Your Lender’s Options When You Face Foreclosure

Your Lender’s Options When You Face Foreclosure

 

These are your lender’s options when you are facing foreclosure

 

  • Establish a new repayment plan
  • Partial Claim
  • Deed In Lieu
  • Sell during Pre-Foreclosure stage
  • Foreclose and sell at Auction
  • Sell as a Bank REO

 

New Repayment Plan

This comes in two forms: 1) Forbearance or 2) Loan modification. In both cases, the bank will establish a new repayment plan that will allow you to repay the loan based upon your situation. You will need to qualify for either program. For more information, click the appropriate links above.

 

Partial Claim

The lender will advance funds on behalf of the borrower from HUD in an amount necessary to reinstate the delinquent loan. This will not exceed 12 months PITI. They will then create a promissory note (Partial claim) payable to HUD, due and payable when the property is paid off or the borrower no longer own the property.

 

Deed In Lieu

With this, the bank will allow you to voluntarily sign the house back over to them in exchange for relief from all obligations…also called “voluntary foreclosure.” For more information, click here.

 

Sell During Pre-Foreclosure Stage

The lender will accept payment in full for the property from a “normal” sale, if you can get it…or from a shortsale if they approve it.

 

If you do a shortsale, you will be held liable for the difference between the shortsale price and the loan balance…unless, of course, you ask for a formal release from the obligation. For more information, contact us here.

 

Foreclose and Sell At the Auction

In reality, banks do not want houses, they want money. So, if they happen to foreclose on a property, an attempt will be made to sell it a auction. The sheriff will order an appraisal to establish a price. Bidding will start at 2/3 of this appraised price, and the property will be sold to the highest bidder. Ninety five (95%) of the properties at the auction are bought back by the lender. The other five (5%) is sold to third party investors. The investor/buyer must make a 10% down payment with the rest due and payable within 30 days.

 

Sell As A Bank REO

If the property is not sold at the auction, the bank will take back the property and sell it as Real Estate Owned …usually at a discounted price. An agent will do a comparative market analysis on the property. The agent will then list the property and try to get as much as possible for it. 

 

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