What are some alternatives to foreclosure?
Foreclosure lawsuits are unique in the type of resolutions that they offer because there is a much wider array of resolutions that we can potentially meet, as compared to perhaps a regular civil lawsuit where it’s just the giving or receiving of money. Foreclosure lawsuits usually have four to six routine alternatives, aside from ending up in relocating from the property.
The first two is a payoff and reinstatement. Reinstatement is just getting caught up on your loan and then continuing to make your monthly mortgage payment. The second is paying off your loan altogether if you’re able to gather that kind of lump-sum funds. These two options tend to be a little bit more financially prohibitive for my clients. The next three to four options are the ones that I see more often.
First thing, a loan modification. A loan modification is simply a reworking or restructuring of the loan with the same bank. We see that very often inside of the foreclosure atmosphere these days. Second is going to be a refinance. A refinance is when we get a loan with a new bank to pay off the foreclosing bank. Third is going to be a short sale or a true sale. That’s a true sale, if you’ve got equity in the property, let’s protect that equity. That’s an asset of yours, and then go invest that somewhere else. Or a short sale if the property is leveraged, which just means you owe more on it than the property value itself, we come in and try and negotiate with the different mortgages to reduce the value of the mortgage and allow you to sell the property with as little financial consequence as possible.
Then last, and people see this very often, is a deed in lieu of foreclosure. We just call that an amicable walk away. It means that everyone wants to walk away from the property and do it in a war-free zone, and we’re able to work out that negotiation for you.