Stay or Walk Away?
There are several factors you should consider before making the decision between seeking a loan modification or walking away and letting your home fall into foreclosure.
June 25, 2011
Stay or Walk Away?With the economy in such a slump, it's not surprising that more borrowers than ever are in danger of losing their homes in 2011. More than one million homes were repossessed in 2010, an increase from the 918,000 seized in 2009. According to Realty/Trac, a web firm that tracks foreclosed homes, 1.2 million homes will probably be taken back by lenders this year, an increase of 20 percent. And it seems likely that this number will continue to rise for the next few years.
The recent trend among mortgage providers is to suggest loan modifications before resorting to foreclosure when homeowners are no longer able to meet their monthly mortgage payments. However, there are several factors you should consider before making the decision between seeking a loan modification or walking away and letting your home fall into foreclosure.
First, according to Dean Wegner, a mortgage specialist and writer in Scottsdale, Arizona, nearly half of loan modifications end in default. When a loan is modified, the interest rate could be lowered, the time in which to pay back the loan might be extended, or part of the loan might be forgiven. In some cases, however, homeowners might still be unable to make their mortgage payments even after the loan is modified.
Second, loan modification is not a given. There is no guarantee that the lender will approve any change in your current terms. The process is also long and complicated, and you could find yourself waiting for a decision from six to 12 months, only to be told the lender is unable to modify your loan.
Borrowers who are not good candidates for loan modification, such as those who won't be able to make even a modified payment, may be tempted to walk away, although doing so is not without ramifications.
For one thing, foreclosure is deadly to credit, remaining on the homeowner's credit report for seven years. Employers might also ask about foreclosure, even after the foreclosure no longer appears on the credit report, which could affect future employment opportunities. Another consideration is that the lenders in some states can pursue the former owner for the amount of money the lender lost after the house has been sold.
Deciding whether to seek loan modification or walk away and allow the foreclosure to happen depends on each individual's circumstances. If you are having trouble paying your mortgage or experiencing other financial difficulties, it is important to contact an attorney to discuss your options.
Article provided by The Law Offices of Allison B. Crain & Associates
Visit us at http://www.crainlaw.com