Mortgages in Trouble

A qualified buyer may be allowed to assume (take over) your mortgage. Ask your lender whether this option is available to you.

A type of aggressive consumer debt resolution where you attempt to either liquidate your debts through a chapter 7 bankruptcy, or re-organize your debts into a payment plan through a chapter 13 bankruptcy.

An instruction issued by a lender to a trustee to initiate foreclosure against a borrower who has defaulted on the payment terms of a mortgage.

You may be able to "give back" your property to the lender, who then forgives the balance of your loan. Again, there may be income tax consequences, so check with the IRS. This option will not save your home, but it is less damaging to your credit rating. Some lenders impose certain restrictions on taking back property. For example, they may require that you try to sell your home at a fair market value for at least 90 days.

Failing to pay a loan for a significant period of time. Once you default on a mortgage loan, foreclosure proceedings can come into effect.

The Federal Housing Administration (FHA) was established in 1934. The FHA insures loans made to borrowers by banks and other lenders. FHA insures loans for home construction, home purchase, and refinance loans. The FHA does not issue loans. The FHA is a part of the U.S. Dept of Housing and Urban Development that insures certain mortgages. Although the FHA does not fund loans, it does establish underwriting guidelines and construction standards for loans it guarantees . By guaranteeing the loan, the FHA gives lenders the confidence that the loan will be paid, even if the borrower defaults on the loan.

Your lender may be able to provide a temporary reduction or suspension of your mortgage payments for a short period, such as 3 or 4 months. After this time, your lender will work with you to create a repayment plan for the loan. You may qualify for forbearance if you have experienced a reduction in income (for example, if you have become unemployed) or an increase in living expenses (for example, higher medical bills). You must provide information to your lender to show that you will be able to stick with the new payment plan.

If the mortgagor (the borrower) defaults (fails to make the monthly mortgage payments), the mortgagee may reach the land to satisfy the debt. In some states this is accomplished with a a judicial foreclosure. This is a lawsuit in which the mortgagor is evicted and the property is sold under the supervision of a government official, such as a sheriff. A judicial foreclosure can start 120 to 180 days following a default.

A collateral claim against property. Mortgages and car loans are voluntary liens. Judgments and tax liens are involuntary.

Your lender may be willing to rewrite the terms of your original mortgage loan to address your financial situation. A loan modification is designed to make your monthly payments affordable. Changes to your loan may include extending the number of years to repay and changing the interest rate, including changing an adjustable rate to a fixed rate. You may have to pay a processing fee to obtain a loan modification.

Loss mitigation is the process by which banks try to cut their losses on loans that are not being paid back as agreed. During the loss mitigation process, the lender works with the borrower to find a mutually acceptable solution. If a solution can't be found that keeps the borrower in the home, such as a loan modification or forbearance, the lender may compel a solution the forces the borrower from the home, such as a foreclosure or short-sale.

Market value is the dollar price that a property will sell for, when both the buyer and seller are acting in their own best interests and are unaffected by undue pressures.

A mortgage consists of two documents: a note (or bond); and the mortgage itself. The note is the buyer’s personal promise to make the repayments. If there is a foreclosure against the property and the foreclosure sale does not yield enough to cover the outstanding mortgage debt, the note serves as the basis for a deficiency judgment against the borrower for the balance still due. The mortgage itself is a document that gives the lender the right to have the property sold to repay the loan if the borrower defaults. Since the mortgage in effect gives the mortgagee (the lender) an interest in the land, the mortgage is recorded at the county clerk’s office.

when a home owner suffers a medically verifiable illness/disability and thus cannot work, this type of insurance covers a specified number of payments.

In mortgage terminology, non-prime is another word for subprime.  Non-prime loans are loans that are available to higher risk borrowers, such as borrowers with: limited credit history, high debt to income ratios, blemished payment history, and a recent bankruptcy filing.

A non-recourse loan is a loan where the creditor's ability to collect on a defaulted loan is restricted to any assets used to secure the loan. With a non-recourse loan, if the lender forecloses, then it cannot get a deficiency judgment and attempt to collect it from the borrower. Whether a loan is recourse or non-recourse depends on the state you reside in and the specific terms of the loan.

If your mortgage is insured by a private mortgage insurance firm, your lender might help you file a claim. Some insurers provide a one-time, interest-free loan to bring your account up to date. The interest-free loan is due when you refinance, pay off your mortgage, or when you sell the property.

payments made by the insured in order to own the policy.

A deed of trust allows the trustee to sell the property in a private sale if the borrower defaults. The private sale must occur in a commercially reasonable manner so as to bring the highest price possible. A private sale may occur as soon as 60 days following a default.

A recourse loan is one where the lender has the legal means to collect the deficiency balance from the borrower.

Lenders are often willing to reinstate your loan if you make up the back payments in a lump sum by a specific date. A forbearance plan may accompany this option.

Your lender may agree to a plan that includes your regular monthly payments plus a portion of the past due payments each month until your payments are caught up.

Your lender will usually give you a specific amount of time to find a buyer and pay off the amount you owe on your mortgage. Your lender may require you to use a real estate professional to help you sell the property.

If you can't sell the property for the full amount of the loan, your lender may accept the amount you get for the selling price, even if it is less than the amount you owe. You may owe income taxes on the difference between the amount you owe and the amount you are able to pay back. Check with the Internal Revenue Service for tax information.