How to save your home: 6 options for distressed homeowners

Downtown Reno River Bridge

 

"Whether it makes sense to other people or not, we have a die-hard emotional attachment to our homes"

Foreclosure is no longer the only option. There are now more ways to save your home than ever. 

Back in 2007-2008 when the Reno real estate market was in a downward spiral, few had any clues on what to do with distressed homes, banks and government were almost as clueless as the average homeowner. 

Things have improved and more and more people are being educated in what they can do to help save their home. 

In my experience, many people still yearn to live in their present homes.  This is beyond economics and statistics and sometimes, logic.  This is where the human factor keys in.  This is where we live, where people have invested their life savings and even cut down on eating out just to save for their mortgage payments.  This is where we lay our heads after a hard day's work.  Sweat and tears cannot be justifiably factored in by any formula. 

Whether it makes sense to other people or not--we have a die hard emotional attachment with our homes.  And this is not negetive or positive.  It's just the way it is.  And I've learned to never judge anyone regardless of how irrational their decision might be.

It helps that the government is willing to lend a hand.  It's not a perfect system in any way, but they do try.

Options for Distressed Homeowners

Although Homeowners who are at risk of default or who have defaulted on their mortgage may believe that foreclosure is their only solution to mortgage problems, there are options available to them.

Home Affordable Foreclosure Alternatives Program (HAFA)

HAFA is the government's newest tool to help homeowners avoid foreclosure. HAFA provides incentives for lenders and homeowners to carry out a short sale or deed‐in‐lieu of foreclosure. The current incentive for homeowners is $3,000 for a successfully completed short sale or deed‐in‐lieu of foreclosure.

Home Affordable Modification Program (HAMP)

HAMP is for homeowners who are struggling with mortgage payments and think that a lowered interest rate could bring their payments to an affordable level. These loan modifications are ideal for homeowners whose mortgage payments are just out of reach.

Second Lien Modification Program (2MP)

2MP is for homeowners who are struggling with payments in part because of a seconds lien on their home. For those who are eligible, the program offers a way to lower payments on their second mortgage. 2MP is a complementary program to the Home Affordable Modification Program (HAMP), so it is meant for those who have already modified their first mortgage through HAMP.

Home Affordable Refinance Program (HARP)

If you are unable to lower the interest rate on your mortgage (possibly due to decreased home value), but are caught up on you mortgage payments, HARP may allow you to refinance.

Sell and Bring Cash to Closing

Although many homeowners today may not have the necessary cash to cure deficiencies at closing, they may have to liquidate assets, e.g., U.S. Treasury Bonds, individual retirement accounts (IRAs), to do so. By curing deficiencies at closing, homeowners can avoid the credit damage that a short sale or foreclosure can cause. However, homeowners are strongly encouraged to consult with their finance and tax professionals before bringing liquid assets to closing.

Lender Workout

Lenders often will work with distressed homeowners to help them keep their homes by reducing or rolling back interest rates, forgiving back payments, adding them to the loan amount or possibly recasting the entire loan and wrapping all fees into a fixed‐rate mortgage.

Mortgage Loan Workout Options

• Forbearance. Lenders may let you make a partial payment, or skip payments, if you have a reasonable planto catch up. Tell your lender if you expect a tax refund, a bonus, or a new job.

• Reinstatement. Reinstatement refers to making a payment that covers all you late payments, usually at the end of a forbearance period.

• Repayment Plan. If you can't afford reinstatement, but can start making payments to catch up, the lender may let you pay an additional amount each month until you are caught up.
• Loan Modification. Your lender may agree to amend your mortgage to help you avoid foreclosure.

The options include:

-Adding all the missed payments to the loan amount and increasing the monthly payment to cover the
larger loan.

-Giving you more years to pay off the loan, lowering your interest rate, and/or forgiving part of the loan, to lower your monthly payment.

-Switching from an adjustable rate mortgage to a fixed rate mortgage, so you aren't exposed to increases in your monthly payment.

-Requiring amounts for taxes and insurance to be included with your monthly mortgage payment so you avoid big bills in addition to your mortgage.

-Sign over the Property to the Lender in Exchange for Debt Forgiveness. This can hurt your credit, but is better that having a foreclosure in your credit history. (www.realtor.org)

Qualifying Sellers for a Short Sale
Not every owner is a short sales candidate and, unfortunately, not every owner can be saved from foreclosure. In the qualifying process, the real estate professional should confirm, among other items:

• Whether or not the homeowner has a valid hardship

• Whether or not there is sufficient time to accomplish a short sale

• That the homeowner will contract or had already contracted with the appropriate finance, tax and legal professionals

• The amount that is owed on the property

• Whether or not the homeowner has liens in addition to the mortgage, e.g., tax liens, homeowner association (HOA) liens

• The condition of the property

• That the homeowner will be cooperative in completing the short‐sale documentation and in maintaining the property for showings

Non-Profit Agencies Recommended by Reno-Sparks Association of Realtors: HUD Approved Counseling Agencies

Consumer Credit Affiliates
Phone: 775.337.6363
3100 Mill Street, Suite 111
Reno, NV 89502
Email: cca@ccanevada.org
Website: www.ccanevada.org

Nevada Legal Services
Phone: 775.284.3491
650 Tahoe Street
Reno, NV 89509
Website: www.nlslaw.net

NID Housing Counseling Agency
Phone: 775.322.5695
1000 Bible Way, Suite 72
Reno, NV 89501
Email: help@teamworknevada.org
Website: www.nidonline.org

Washoe County Senior Law Project
Phone: 775.328.2592
1155 E. 9th Street
Reno, NV 89512
Email: slawproj@washoecounty.us
Website: www.washoecounty.us/seniorsv/legal/srhousing.htm

Other HUD approved Credit counselors in the State of Nevada can be found at: www.hud.gov

Related links:

• A guide to Short Sale and Foreclosures in Reno-Sparks

• Confessions of a short sale expert in Reno