You have options even when it seems like nothing can save you from a bad mortgage. These programs are a coordinated effort between the federal government and the mortgage industry to assist borrowers in need. If you find yourself struggling to pay your mortgage every month, one of these programs will probably be the answer you have been looking for.
Loan Modification
A loan modification is a permanent change in one or more of the terms of your loan creating a brand new contract between you and your lender. You or your loss mitigation company works with the lender to create a new contract that will reinstate your loan and give you a fresh start by restoring your credit status. The new terms will be shaped by your ability to pay and can include adding the delinquent balance to the loan, reduce the interest rate, extending the years due, and sometimes reducing the balance owed.
Short Sale
A short sale is a negotiated sale of your home at a price below what you owe on the mortgage. If you face an uncontrollable hardship that makes it impossible to afford your home and because of a market fluctuation you owe more then your home is worth, then working with your lender to negotiate for a short sale could be your best option. By approving a short sale, the lender can avoid a lengthy and costly foreclosure, and you can pay off the loan for less than you owe. This option is beneficial for you as it significantly lessens the impact to your credit versus foreclosure and can often be removed completely.
Forbearance
In a forbearance agreement with your lender, you generally get some sort of temporary relief on your mortgage. It is essentially an acknowledgment that you have a situation that has temporarily weakened your ability to pay what you owe every month, but will turn around as soon as the hardship you are experiencing is over. This could be something like a period of unemployment or a medical issue that gets resolved.
Deed-in-Lieu of Foreclosure
This program could be considered just short of foreclosure, but still a better resolution. The result are similar in that the bank takes over your home, but by avoiding the foreclosure process, none of the proceedings become public and you are free of any personal indebtedness meaning the lender won’t be able to sue you.
Cash For Keys
In some cases, lenders are willing to pay a certain amount of money for you to walk away from your foreclosed home without doing any damage to it. Many homeowners become disgruntled and do extensive damage costing thousands of dollars to repair. This is why lenders are willing to pay you for a peaceful exit. It may be a hollow gesture, but it’s still something for you to take away during the painful foreclosure process.
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