The current U.S. housing market and national financial crisis has caused untold stress and
heartache for many American families. Foreclosure is one of the most devastating financial
challenges that a family can face and one that many times can be avoided. The options
available to Va Beach-area residents for foreclosure are many. Following is a brief
explanation of these solutions, including their benefits and drawbacks:

Reinstatement
A reinstatement is the simplest solution for a foreclosure, however it is often the most
difficult. The homeowner simply requests the total amount owed to the mortgage company
to date and pays it. This solution does not require the lender's approval and will 'reinstate' a
mortgage up to the day before the final foreclosure sale.

  • Benefit: Does not require the mortgage company or lender's approval.
  • Drawback: Requires that a homeowner be able to pay all back payments, fines and
    fees.

Forbearance or Repayment Plan
A forbearance or repayment plan involves the homeowner negotiating with the mortgage
company to allow them to repay back payments over a period of time. The homeowner
typically makes their current mortgage payment in addition to a portion of the back
payments they owe.

  • Benefit: Allows the homeowner to make back payments over time.
  • Drawback: Requires that a homeowner be in a financial position to pay not only their
    current mortgage, but also a portion of the back payments owed. Some mortgage
    companies will require a homeowner to 'qualify' for forbearance.

Mortgage Modification
A mortgage modification involves the reduction of one of the following: the interest rate on
the loan, the principal balance of the loan, the term of the loan, or any combination of
these. These typically result in a lower payment to the homeowner and a more affordable
mortgage.

  • Benefit: Reduces the payment a homeowner is required to make on a monthly basis
    and may reduce the principal balance of the loan
  • Drawback: Requires that a homeowner 'qualify' for the new payment and will often
    require full documentation. Lender has to be actively pursuing modifications.

Rent the Property
A homeowner who has a mortgage payment low enough that market rent will allow it to be
paid, is able to convert their property to a rental and use the rental income to pay the
mortgage.

  • Benefit: Allows homeowner to keep property indefinitely.
  • Drawback: The issues that can arise with a rental property are many, and rent often
    does not cover the full cost of property ownership and maintenance.

Deed in Lieu of Foreclosure
Also known as a 'friendly foreclosure', a deed in lieu allows the homeowner to return the
property to the lender rather than go through the foreclosure process. Lender approval is
required for this option, and the homeowner must also vacate the property.

  • Benefit: Many times in a successful deed in lieu, the lender will forego their right to a
    deficiency judgment.
  • Drawback: Requires that a homeowner vacate the property, and a deed in lieu may
    be reported to credit bureaus as a foreclosure.

Bankruptcy
Many have considered and marketed bankruptcy as a 'foreclosure solution,' but this is only
true in some states and situations. If the homeowner has non-mortgage debts that cause a
shortfall of paying their mortgage payments and a personal bankruptcy will eliminate these
debts, this may be a viable solution.

  • Benefit: Does not require lender approval.
  • Drawback: If a homeowner cannot afford their mortgage payment, a bankruptcy will
    only stall—not stop—the foreclosure process. Bankruptcy can be costly, is damaging
    to credit scores, and can only be declared once every seven years.

Refinance
If a homeowner has sufficient equity in their property and their credit is still in good
standing, they may be able to refinance their mortgage.

  • Benefit: In some cases, this will lower payments.
  • Drawback: In today's market, a refinance will almost always raise mortgage payments,
    and is an expensive process.

Servicemembers Civil Relief Act (military personnel only)
If a member of the military is experiencing financial distress due to deployment, and that
person can show that their debt was entered into prior to deployment, they may qualify for
relief under the Servicemembers Civil Relief Act. The American Bar Association has a
network of attorneys that will work with servicemembers in relation to qualifying for this relief.

  • Benefit: If qualified, this will lower payments on all consumer debt in addition to
    mortgage payments.
  • Drawback: Must be active military to qualify.

Sell the Property
Homeowners with sufficient equity can list their property with a qualified agent that
understands the foreclosure process in their area.

  • Benefit: Allows homeowner to avoid foreclosure and harvest some of their equity.
  • Drawback: In many cases today, homeowners do not have sufficient equity to sell
    their property without negotiating a short sale (see next solution).

Short Sale
If a homeowner owes more on their property than it is currently worth, then they can hire a
qualified real estate agent to market and sell their property through the negotiation of a
short sale with their lender. This typically requires the property to be on the market and the
homeowner must have a financial hardship to qualify. Hardship can be simply defined as a
material change in the financial stability of the homeowner between the date of the home
purchase and the date of the short sale negotiation. Acceptable hardships include but are
not limited to: mortgage payment increase, job loss, divorce, excessive debt, forced or
unplanned relocation, and more.

  • Benefit: A short sale allows the homeowner to avoid foreclosure and salvage some of
    their credit rating. This also keeps foreclosure off the individual's public record, and
    in many cases will allow the homeowner to avoid a deficiency judgment. Borrower
    may qualify for another mortgage in as little as 24 months (as opposed to five years
    for a foreclosure).
  • Drawback: Short sales can be a trying process in which a homeowner is best served
    by contracting with a qualified real estate agent to guide the way.

This represents only a summary of some of the solutions available to homeowners facing
foreclosure. Please call me today for a free confidential evaluation of your individual
situation, property value, and possible options.
Foreclosure Solutions
Neil Bennett and Associates - Prudential Towne Realty - 757.217.0207 - sellhomz@cox.net
NEIL BENNETT AND
ASSOCIATES
NEIL BENNETT AND
ASSOCIATES
757.449.4587
sellhomz@cox.net
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