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Know Your Options

Options to Keep Your Home

(Loss-mitigation options available in your situation depend on the investor, the type of loan you have, and what the loan servicer is able to negotiate.)

• Refinance - A new mortgage on the loan with no change in ownership. The ability to refinance a loan requires that the borrower not be delinquent and that there be equity in the home.
  

• Repayment Plan – Plan where delinquent payments are distributed over a period of time, usually no more than12 months. The monthly amount is added to usual mortgage payment resulting in a higher payment until the delinquent amount has been repaid. This repayment plan brings the account up to date within a specified period.
  

• Loan Modification - Past-due interest and escrow to the unpaid principal balance, which is then re-amortized over a new term. Rate adjustments, term extensions, and principal forgiveness may be considered. Loan modification results in permanent, contractual changes in one or more mortgage terms. Additional loan fees may be involved based on the type of the mortgage a customer holds and on the specific investor. A loan modification immediately brings the account up to date.
  

• Forbearance – A temporary reduction or suspension of a borrower’s payment. The repayment plan is based upon the customer’s financial situation. Because of long-term implications, this option is used only in severe hardship cases.
  

• SAVE OUR HOME AZ PROGRAM - On February 19, 2010, President Obama announced a plan to direct $1.5 billion in funding to the five states hardest hit by the housing crisis, California, Nevada, Florida, Michigan, and Arizona. Shortly after, the Arizona Department of Housing was awarded $267.8 million from the US Treasury Department for foreclosure prevention assistance. Since then, ADOH has implemented the program, Save Our Home AZ, to help struggling Arizona homeowners. Save Our Home AZ offers assistance to consumers facing foreclosure in Arizona’s Hardest Hit Markets. The program provides assistance in the form of Principal Reduction Mortgage Modification, Unemployment/Underemployment Mortgage Assistance, Second Lien Elimination and Short Sale Assistance.
  

• Bankruptcy – may or may not allow you to keep your home. Be sure you seek the advice of an attorney (see Community Resources for more contact information).

What will happen to your home if you file bankruptcy?

• Bankruptcy cannot discharge your mortgage because it is a “secured” debt.
• You cannot force the mortgage company to take late payments over time
• In Arizona, most homesteaded property may be returned to the mortgagee without liability for any deficiency
• You cannot keep your home if you do not continue to the pay the debt as worked out by the bankruptcy trustee
  

CALL YOUR MORTGAGE COMPANY/SERVICER IF YOU KNOW YOU’LL BE LATE AND ALWAYS RETURN THEIR CALLS!!

Options to Not Keep Your Home

How to Exit Gracefully

The following summarizes the ways to avoid foreclosure but not keep the home. Even though you may not be able to keep your home, it is important to work with your servicer during this process. Walking away from your home without consulting with your servicer may result in a foreclosure reported in your credit file, tax consequences, and/or a deficiency balance for loan proceeds not recovered in a foreclosure sale. If keeping your home is not a viable option, your loan servicer may have alternatives available to absolve the mortgage and home.

• Sell the Property – This is the best option if you cannot afford the mortgage payment and if the house is worth more than the amount owed. Other considerations when deciding to sell your home include the condition of the home and how much time you have.
  

• Assumption - If allowed by loan documents and if you find another borrower willing and qualified to take over your mortgage and your home, they may assume your mortgage. The new borrower must meet the lender’s criteria.
  

• Short Sale – If the market value is less than total amount owed, a short sale allows the borrower to sell their home and use the proceeds to pay the mortgage even though the proceeds will not be sufficient to pay off the outstanding balance. The investor and mortgage insurer must agree to this option.
  

• Deed-In-Lieu of Foreclosure – The borrower transfers the property to the servicer if the home cannot be sold at market value. This option requires that the property be listed for a specified period of time, generally 90 days. There may be tax consequences.
  

• Bankruptcy- Consumers do have the option of filing a Chapter 7 or Chapter 13 Bankruptcy if they need more time to pay a mortgage delinquency or need to restructure their debt so that they have funds available to pay secured debts. Either type of bankruptcy provides two important benefits:
  

1. Automatic Stay: if the debtor has not filed bankruptcy before, upon filing an automatic stay is put in place by the Bankruptcy Court. This means all other litigation against the debtor cannot proceed to conclusion without permission of the court. Further, all garnishments against a debtor’s income/bank account must stop as of the date of the bankruptcy filing. Any creditor, who wishes to continue its action, including a foreclosure, must get permission of the Bankruptcy court to proceed before continuing its action.
   
2. Time to Review alleged Claims: Sometime creditors, including mortgagees, claim amounts are due which the debtor may question. Review by the court of the claim is possible and many erroneous charges can be corrected.
   

CALL YOUR MORTGAGE COMPANY/SERVICER IF YOU KNOW YOU’LL BE LATE AND ALWAYS RETURN THEIR CALLS!!

Let’s work together!

Derek O’Toole

Helping Hands Solution AZ