I live in Buckeye, AZ. I built my house in 08. When the prices of houses dropped mine appraised at $137,000 and I owe $294,000 and the bank told me they don't do mortgage loans so they gave me a 5-year interest-only with a payment of $1,785 not including insurance and tax that was after we asked for a lower payment. My wife recently lost her job and I am finding it harder and harder to pay all my bills and my savings is dwindling fast. What can I do to get out of this loan without losing everything and try to find a home that fits my budget?
My answer explores options for you to stay in the home or sell it without incurring a large liability, including:
The foreclosure process is expensive for all parties concerned, and the cumulative effect of many foreclosures can depress housing prices. To stabilize the housing market, the Obama administration created the Making Home Affordable (MHA) initiative. One program in MHA is the Home Affordable Refinance Program. HAMP is available to residents of their homes whose first mortgage is no more than 125 percent of the property's current market value. It is open to open to homeowners whose mortgage is guaranteed by Fannie Mae or Freddie Mac. Borrowers must be current on their mortgage, but at risk for foreclosure. To qualify a homeowner must also not owe more than $729,750 on a single-unit home, and their monthly mortgage payment must come to more than 31 percent of their gross income.
Another MHA program is Home Affordable Foreclosure Alternatives (HAFA). HAFA sets guidelines for short sales and deeds in lieu of foreclosure for distressed homeowners. If your servicer (the financial institution collecting your mortgage payments) participates in HAFA, then the servicer must follow HAFA's guidelines and deadlines. The guidelines provide financial incentives for both servicers and homeowners. The homeowner must also be eligible for HAMP, as set forth by the program guidelines.
Foreclosure is the legal process through which a lender (most typically a mortgage lender) repossesses an asset from the consumer borrower who has defaulted on their mortgage payments. Because foreclosure is expensive and usually results in a poor return, lenders do not like foreclosure any more than homeowners do. Accordingly, learn more about HAFA, as discussed above.
Arizona foreclosure laws are found in Title 33, Chapter 6, Article 2.
Under Arizona law, a lender may be prevented from suing the borrower for the deficiency following a foreclosure. However, Arizona's anti-deficiency laws are tricky. Under Arizona 33-814, a homeowner is liable for a deficiency judgment if they have not resided in their home for six consecutive months. A deficiency on a purchase-money mortgage is not allowed on residential property if a single one-family or single two-family dwelling that is on 2.5 acres or less (33-814G). A deficiency is allowed if the value of the house has declined because the homeowner has committed waste (33-814A). Consult with an Arizona attorney with experience in property law to understand your rights and liabilities in your situation.
You can resolve a deficiency balance or deficiency judgment in bankruptcy or debt settlement. Bankruptcy is a complicated process. Chapter 7 and Chapter 13 bankruptcy are the options appropriate for most consumers seeking 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. Filing bankruptcy can be difficult and, though a consumer can do themselves, I advise consumers to consult with an attorney licensed in their state to ensure the filing is completed accurately.
Debt settlement is an alternative to bankruptcy. It is also called debt negotiation, and is the process by which creditors agree to forgive a part of a balance, saving the debtor up to 60% of the original balance. The debtor pays the new agreed-upon sum. A debtor can negotiate directly with creditors or hire a debt settlement service to negotiate for you.
Apply for HAMP first. If you do not qualify and cannot afford to remain in your home, ask your loan servicer about putting the home on the market in the HAFA program. Do what you can to avoid foreclosure.
I hope this information helps you Find. Learn & Save.