prevalence of fraud in the origination or implementation of the loan. Legal recourse is then sought against the lender based on the findings. It is not a loan modification and the results are typically a lot more impressive. The legal recourse that can be sought is a substantially lower mortgage payment, principal reductions, cash settlements or rescission of the original loan. The loan resolution process will find the violations in a loan and provide clients with experienced attorneys for representation against lenders. When loan violations are discovered, the lender will possibly receive penalties and fines. Facing possible penalties lenders will come to the bargaining table.

Once violations are discovered and a resolution strategy is determined, attorneys then draft a demand letter seeking specific legal recourse. The demand letter will summarize to the lender violations found related to the loan and will include, when applicable, an econometric damages estimate and a determination of what type of reformation or rescission action sought. You might ask why this is important to you. In the event you have you have violations, which 4 out of 5 loans that are reviewed do, then you now have leverage against your lender to settle the law firm’s demands. You may have fraud (civil and/or criminal) perpetrated against you and the law firm will use this as leverage to settle with your mortgage company. As stated before the results could include a substantially lower mortgage payment, principal reductions, cash settlements or rescission of the original loan. The intent is to ensure that the client is made whole.

Mortgage Resolution is a commonly used term but does not always translate to the litigation concept discussed here. Mortgage Resolution is very different from loan modification although the outcomes can be very similar if successful. Mortgage Resolutions is for the consumer who feels they have been a victim of predatory lending practices or was misguided during the loan origination process. If facts were misrepresented during your loan origination or you feel you may be a victim of fraudulent lending practices Mortgage Resolution is for you.

 

Short Sale

 

Through a short sale, the lender agrees to accept the sale of the home at the current market price, cancelling the remaining deficiency on the loan in most cases. Similar to a Short Refinance, the borrower must provide proof of hardship, and be in default on their mortgage (typically). You can stay current on your mortgage and still go through a short sale, this way is a bit more difficult, but your credit score is affected less going this route.

Often times short sales are an extremely lengthy process. Finding a good short sale specialist can be the key in successfully completing a short sale. Once an offer is accepted on your property, the negotiating process begins. This can take anywhere from 3-12 months, of course there are those rare occasions when a short sale is completed in 30 days. Short sales require cooperation from both the borrower and the lender; they must work together throughout the process in order for it to close. Like Deed in Lieu of Foreclosure, the homeowner must be careful in regards to the potential tax implications that follow a short sale. In some cases, the remaining deficiency is “forgiven” by the lender, if this isn’t agreed upon, the responsibility falls on the borrower.

 

Short Refinance

 

A Short Refinance is the refinancing of a mortgage by a lender for a borrower currently in default on his or her mortgage. The main objective of this is to avoid foreclosure and come out of this short refinance with a new monthly payment and mortgage that you can handle and be more in line with today’s real estate market. In most cases the new refinanced loan amount is less than the outstanding balance was, and the difference is “forgiven” by lender. Foreclosure is typically very expensive for the lender; they miss out, in most cases, on 12+ months of payments by the borrower. On top of this, the lender may also miss out on fees associated with the procedure. The lender will be willing to execute a short refinance when it is more cost effective than going through the foreclosure proceedings.

 

Deed in Lieu of Foreclosure

 

Another beneficial option for a struggling homeowner is to perform a Deed in Lieu of Foreclosure. Like the name suggests, a Deed in Lieu of Foreclosure is an agreement between the lender and the borrower to surrender the Deed back to the lender in return the lender will cancel the loan on the property. This is done to save the borrower from foreclosure. The lender must agree and promise not to initiate foreclosure proceedings, as well as terminate any and all foreclosure proceedings already in progress. The most common negative problem, in regards to a deed in lieu of foreclosure, is the potential tax liabilities. The lender may or may not agree to forgive the remaining deficiency on the loan after the deed is given back and the home is sold. Close attention to this issue is extremely important when going through the process of a deed in lieu of foreclosure.

 

If you would like to speak with one of our specialists about enrolling in a particular program, or just need some help deciding which solution is right for you, feel free to call us at (877) 905-7965 or complete the form on our CONTACT page.