When a borrower misses several mortgage payments, the bank has the option to the initiate foreclosure process to protect their loan. However, a bank usually does not want to foreclose on your property. The bank must incur costs and fees when foreclosing on your home, and anti-deficiency laws may prevent the bank from coming after you for the balance of the loan if your mortgage in underwater.
For borrowers, this means that you have some negotiating leverage, even if you have missed some mortgage payments. The threat of foreclosure is intimidating to borrowers, but it’s also something the lender wants to avoid as well. Consider some of these options when negotiating with your bank and attempting to avoid a foreclosure:
- Reinstatement: You pay off all delinquent payments and the associated costs. For many borrowers, this will not be financially feasible, but it is probably the fastest way to become current on your payments and get back on track.
- Modification: Negotiate with your lender to see if you can make up for missed payments at the end of your loan, or if you can otherwise change you loan terms to give you time to catch up.
- Refinancing: If your credit is good, you may be able to refinance, but may have to pay a down payment or have larger monthly payments.
- Bankruptcy: A Chapter 13 bankruptcy may allow you to make for missed payments over the life of your bankruptcy plan, which is typically three to five years. Whether this is a good option for you will depend on many other factors as well, including your eligibility for a bankruptcy filing.
- Short Sale: This involves selling your home for less than what is owed on your mortgage, and getting an agreement from the lender that they will accept the funds from the sale and will not come after you for the balance of the loan. Why would a lender agree to this? As discussed above, the foreclosure process is costly to lenders, and leaves them stuck with your property. A short sale gives the lender cash and saves them from going through the foreclosure process.
Chernoff Law handles real estate litigation matters throughout Arizona. Contact us by calling 480-719-7307 to discuss your real estate matters.