Mortgage modifications take many forms—interest rate reductions, extending the length of time it takes to pay off the mortgage, adding part of the amount owed to the end of the mortgage, adding all delinquencies to the back-end of the loan, and, in some cases, principal reduction. The following are some of the programs that may be available to people seeking a mortgage modification:
- Many mortgage servicers offer in-house modifications. The eligibility guidelines and applications processes vary by servicer, so borrowers should contact their mortgage servicer directly to determine any available options.
- Navigating the Loan Modification Process
Beware! There are many mortgage modification scams in the marketplace. Remember, you do not have to pay a fee for assistance with a modification.
Refinancing Your Mortgage
If you are considering refinancing your mortgage, you should contact your lender directly to see if it will refinance your loan. In addition, you may qualify for one of the modification options described above. You may also try refinancing through another lender or contact a U.S. Department of Housing and Urban Development approved nonprofit housing counselor for additional assistance. Be very careful about who you select to assist you, as there are many refinancing scams in the marketplace (more on this below).
Sell the Property
You can hire a realtor and list the property for sale. If a commissioner has not been appointed (i.e., no summary judgment is yet in favor of the mortgage holder), the foreclosing plaintiff may allow the homeowner to stay in the property, provided that it is listed. Mortgage holders typically just want payment on the mortgage, and are less interested in how that happens. Of late, prices are very high, and sales are a very viable option that may enable a homeowner to save the equity in the home (or at least escape without owing a deficiency).
A short sale occurs when a lender allows a homeowner to sell their home for less than the principal balance of the mortgage. With short sales, the lender may still hold the seller responsible for the deficiency. And if the seller has a second mortgage, he or she may be responsible to the owner of the second mortgage for any deficiency as well. People interested in a short sale should contact their lender about the application and qualification process. Because short sales can have income tax consequences, they may also want to consult with a tax advisor.
Cash for Keys
Cash for keys is a way for a bank in a foreclosure situation to convince a homeowner to vacate a property in exchange for an agreed upon sum of money. Although it may seem counterintuitive, cash for keys in many instances is less expensive than going through a lengthy eviction process.