Options with your Lender to Avoid Foreclosure
Although not required to do so by law, in some situations, a lender may agree not to pursue foreclosure even though your loan payments on your loan secured by your home (your “home loan”) are behind. Although a lender isn't required to accept any offers or renegotiate the terms of your loan, in the proper situation there may be alternatives to foreclosure. Alternatives will vary from situation to situation and will differ for different lenders, but could include such things as:
Special Forbearance
Your lender may be able to temporarily reduce or suspend your payments for a fixed period of time. At the end of that time, you would undoubtedly be required to make a lump sum payment or enter into a long term repayment plan acceptable to your lender to pay back the reduced or suspended amount. Forbearance may be a good option when the cause of your default is specific and temporary and it is reasonable to assume you will be able to resume making payments at the end of the forbearance period.
Repayment Plan
Your lender may be able to arrange a simple repayment plan for the past-due payments which have created your default, such as requiring you to make your regular loan payments plus an amount of the total in default each month. The plan could be a few months long, or in some cases may extend to a year, in the discretion of your lender. At the end of the time period, you would have paid off the past due amount and your payments could go back to the payment amount called for by your Note. Your lender or servicer may require a good faith payment upfront to begin the plan. A repayment plan may be a good option when the situation that caused your default is resolved. For example, the default may have occurred because you were unemployed for a period of time, but you have now become employed again.
Mortgage Modification
You may be able to refinance the debt and extend the term of your home loan. This will help you catch up by possibly reducing the monthly payments to a more affordable level. You may qualify if you've recovered from a financial problem but your net income is less than it was before the default.
Partial Claim
In some cases your lender may be able to work with you to obtain an interest-free loan from HUD to bring your mortgage current, if you qualify.
Pre-Foreclosure Sale
You could sell your property and pay off your home loan to avoid foreclosure and the incident damage to your credit rating. If you're unable to afford the house long-term, you may be able to sell the house yourself before the foreclosure sale and save some of your equity.
Deed-in-lieu of foreclosure
You may be able to voluntarily "give back" your property to the lender. This won't save your house for you, but it may be less damaging to your chances of getting another home loan in the future than a foreclosure would be.
Other Options to Avoid Foreclosure
Cashmere Valley Bank may be contacted at: (509)662-7722 (local) or 800-860-0845 (long distance) if you wish to discuss options for avoiding foreclosure.
Contact the Washington Homeownership Information Hotline
1.877.894.HOME. Free foreclosure counseling is available via funding from the State of Washington. For more information visit www.homeownership.wa.gov.
Keep In Mind There May Be Alternatives To Foreclosure, Such as:
Washington State Homeownership Information Program
For information about free counseling, classes, workshops, and resources available to Washington State residents, visit www.homeownership.wa.gov.
HUD Adds New Program For FHA Loans In Foreclosure
Effective August 15, 2009, if you have an FHA loan in foreclosure you may be eligible for a Partial Claim program. The program is called the FHA-Home Affordable Modification Program, or FHA-HAMP. The program is designed to help borrowers retain their homes and to prevent the destructive impact of foreclosures on families and communities. The program is available to borrowers who do not qualify for the existing FHA special forbearance or loan modification.
The FHA-HAMP Partial Claim is similar to the federal Making Home Affordable (MHA) program available to non-FHA borrowers. As we understand, your front-end debt-to-income ratio must be greater than 31 percent and your back-end debt-to-income ratio must not be greater than 55 percent. In addition, you must provide a Hardship Affidavit and must successfully complete a three-month trial payment plan. If these conditions are met, your monthly mortgage payment is permanently reduced through the use of an interest-free subordinate mortgage that is deferred until the first mortgage is paid off.
More details for the new programs are available. Contact your lender or servicer to see if you qualify.
Making Home Affordable Program
Through President Obama's Making Home Affordable program, Washington families may be eligible to refinance or modify their loans to a payment that is affordable.
Refinancing Through Making Home Affordable
If you are a homeowner who is current on your home loan payments but unable to refinance to a lower interest rate because your home value has decreased, you may be able to refinance. See your lender or another lender in the business of making home loans.
Loan Modification Through Making Home Affordable
If you can no longer afford to make your monthly loan payments, you may qualify for a loan modification to make your monthly mortgage payment more affordable. Millions of borrowers who are current, but having difficulty making their payments and borrowers who have already missed one or more payments may be eligible.
Property Tax Deferral Program
Struggling to make ends meet? The Washington State Department of Revenue has programs that may help. The Property Tax Deferral Program helps homeowners with limited income by paying 50 percent of property taxes and/or special assessments on behalf of the owner. The taxes are postponed and must be paid when the homeowner no longer owns and uses the property as their primary home. For more information and a list of requirements visit dor.wa.gov or call (360) 570-5900, or call your local county assessor’s office.