It can be very stressful to be late on your mortgage
payments. You may not know all your
options once the bank has issued official notices stating your house will be
sold at auction unless you do something.
The bank is trying to call you and you may be avoiding their calls. They want their money and you don’t know how
to pay them! Our company has become an
expert resource for you, and as a result, we’ve written this brief article to
go over your options.
- Reinstate: This is the preferred,
simplest and most straightforward option.
Ideally, you can get the money together for all the missed payments,
plus all the penalties and fees that have accrued. You’ll have to call your bank and ask for a
“reinstatement quote.” Once you have
that, send them the exact amount owed to them, and then resume making regular
payments. Your credit score may be
damaged from the late payments, but at least you’re back on track!
- Modification: You can ask the bank to
review all your financial information, along with your household financial
worksheet (all expenses and income) and see if they can make a deal with
you. If you only had a temporary setback
that caused you to get behind on your payments, but you’re earning money again,
this can be a great solution. There’s no
set formula for how they will modify your loan or payments, but ideally, they
work with you to set a payment that you can afford. Be advised that in many cases, your payment
may be higher than before the modification because they want to get back the
money that was late.
- Bankruptcy: Filing a bankruptcy will get
you a 2 to 8-week delay on the foreclosure sale. If you proceed with a full bankruptcy, and
you make the payments that the bankruptcy court prescribes, you’ll catch up on
the late payments over a 5-year span, and then be back on your regular
payments. This is an extremely
simplified explanation. Consulting with
a bankruptcy attorney would be your best option to learn of the benefits and
costs associated with filing bankruptcy.
- Attorney Delay Tactics – Every week we
meet clients that have paid an attorney $5,000 or more under the premise that
the attorney will sue the bank and get you a bunch of money. In reality, this has not happened since 2011. No attorney has successfully sued a bank in
California and got principal forgiveness or any type of cash for their
client. But, paying an attorney can
delay the foreclosure auction. They may
also help you get a modification, even though it is illegal to pay someone for
modification assistance prior to the modification being granted by the
bank. So, the moral of the story is that
paying an attorney can delay a foreclosure, but it may not be a good long-term
- Deed-in-Lieu – This means that you would
literally give the property back to the bank.
This happens especially if you owe more on your mortgage than your
property is worth. Many times, the bank
will offer you a few thousand dollars to cooperate and give them your
deed-in-lieu of foreclosing on your property.
This should be one of the last options you consider. Selling or even short selling your property
is a much better option in regards to your credit and tax implications.
- Sell the home – You can sell your home
before the bank sells it at the foreclosure auction. If you don’t have the money to catch up on
the payments, this may be your best option.
Whether you have equity, or not, selling your home can be one of your
best exit strategies. Even with a short
sale, the bank will often offer $5,000 or more in relocation assistance.
- Do Nothing and let the house Foreclose –
Unfortunately this happens about 300 times per year in San Diego alone. It’s possible the bank has postponed your
foreclosure sale date in the past, but eventually they will sell the home so
they can gain control of their collateral.
Unfortunately, many banks may lead you on to think they will postpone
your sale date, but they may tell you that they make that decision on the
morning of the auction! This does not
give you any advance notice, so you can’t do anything to stop the sale at that
point. Even if it’s the day before the
auction, you have time to stop the sale.
Please don’t hope the bank will postpone your sale on the morning of the
There are a lot of benefits and consequences with each of
these options. It’s hard to cover everything in this short article, but this is
a good reference so you know what is possible when facing a foreclosure. We know how difficult it can be to have a
late mortgage, but you’re not alone. We’ve faced these difficult situations
ourselves and know to solve these problems!
Our consultations are always free.