We need help! We live in oregon and bought our home in 2006, we payed $169900. My wife was laid off in Jan. 09, and can only find part time work, her unemployment will run out in 13 wks. We have been working with the 1st to modify and just received documents stating the modification on the 1st will be lowered by only $95 a month. A home around the corner with 2 more bedrooms and 400 more square ft just sold for $39900. Many homes in our neighborhood are in foreclosure because they could not short sell. We are upside down, my work is cutting my hours, and I don't think we can continue to make the mortgage payments. What should I do?
You have several options if you cannot afford the modified mortgage payments. You can do a short sale, deed in lieu of foreclosure, foreclosure, or bankruptcy. Each of these options will impact your credit score with different levels of severity.
A short sale is where the mortgage holder agrees to accept less than the balance owed on the mortgage at sale to prevent foreclosure. The lender would much rather see you sell the property than be forced to take the property through foreclosure, as foreclosure is a costly and time-consuming process. You should contact your mortgage lender to discuss what it can do to assist you in selling the property through a short sale, and what are its procedures and requirements. Explain to the lender that you cannot afford your mortgage payments, and that you need to sell the property through a short sale to prevent foreclosure. Generally speaking, upon completion of a short sale the debtor is not liable for the deficiency balance. However, Bills.com readers have reported that some lenders are pursuing debtors for the deficiency balance. The impact of a short sale on your credit score will be slight. To learn more about short sales read information on effect of short sale on credit score.
In a deed in lieu of foreclosure, the property owner surrenders the property to the lender voluntarily in exchange for the lender canceling the loan. The lender promises not to initiate foreclosure proceedings, and to terminate any foreclosure proceedings already underway. The lender may or may not agree to forgive any deficiency balance that results from the sale of the property. The impact of a deed in lieu of foreclosure on your credit score will be slight. Read A Deed In Lieu Of Foreclosure vs. A Short Sale to learn more about both of these options.
You should pursue all available alternatives to foreclosure. Foreclosure is the legal process through which a lender (most typically a mortgage lender) claims an asset from the consumer borrower. Foreclosure is almost always a last ditch option for your mortgage company, and should typically be the last option, aside from bankruptcy. A foreclosure can severely impact your credit score for up to seven years. To learn more about foreclosures please visit Judicial Foreclosure and Foreclosure Information with Advice and Assistance.
Bankruptcy is a complicated process, including Chapter 7 bankruptcy and Chapter 13 bankruptcy options for consumers seeking to get debt relief, unfortunately, after the passage of the Bankruptcy Reform Act in 2005, it became harder to file for a liquidation bankruptcy, and there is now more complexity to an already intimidating process. Bankruptcy is a last resort and will appear on your credit report for 10 years, although its practical impact is much shorter. To learn more about bankruptcy I encourage you to read Types of Bankruptcy.
If you are considering foreclosure or bankruptcy I encourage you to consult with an Oregon attorney who has experience in bankruptcy matters.
I hope this information helps you Find, Save, and Learn.