Explore other options before foreclosure

This was originally published on Monday, October 14, 2013, in the Pacific Daily News.  Click here to subscribe to the PDN.

I gave some options on trying to keep your home and avoiding a foreclosure in the article last week.

Sometimes, due to a loss of a job, health problems or other financial issues, you may come to the realization that keeping your home is not possible.

A foreclosure should be the last option. Some consequences of a foreclosure are: being evicted from your home, damaging your credit, possible obligations to pay a balance after a foreclosure sale and forfeiting any ability to purchase another home.

There are other options that you may explore before going through a foreclosure.

• Short sale. A short sale is when you sell your home for less than what you owe on your mortgage. Your mortgage company must agree to a short sale. It’s not as damaging to your credit as a foreclosure and stays on your credit report for at least two years. It will give you some time to transition out of your home and in some instances give you money to help you relocate through the federal Home Affordable Foreclosure Alternatives (HAFA) Program (http://www.makinghomeaffordable.gov). You may be obligated to pay a balance on your mortgage.

• Deed-in-lieu of foreclosure. Your financial institution may agree to a voluntary transfer of the ownership of your home to your mortgage institution. Like a short sale, it will clear your credit report in at least two years, you may still be required to pay a balance and you may qualify for monetary relocation assistance.

• Bankruptcy. If you have no other way to avoid foreclosure, you may want to consider filing for bankruptcy. In some cases, bankruptcy can stop or postpone the foreclosure of your home or even allow you to keep your home. Get legal advice to decide if a Chapter 13 or Chapter 7 is best for your situation. A bankruptcy usually lasts 10 years on a credit report.

Depending on the severity of your delinquency, you may receive a notice of default. Three to six months after the first missed payment, banks generally start the foreclosure process, starting with a foreclosure letter. The lending institution will usually give you a month to bring the account up-to-date. This will include missed payments, interest, late, administrative and attorney fees. It is imperative to get legal advice before getting to this point.

Michael Camacho is president and chief executive officer of Personal Finance Center. He has more than 20 years of experience in retail banking and at financial institutions in Guam and Hawaii. If there is a topic you’d like Michael to cover, please email him at moneymattersguam@yahoo.comand read past columns at the Money Matters blog at www.moneymattersguam.wordpress.com.

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