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When you are behind on your mortgage payments, reinstatement lets you pay back the amount in lump-sum payment (which may include any interest and penalty charges) before a specific date.

Pros

Your obligations for the mortgage are fulfilled and updated the current payment status. This allows you to be current. The lender must reset the delinquent payment to zero. You will need to pay late fees, etc.

Cons

None. You have reinstated your mortgage. Make sure you have the financial ability to keep payments current.

The Consumer Financial Protection Bureau (CFPB) puts it best:

A reverse mortgage is a type of loan that allows older homeowners to borrow against the equity in their homes. It is called a reverse mortgage because instead of making payments to the lender, you receive money from the lender. You are using the equity in your home to provide a constant cash flow for living and enjoying expenses.

Pros

Reverse mortgages can help you access the equity in your home to handle day-to-day expenses and emergencies, establish an equity line of credit, and more.

Cons

Do you want to leave your home to your children? Is the loan only in your name and not your spouse’s? Could you be moving anytime in the near future? Do you anticipate any problem at all making payments on property taxes, homeowners insurance, and/or home maintenance?

If you answered yes to even one of those questions, a reverse mortgage can complicate your finances at best and at worst, leave you or your heirs without a house.

A loan modification is an agreement between you and your lender that allows you to modify the existing terms of your home loan with the goal of making your payments more affordable.   Remember that your bank has a financial incentive to keep you in your home making payments.  If you have the opportunity to try a home loan modification program, our experienced legal team will help negotiate to obtain a favorable deal for you and your family.

Loan modification allows you to refinance your mortgage loan or extend its term. The lender may settle for monthly mortgage payments that are within your financial means. However, to qualify for this alternative you need to persuade your lender that your monetary problems are only temporary and will soon be resolved.

Pros

A loan modification can lower your mortgage rate, decrease your loan term, and bundle closing costs into the new loan.

Cons

There are a lot of loan modification scams. A whole lot. Separating the good guys from the bad guys is almost a cottage industry in and of itself. MakingHomeAffordable.gov has some information that helps, as does the Federal Trade Commission. A loan modification can be very beneficial, but you need to advance carefully to avoid falling prey to a mortgage relief scam.

What Programs are Available?

Although your lender may have specific requirements for eligibility into a home loan modification, there are also government programs available to assist you.

1. Home Affordable Modification Program (HAMP)
2. Home Affordable Refinance Program (HARP)
3. Florida Hardest Hit Program

Forbearance

Sometimes a short-term financial hitch, such as a medical emergency or a sudden, unexpected decrease in income, may not allow you to make mortgage payments on time. If your lender believes that you have a valid reason behind the missed payments, it may agree to help you out by granting you a forbearance.

Depending on your financial circumstances, your lender may consent to a repayment plan that temporarily lowers your payments—or even suspends them for a specified period. However, to secure this agreement you will have to assure your lender that you will resolutely abide by the new repayment plan.

The CARES Act directs that if a residential borrower is experiencing financial hardship due to COVID-19, they can be granted forbearance on your federally-backed mortgage loan for up to 180 days, with the option to extend for another 180 days (potentially relief for a total of 360 days).

Refinancing your mortgage means you are replacing the old mortgage with a new one that includes terms more favorable to you; a lower interest rate, for example. This is how refinancing a loan is different than modifying a loan: modifying a loan makes some adjustments to the loan but keeps the same loan in place.

Pros

Refinancing a loan can improve the terms for you, such as decreasing your interest rate.

Cons

Getting the most out of a mortgage refinancing scenario requires the stars to align just so: you’re not planning on moving soon, your credit is good, you won’t have a problem paying closing costs, you’re not interested in tapping into your home’s equity and so on.

Refinance With a Hard Money Loan

Your lender may refuse to refinance your loan if it considers you to be a high-risk borrower. In this case, you can contact a private lender to refinance with a hard money loan to stop foreclosure. Such loans generally have astronomical interest rates and fees, but one could allow you to buy the time you need to avoid foreclosure.

Refinancing your mortgage with a private lender as a hard money loan should be a method of last resort, as the interest rates and fees are extremely high.

In a deed-in-lieu of foreclosure agreement, your lender assumes ownership of your home rather than have it enter the foreclosure process.Another way out is to willingly give your property to the lender in return for pardoning your debt. You will qualify for a deed in lieu of foreclosure only if you are unable to sell your home before foreclosure. It’s often considered alongside a short sale and only marginally better than a full-on foreclosure.

Pros

The primary way a deed in lieu of foreclosure is helpful? It isn’t a foreclosure.Just like a short sale, the use of a deed in lieu is one potential solution to avoiding foreclosure and if done correctly a deed in lieu can be negotiated to allow homeowners to avoid a deficiency judgment against them.

The most attractive portion of the deed in lieu is that after the process is completed, you are completely released from the debt associated with the loan in some circumstances. There aren’t many helpful turns at this stage.

Cons

Some experts believe that your credit score suffers from a deed in lieu of foreclosure as much as it would an actual foreclosure. Factor in any damage your credit score received from missed mortgage payments, and you have a scenario that will haunt your credit score for a long time.

