So, your house is in foreclosure Now what? Try to look at the situation without attaching your emotions. From a strictly business viewpoint, you can more successfully analyze which option might best suit your needs and desires and move toward resolving your financial difficulty. One very important thing to remember: Time is of the essence, so take quick action in order to allow yourself enough time to complete the chosen process.
BANKRUPTCY This is the most mis-understood law in the industry. Since 2006 "Bankruptcy can no longer be used to dis-charge your mortgage debt." What this means is this. If you are foreclosed on or file bankruptcy the bank will take your house. Wholesale it out at an auction. THEN YOU WILL BE HELD RESPONSIBLE FOR THE REMAINING DEBT!! IE-House is sold for 200k, you owe 300k. You are now the owner of a 100k lien for life!!
DO NOTHING If a homeowner does nothing, they most likely will lose their home at foreclosure auction. Loan applications generally ask if the applicant has ever been foreclosed upon. Credit reports also disclose this damaging information.
PAYOFF/REFINANCE Completely paying off the entire loan amount plus any default amount and fees. Usually accomplished through a refinance of the debt. New debt is at a normally higher interest rate and there may be a prepayment penalty because of the recent default. With this option, there should be equity in the home.
REINSTATEMENT Paying the entire default amount plus interest, attorney fees, late fees, taxes, missed payments and fees.
DEED IN LIEU OF FORECLOSURE Give the property back to the bank instead of the bank foreclosing. Banks generally require the home be well maintained, all mortgage payments and taxes must be current. Most loan applications ask if this has ever happened. Bank may come after you for the difference between the selling price and what is owed.
