Don't let your Vancouver, WA and Portland, Oregon home go back to the bank
With so many Americans facing foreclosure today, it is important to know what the process is and all of the details relevant to the subject. This article is for the purpose of explaining, in detail, the foreclosure process and short sales and the process and procedures that must be followed for both subjects. We will address how sellers end up in foreclosure, ways to avoid foreclosure, alternatives to foreclosure and anything else that is pertinent to foreclosure. Short Sales are an alternative for foreclosure and the positive side of short sales is the fact that many people, including astute investors, make a lot of money investing in homes about to go into foreclosure. Another subject in this article is REO investing as it is closely related to the other subjects and people should know about the money making opportunities that are available with REO homes.
What is the difference between Foreclosures, Short Sales, REOs
Foreclosures & Short Sales: When a homeowner fails to make the mortgage payments for 3 months, the lender will mail out a notice of default asking for payment by a certain date. If no payments are received by that date, the lender authorizes their attorney's to start foreclosure proceedings. In the following months, the homeowner will be under much stress and strain, as the process can last as long as 12 months or more. The homeowners credit score is going to be affected negatively and it will remain on your credit report 7-10 years. You will not be able to purchase a home for at least 5 years or more. On top of that, the IRS considers a foreclosure as a home sale and the income is taxable.
Foreclosure Alternatives in Vancouver WA and Portland:
Each state has its own laws regarding the foreclosure process so some of the alternatives listed may not be appropriate for all cases. Some options are:
Repayment Plan: This usually involves establishing a schedule with your Lender to make a full regular monthly payment plus a little extra each month, to repay the delinquent amount over a specified period of time.
Special Forbearance Plan: This option may provide for a temporary reduction or suspension of payments, that will be increased at a later point to repay the delinquent amount over a specified period of time.
Mortgage Modification: This option may allow you to refinance the debt and / or extend the term of your existing mortgage loan.
HUD Partial Claim: If your loan is an FHA insured loan, your lender may be able to obtain a one time payment from the FHA-Insurance Fund to bring your mortgage loan current with payments.
Refinance: This option may allow you to use the equity that you have established in your home to pay the delinquent amount. Depending on the interest rate of your new loan, your monthly payments might be reduced. You can explore refinancing with your existing Lender as well as with any lender of your choice.
Sell the house: If there is sufficient equity in the property, you may be able to receive more for your property than what is due on the mortgage loan.
Assumption: With this option, you would sign over the property to another person. That person would then take possession of your home, and take over making the payments.
Bankruptcy: Many people believe that by filing for Bankruptcy, it will allow the homeowner to keep a home, and will prevent it from going to foreclosure. Eventually the home will be taken by the lender and all bankruptcy will do is delay or put off the time until you loose your house. An attorney should be consulted before anyone considers any type of bankruptcy.
Pre-Foreclosure Sale: This option may allow you to sell your property for an amount less than what is necessary to pay off your mortgage loan.
Deed In Lieu Of Foreclosure: This option may allow you to voluntarily "give back" the property to your Lender without further damaging your credit.
Short Sale: A short sale is when the lender agrees to accept a mortgage payoff that doesn't cover the entire amount of the outstanding loan. This is a complicated process and can take up to 12 months or longer. The seller, or homeowner, must prove that they are having severe financial hardship, and then present to the lender a variety of documents and paperwork that goes on and on. The homeowner must list and sell the home. There is much stress involved as the homeowner is under the gun with time restraints dictated by the lender. Once you sell the property, you have to supply additional documentation. When the property is listed, your real estate agent prepares a comparative market analysis. You're going to need that and you will need to supply a copy to the lender, along with your hardship letter, and a variety of documents needed by the lender. The lender will need a copy of the purchase agreement, and a "net sheet" showing how much you will net (or lose) from the sale of the home. If there is PMI on the home loan, then the PMI insurance company also has to give their approval for any sale.
If the lender feels that the deal is good, and the lender accepts you hardship letter, most likely the sale will be approved. If the lender approves the sale, thus forgiving the debt, the IRS considers forgiveness of debt the same as taxable income and you will have to pay taxes on that income. The Short Sale Process is a long one and is complicated and there are certain procedures to be followed. The homeowner will have to hire a real estate agent, broker or Realtor to do much of the paperwork and leg work involved.
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