And if you plan on buying another home, make sure those plans are no sooner than two years off, and maybe as many as four years. That’s how long Fannie Mae and Freddie Mac will wait before purchasing mortgages under a deed in lieu of foreclosure circumstances.

Lenders are also hesitant to agree to deed-in-lieu of foreclosures. Why? They worry the homeowner could sue at a later date and claim they didn’t understand what they were doing; they’re on the hook for any second or third mortgages the homeowner may have; and finally, they want to be certain the financial distress is real.

Keep in mind that when you are considering a Deed in Lieu of foreclosure you are really offering to your bank the option of retaking the title to your property, which your bank will then have to turn around and sell to a qualified buyer.  If you have additional interests that have placed liens on your title, like second mortgages or tax liens, or home equity loans, then your bank will not have clear title to freely dispose of your property.  Those sort of issues make a deed in lieu unattractive option if you have second mortgages.

A deed in lieu of foreclosure will also have some serious potential tax consequences.  Fortunately, the Mortgage Forgiveness Debt Relief Act which was in play for 2013 allows a debt to be forgiven if it related to a borrower’s primary residence and certain other conditions applied.  If you’re considering a deed in lieu as a foreclosure option, make sure you speak with a qualified professional to consider your potential tax consequences.

USA.gov defines a foreclosure as a situation in which a homeowner is unable to make mortgage payments as required, which allows the lender to seize the property, evict the homeowner, and sell the home.

Pros

A foreclosure helps in that it alleviates the stress and pressure the homeowner feels over missed mortgage payments and an uncertain future.

Cons

You can no longer live in the place you call home. Foreclosures can damage your credit score to the tune of 250-280 points and may stick around on your credit report for as many as seven years. Foreclosure is so damaging to your credit that it can make your whole life more difficult, from applying for a credit card to renting an apartment.

You’ll face years of expensive and limited credit opportunities. You may even face limited job opportunities since some employers look at credit scores when evaluating potential applicants. You’ll also need to wait three to seven years in order to buy a home again.

Sadly, the consequences of foreclosure don’t stop there. The list of long-lasting and debilitating downsides just keeps growing. Consequences include:

• An embarrassing and public eviction from your home
• Uncertainty and stress of not knowing exactly when you’ll leave your home or where you’ll go
• Owing a deficiency balance after the foreclosure sale
• Losing any relocation assistance or leasing opportunities that may be available if you avoid foreclosure

Forfeiting the ability to get a Fannie Mae mortgage to buy another home for at least seven years

Bankruptcy, specifically chapter 13 bankruptcy, allows people with regular income to repay all or part of their debts over anything from three to five years. An important feature is that it can help homeowners avoid foreclosure.

Pros

Filing bankruptcy provides some breathing space to people faced with severe financial hardships, a chance for them to receive the support necessary to address their income problems.

Cons

This option does the most significant amount of damage to your credit score, wiping out anywhere from 130 to 240 points. A bankruptcy can stay on your credit report for as long as a decade. As far as personal finances are concerned, bankruptcy is a weapon of mass destruction best avoided if at all possible.

Bankruptcy will usually not buy you enough time to catch up on your debts; more often than not, it merely postpones the inevitable.

Bankruptcy

Many people believe that filing for bankruptcy is an excellent solution to foreclosure. In reality, all bankruptcy can do is delay the foreclosure process and possibly buy you some time to catch up on your payments.

Once the bankruptcy-instated suspension is revoked, the lender can ask for a full payment, which may require that you apply for a refinancing loan. However, the chances of getting a refinance loan are almost zero at this point, because the bankruptcy declaration will have left you with a negative credit score.

If you are absolutely convinced about your deteriorating finances, then the only option left for you is to sell your home for less than the amount required to pay the mortgage loan. You may be eligible for this alternative only if you default on your mortgage payments by a few months or as specified by your lender. Also, you may be required to sell your home in a specific amount of time.

If you can’t bear to move out, you could sell your house to a friend or an investor who will then lease the home to you. The best way to do this is to sign a lease (or contract) that includes an “option to purchase” clause, which gives you the right to buy back your home once your finances have improved. However, this alternative does have significant risks, as the investor can borrow against your property or even sell your home without your authorization while you are leasing it.

As a homeowner, it is up to you to take all the necessary steps to save your house from foreclosure. The easiest way is to stay away from situations that cause it. Excessive debt, adjustable-rate or exotic mortgages, insufficient emergency resources, lack of insurance, and buying a home you can’t really afford will all increase your risk of foreclosure.

It is important to scrupulously research the best interest rates available and pick the mortgage term that is right for you. For example, 40-year mortgages will typically allow you to make lower monthly payments than traditional 30-year fixed mortgages. That said, the interest rates for these mortgages tend to be higher. Use an online mortgage calculator to best estimate your total mortgage costs and plan ahead.

Occasionally, financial setbacks can get in the way of making regular mortgage payments. When this happens, the only wise thing to do is to immediately inform your lender about the situation. In most cases, they will be willing to cooperate with you and help you catch up. Often lenders are not interested in foreclosing on your house except as a last resort, because of the costs and time involved in the process.

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