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 solution.
- 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 auction!
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.