House Debt Relief logo with the tagline: "Your Partner in Foreclosure Hardship".

A Guide to Options in the Foreclosure Process,

Each Case is Unique

Wrap-around mortgage:

What is a Wrap-around mortgage?

A wraparound mortgage is seller financing where the buyer pays the seller directly, who then pays their own mortgage lender. It combines the existing mortgage with additional funds from the buyer’s payments.

Why would someone do a wraparound mortgage?

A wraparound mortgage is a unique financing option that allows a homebuyer to assume the seller’s existing mortgage while obtaining additional financing to cover the remaining purchase price.

Can the Homeowner stay in their home? (YES)

With a wraparound mortgage, the buyer can stay in their home, but if the seller defaults, the original lender can foreclose. The wraparound loan is secondary, with the buyer paying more to cover the original mortgage and generate profit for the lender.

Notes: The downside of a wrap-around mortgage during foreclosure is the risk of complications with the original lender if the seller defaults, potentially leading to foreclosure proceedings that affect the buyer’s credit and ownership of the property.

Scroll

What is a deed in lieu of foreclosure?

A deed in lieu of foreclosure is a legal agreement where the homeowner voluntarily transfers the property title to the lender to satisfy a mortgage debt instead of going through a foreclosure process.

What is a deed in lieu of foreclosure?

A deed in lieu of foreclosure is a legal agreement where the homeowner voluntarily transfers the property title to the lender to satisfy a mortgage debt instead of going through a foreclosure process.

Why would someone do a deed in lieu of foreclosure?

A deed in lieu of foreclosure can be a way for homeowners to avoid the negative impacts of foreclosure on their credit and to negotiate with the lender for a more favorable resolution.

Can the Homeowner stay in their home? (NO)

In a deed in lieu of foreclosure, the homeowner typically cannot stay in their home as ownership is transferred to the lender. However, it can help avoid the lengthy and costly foreclosure process.

Notes: The downside of a deed in lieu of foreclosure includes losing ownership of the property, potential impacts on credit, and the need to negotiate with the lender to agree on the terms.

Reverse Mortgage:

What is a reverse mortgage?

A reverse mortgage is a type of loan available to homeowners over 62 that allows them to convert part of the equity in their homes into cash. Unlike traditional mortgages, the loan does not require monthly payments.

Why would someone do a reverse mortgage?

People might opt for a reverse mortgage to supplement their retirement income, cover healthcare expenses, or improve their quality of life.

Can the Homeowner stay in their home? (Yes)

Yes, the homeowner can stay in their home as long as they continue to meet the loan obligations, such as property taxes and home insurance.

Notes:The downside of a reverse mortgage includes the accumulation of interest over time, reducing the equity in your home. Additionally, if you don’t meet obligations like property taxes or home maintenance, you could face foreclosure.

Short Sale:

What is a short sale?

A short sale occurs when a homeowner sells their property for less than the amount owed on the mortgage, with the lender’s approval.

Why would someone do a short sale?

Homeowners might choose a short sale to avoid foreclosure and minimize the impact on their credit score.

Can the Homeowner stay in their home? (Yes/No)

During a short sale process, the homeowner can stay in their home until the sale is finalized. Once the sale is finalized the lender may pay to have them relocate.

Notes: The downside of a short sale includes potential damage to your credit score, as it’s considered a negative event by lenders. You may also still owe the difference between the sale price and the remaining mortgage balance, depending on the agreement with your lender.

Short Pay:

What is a short pay?

A short pay refers to negotiating with a lender to accept less than the full amount owed on a mortgage. (it's also know as a bridge loan).

Why would someone do a short pay?

A homeowner might pursue a short pay to avoid foreclosure or resolve financial difficulties. The Homeowner must be underwater, and lender may take less, and at times we can reconstruct the loan and keep the homeowner in the property. This can have a positive effect by adding equity to the new loan.

Can the homeowner stay in their home? (Yes)

The homeowner can stay in their home if the lender accepts the short pay arrangement.

Notes: Short Pays have drawbacks, such as potential damage to your credit score and the challenge of persuading your lender to agree to a reduced payoff amount, which can be intricate and isn’t guaranteed to succeed. This option is viable for jumbo loans categorized as portfolio or commercial loans.

