Arizona Alternatives to Foreclosure | Other Options for Homeonwers

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This web site may or may not list all possible repercussions of a short sale.

It is designed for informational purposes only and users understand that individual circumstances may vary.

All consumers are advised to obtain counsel from a competent real estate attorney on legal issues and discuss

with your accountant the tax ramifications that may be unique to your specific situation.

IMPORTANT GOVERNMENT DISCLOSURE: You may stop doing business with us at any time. You may accept or reject the offer of mortgage assistance we obtain from your lender (or servicer). If you reject the offer, you will not have to pay us for our services. The above brokerage is not associated with the government, and our service is not approved by the government or your lender. Even if you accept this offer and use our service, your lender may not agree to change your loan. If you stop paying your mortgage, you could lose your home and damage your credit rating.

Reinstatement

If the reason that an Arizona homeowner missed a payment was temporary and it has been resolved then they have the option to reinstate their mortgage right up to the bank sale. In some states the owner actually has a redemption period that extends beyond the date of bank sale.

In order to reinstate a mortgage, the homeowner has to pay all missed payments, late fees, and legal fees that are due up to the date that the loan is reinstated. The owner requests this amount from his mortgage company in the form of a reinstatement letter. This letter will typically require a one-time payment of all delinquent funds in full. Once the owner makes the payment, the mortgage is reinstated and they are free to make payments as they had before.

Forbearance or Re-payment Plan

If the Arizona homeowner does not have the means to repay all of the missed payments and legal fees, then this is another option that also reinstates the mortgage. The lender allows the seller to pay the past due amount over a period of time or they place the missed payments on the end of the scheduled loan amortization. It is much more likely that the homeowner will be given a period of time in which to pay delinquencies. This usually requires income documentation from the homeowner showing that they will be able to comply with the terms of a repayment plan.

Sell the Property

If the sellers have equity in their Arizona property, they can sell it and use the funds from their equity to cure the Foreclosure. Unfortunately, many sellers believe that they have to sell much faster than they do and end up taking the first offer that comes along.

Rent the Property

In some cases a homeowner facing Foreclosure may have payments low enough to allow him/her to rent their property and keep up their mortgage payments. This is, however, often a short term solution since when taxes and insurance payments come due, many homeowners cannot afford them. This causes the mortgage company to enforce an escrow account on the property. This will cause the payments to go up and it is very possible that the homeowner will end up in the same situation they were in before they rented the property.

Refinance

If the homeowner has sufficient equity and income and their credit has not been too badly damaged they may be able to refinance. This is also typically a short term solution since the payments on the property typically go up considerably due to the refinance. Again if the issue that made the homeowner late in the first place has been resolved then sometimes this will work, but in many cases this is just a Foreclosure waiting to happen.

Mortgage Modification

In some cases where homeowners do have the means to afford their mortgage payments or very close to their mortgage payments, their mortgage company may qualify them for a mortgage modification. A loan modification is very similar to a lower interest refinance where the lender lowers the interest rate on the existing loan in order to lower the payments. The homeowner will have to qualify for a modification by sending in proof of income and expenses. If this option is available, it is an excellent option for homeowners to keep their properties.

Short-REFI

This relatively new phenomenon shows just how far some mortgage companies and lenders are going to Avoid Foreclosing on Arizona properties. This process involves the refinance of a home with a reduction in the principal balance and often the interest rate as well. The borrower will have to qualify for this process both in showing a hardship as well as showing the ability to pay the new mortgage often through a fully documented qualification process.

Deed-in-Lieu of Foreclosure

A Deed-in-Lieu of Foreclosure is sometimes referred to as a friendly Foreclosure since the homeowner essentially gives the deed back to the bank. This may prevent the banks from having to go through a lengthy Foreclosure Process and in exchange they will sometimes forego their rights to a deficiency judgment. The mortgage company agrees to take the deed back in exchange for the property and they typically have no further recourse. This solution only works in cases where there is one mortgage and there are no liens (or very small liens) on the property or in rare cases where a first mortgage holder will negotiate with the second mortgage holder. This happens infrequently and previously was unheard of. However, this market is changing daily. If an owner has equity, this is not a good option since they give up any tight to the property and any equity when using Deed-In-Lieu as a solution.

Bankruptcy

A Bankruptcy may stop a Foreclosure and allow a homeowner to reorganize his/her debt and keep their property. The reality, however, is that most of the time this is not the case and the bankruptcy only stalls the Foreclosure. If the homeowner is not able to make the payments after bankruptcy, the house will Foreclose anyway.

The other major drawback to bankruptcy is that is makes it very difficult for the homeowner to sell his property once he enters the process. It makes it near impossible to negotiate a Short Sale. The only possibility is if the trustee for the bankruptcy agrees to release the property from the proceedings and allow it to be sold. It is not recommended to list properties where the homeowner is in bankruptcy unless there is equity and they are in the final stages and will be finished by the close or the trustee is very cooperative.

Servicemembers Civil Relief Act (SCRA)

The SCRA is a bill that was signed into law (Public Law 108-189) on December 19, 2003. This law provides Servicemembers other protections.

As it applies to mortgages the law reads:

MORTGAGES: The SCRA can also provide temporary relief from paying your mortgage. To obtain relief, a military member must show that their mortgage was entered into prior to beginning active duty, that the property was owned prior to entry into military service, that the property is still owned by the military member, and that military service materially affects the member’s ability to pay the mortgage.

http://www.uscg.mil/legal/la/topics/sscra/about_the sscra.htm

It is important to not that this relief is only temporary and in many cases the most prudent course of action for a Servicemember, is to sell their property. This is a personal decision based on their specific financial situation.

Short Sale

When a homeowner owes more on a property than it is currently worth and one of the above solutions do not apply to their situation, there is the option of pursuing a Short Sale.

Please click here for more information about Arizona Short Sales.

Many homeowners facing a possible Arizona Foreclosure don’t realize that they have other options....

Their options include: