Marino on Money: August 13
This week we are discussing foreclosure. The first two options to avoid foreclosure are refinancing through the Making Home Affordable program, or tapping other assets. What if neither of those options is available, and your home is worth considerably less than the mortgage?
In general, there are three options, and none of them are real attractive.
1. Short sale
2. Deed-in-lieu of foreclosure
In a short sale, the lender agrees to accept less than what is owed on the house. For example, your mortgage may be worth $200k, but the lender agrees to lesser amount. This must be negotiated with the lender. Be sure to call the lender first before you consider this option.
With a deed-in-lieu of foreclosure, you literally deed, or sign over your property to the bank without going through the foreclosure process.
Or, you may simply need to foreclose on the property. If that happens, a foreclosure is reported on your credit for up to 10 years. It may take another five years or more before you qualify for a new mortgage.
For someone facing foreclosure, none of the options sound real appealing. Unfortunately, there may be no easy way out. But at least there are options. As always, seek the assistance of an attorney for any legal matters.
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