Another problem is that mortgage companies have a history of reporting to their borrowers that "everything is fine", when in fact nothing is usually set in stone until the final loan papers are drawn up.

It is generally not recommended to leave your entire fate in the hands of a mortgage company. It is too easy for them to back out in the final hour, leaving you in a very dangerous situation.

In many cases where enough equity exists, refinancing can be a simple solution. This can be done through a new mortgage company, or through a negotiation with the current lender in which they refinance the current mortgage to include the past due amount (the arrears). With this form of financing, new loan documents are drafted.

Be aware that if there are any other mortgages on the property, second mortgage, home equity loans, etc., these junior lien-holders must agree to remain in their present lien-holder position by entering into a subordination agreement with the primary lender. If there are no other mortgages, the process is much simpler. The homeowner will benefit from this type of refinancing in that the lender will wrap the past due payments into the new loan. (much like a loan modification)

The biggest barrier that is faced in exercising this option is a lack of equity. A straight refinance usually works only if you have substantial equity in your homes.

Shortsale/Preforeclosure Sale This strategy can be attempted with great success if you don't have the funds or the ability to keep your home.

A shortsale is when the lender agrees to accept less than the full principle plus arrears as payment in full in exchange for being paid off right away. The most the lender will usually discount is ten to fifteen percent of the full amount owed. The prudent lender will cut their losses, saving money from being spent on additional foreclosure costs and legal fees versus taking the property back and then having to market and sell the property. This strategy of a shortsale is usually performed through a third party professional and who is also experienced in negotiating shortsales. The lender factors in something that they call the "time-value of money". The experience and expertise of the professionals that you use will have much to do with the success or failure of the technique. Make sure that the people you use specifically have experience successfully negotiating shortsales. We recommend Platinum Property Management to our clients looking for this resolution type. Please call us for any information on how to contact their office.

Bankruptcy

Generally speaking, of the various chapters of Bankruptcy available, the option that provides the most protection to a homeowner who has substantial arrears and is trying to save his/her house is Chapter 13.

Discussing the many details of the differences between Chapter 7 and Chapter 13 is beyond the scope of this information being provided

Bankruptcy is a severe form of financial reorganization since it involves government intervention into your financial affairs as well as publicly blemishes your credit report for several years.

In order to file for bankruptcy, a filing fee must be paid, plus any attorney costs, and an assortment of forms and schedules must be filed with the clerk of the Federal Bankruptcy Court. Both extreme care and honesty must be exercised while filling out these forms and schedules. Mistakes can result in a dismissal of the petition as well as non-discharge of certain debts.

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