There might be light at the end of the COVID tunnel, but we know how hard the past several months have been on your finances. Making mortgage payments was—and still is—difficult. As a result, you might be facing the threat of foreclosure and the accompanying adverse effects. While being foreclosed on is nothing shameful, there are several alternatives to this process you should consider before you get the notice from your mortgage lender.
1. Deed in lieu of foreclosure. If you’re willing to walk away from the property you’re residing in, consider transferring ownership of the property to your mortgage lender. As long as the lender agrees to accept the deed as payment in full, then you may execute what’s referred to as a “deed in lieu of foreclosure.” The agreement is not always so clear-cut, though, which is why it’s essential that you consult with an experienced attorney before accepting this option.
2. Short sale. This could be an effective route to take if you are underwater on your mortgage. In this process, you and your lender agree for you to put your house on the market for its fair market value. Even though the purchase price would not cover everything you owe to the lender, you will be off the hook for the difference as long as the lender agrees to the sale price as full payment. An effective short sale is the result of robust negotiations between the borrower and lender—something for which your attorney should be present.
3. Reset your mortgage. If you receive a sudden windfall of money, you might be able to pay your lender all money owed (interest and fees included) and escape foreclosure. Florida law doesn’t require mortgage lenders to accept a mortgage reset (sometimes called restoration or reinstatement), but your contract may allow it.
4. Renegotiate terms of your mortgage. It might be worth starting a dialogue with your mortgage lender to see about receiving a better interest rate or lengthening the term so your monthly payments decrease. If your lender is a government-sponsored enterprise (GSE), there might be more than a handful of programs available to provide you with some relief. Still, many private lenders offer loan modification applications as well, which must be filled out and submitted properly.
5. Bankruptcy. That word—bankruptcy—has an ill-gotten reputation as a destructive force for people’s finances. In fact, bankruptcy is a useful tool for thousands of Americans. It’s designed to help give you a relatively clean slate so you can regain your financial footing. If this is the best option for you, we will be happy to let you know that and refer you to an attorney who can handle the matter for you.
Beyond these five options, there are many ways an attorney can help. For instance, lenders must adhere to strict procedures and protocols when executing a foreclosure action; any errors on their part could be to your advantage.
Our firm knows the emotions you’re feeling as you stare down the barrel of a possible foreclosure. We’ll spring into action so you won’t feel like you have to go through these difficult times alone. Reach out to us soon to discuss your options or schedule a consultation.
John Salas