Subject to:

What is a subject to?

A subject-to transaction involves buying a property "subject to" the existing mortgage, where the buyer takes over the mortgage payments without formally assuming the loan.

Why would someone do a subject to?

Buyers may choose this option to acquire a property without obtaining new financing or if the existing mortgage terms are favorable.

Can the Homeowner stay in their home? (Yes)

Yes, the homeowner can stay in their home as long as the new owner continues making the mortgage payments.

Notes: Overall, purchasing a property subject to the existing mortgage can be a strategic move for investors looking to maximize returns, minimize upfront costs, and capitalize on favorable financing terms.

Seller Financing:

What is seller financing?

Seller financing occurs when the seller provides financing to the buyer instead of or in addition to a traditional mortgage lender.

Why would someone do seller financing?

Sellers might offer financing to attract buyers who cannot qualify for traditional loans or to facilitate a quicker sale.

Can the Homeowner stay in their home? (Yes)

Yes, the homeowner can stay in their home under a seller financing arrangement, as long as they continue to meet the terms of the financing agreement.

Notes: The downside of seller financing includes potential risks for both parties, such as legal complexities, default consequences, and potential disagreements over terms or property conditions.

Cash Offer:

Why would someone accept cash for their home that's in foreclosure?

Accepting a cash offer for a home in foreclosure has several benefits. Cash offers close quickly, usually within 7 days, resolving financial challenges swiftly and avoiding foreclosure's credit impact. It also saves on costs like legal fees and repairs, with cash buyers offering flexible terms for a smoother transaction.

Illustration of a homeowner holding legal documents, representing homeowner rights to a non-judicial process.
Can the Homeowner stay in their home (No)

With a cash offer for a home in foreclosure, the homeowner typically cannot stay in their home. However, they may receive funds for a fresh start, avoid foreclosure or bankruptcy, and even receive compensation for relocation expenses.

Notes: Accepting a cash offer during a foreclosure means selling properties “as is,” which can sometimes disqualify them from FHA loans due to their condition and other factors.

Scroll

Loan Modification:

Our experienced team, led by Foreclosure Specialist Freddie Avila, is dedicated to providing you with personalized support throughout the process. Here's how we work:

What is a loan modification?

A loan modification involves changing the terms of an existing mortgage to make it more affordable for the homeowner.

Why would someone do a loan modification?

Homeowners might pursue loan modifications to reduce monthly payments, lower interest rates, or avoid foreclosure.

Can the Homeowner stay in their home?

Yes, the homeowner can stay in their home if they successfully negotiate a loan modification with their lender.

Notes: A long modification process during foreclosure has several downsides. Firstly, it doesn’t halt the auction sale, putting your property at risk of being sold. Secondly, the new mortgage terms may lead to higher payments that you might struggle to afford. Additionally, the modified loan could extend for many years, increasing the overall cost. Lastly, there’s a risk of encountering unethical practices during the modification process, which can further complicate your situation.

Bankruptcy:

What is bankruptcy?

Bankruptcy is a legal process that allows individuals or businesses to eliminate or repay debts under the protection of the bankruptcy court.

Why would someone do bankruptcy?

People might file for bankruptcy to discharge debts, stop foreclosure or repossession, and get a fresh financial start.

Can the Homeowner stay in their home? (Yes)

The impact of bankruptcy on homeownership varies depending on the type of bankruptcy and individual circumstances. In some cases, homeowners can keep their homes through bankruptcy proceedings.

Notes: The downside of bankruptcy includes potential damage to your credit score, limited access to credit in the future, and the possibility of losing assets depending on the type of bankruptcy filed.

DISCLAIMER

Every situation is different, and depending on several factors, we will determine the best result. We cannot make any guarantees that your property will be saved. Time is of the essence, and depending on your financial situation, at times, the home may need to be sold. Additionally, we may have the ability to make a cash offer and provide assistance with moving costs, but all cases vary.

copyright © 2024 all rights reserved

Privacy Policy

Terms and Conditions

For any queries, don't hesitate to ask

Let’s start by you telling us how we can help.