Foreclosure Options Presentation


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Foreclosure Options Presentation

  1. 1. Foreclosure Options and Alternatives Crisis Budget Workshop resources compiled by Arizona Saves
  2. 2. IF you are not in default yet… <ul><li>Default = late on payments </li></ul><ul><li>If homeowner is in danger of becoming delinquent because of financial hardship or impending interest rate adjustment… </li></ul><ul><ul><li>Determine objective – does the homeowner want to keep the home? </li></ul></ul><ul><ul><li>Reduce expenses & prioritize debts </li></ul></ul><ul><ul><li>Liquidate assets </li></ul></ul><ul><ul><li>Refinance to lower rate (if eligible) </li></ul></ul>
  3. 3. IF you are in default <ul><li>If homeowner is 30, 60 or 90 days late = in default </li></ul><ul><li>Contact lender’s Loss Mitigation Department (not the collection dept.) as soon as possible </li></ul><ul><li>Respond to communications from the lender </li></ul><ul><li>Provide complete disclosure of your circumstances </li></ul><ul><li>Contact a HUD Certified housing counseling agency who offers foreclosure prevention services ( to find counselor) </li></ul>
  4. 4. Documents to have ready: <ul><li>Hardship Letter: </li></ul><ul><ul><li>The circumstances that led to delinquency, (why you’re late or unable to pay) </li></ul></ul><ul><ul><li>What foreclosure prevention option the homeowner is seeking, </li></ul></ul><ul><ul><li>An overview of income & expenses, </li></ul></ul><ul><ul><li>State whether homeowner has a lump sum saved to offset any delinquency, </li></ul></ul><ul><ul><li>Describe proposed plan. </li></ul></ul>
  5. 5. Documents to have ready… <ul><li>Disclosure of financial information: </li></ul><ul><ul><li>Budget Worksheet </li></ul></ul><ul><ul><li>Loan Documents (copies of Promissory Note & Deed of Trust, and other loan docs) </li></ul></ul><ul><ul><li>Income Verification (recent pay stubs or other documentation for all household members) </li></ul></ul><ul><ul><li>Tax returns and W-2 forms </li></ul></ul><ul><ul><li>Bank statements (most recent 3 months) </li></ul></ul><ul><ul><li>Copies of bills (for any loans, credit cards, other debts and obligations) </li></ul></ul><ul><ul><li>List of Assets and documentation of same </li></ul></ul><ul><ul><li>Hardship verification (medical documents, divorce papers, court documents, job loss information, etc.) </li></ul></ul><ul><ul><li>Verification for anticipated changes to income and expenses </li></ul></ul><ul><ul><li>Other documentation as requested </li></ul></ul>
  6. 6. Options to KEEP Your Home <ul><li>Repayment plans/special forbearance </li></ul><ul><ul><li>Available for short-term financial hardship </li></ul></ul><ul><ul><li>Suspends or reduces monthly payments for short period of time </li></ul></ul><ul><ul><li>After the agreed time period, homeowners must pay regular monthly payments plus additional amounts until the deficiency is repaid </li></ul></ul>
  7. 7. Options to KEEP Your Home <ul><li>Loan modification – changes the terms of the original mortgage agreement </li></ul><ul><ul><li>Reduction of the interest rate </li></ul></ul><ul><ul><li>Extension of the loan payment period </li></ul></ul><ul><ul><li>Reamortization with capitalization of arrears </li></ul></ul><ul><ul><li>Reduction of the principal balance </li></ul></ul><ul><ul><li>May result in lower payment amount </li></ul></ul>
  8. 8. Options to KEEP Your Home <ul><li>Partial claims – FHA loans only </li></ul><ul><ul><li>Interest-free loan from HUD/Insurer to bring the loan current </li></ul></ul><ul><ul><li>The homeowner signs a promissory note </li></ul></ul><ul><ul><li>Results in a lien filed against the property </li></ul></ul><ul><ul><li>HUD/Insurer is responsible to collect the partial claim amount </li></ul></ul>
  9. 9. If you are not able to keep your home <ul><li>Pre-foreclosure sale </li></ul><ul><ul><li>Quick Sell - sell home to avoid foreclosure </li></ul></ul><ul><ul><ul><li>Appraised value must be more than loan balance </li></ul></ul></ul><ul><ul><ul><li>Sell home quickly at a reduced price </li></ul></ul></ul><ul><ul><ul><li>Lender may freeze foreclosure proceedings to allow time to sell </li></ul></ul></ul><ul><ul><li>Short Sale – sale may be approved by lender even if home is worth less than is owed </li></ul></ul><ul><ul><li>Some homeowners prefer a short sale to foreclosure because the consequences to credit record are less damaging. Lender may or may not waive deficiency. </li></ul></ul>
  10. 10. If you are not able to keep your home <ul><li>Deed-in-Lieu of foreclosure </li></ul><ul><ul><li>Transfer of property directly to the mortgage holder to satisfy the mortgage (only possible when there are no junior liens on the property) </li></ul></ul><ul><ul><li>Avoid foreclosure sale </li></ul></ul><ul><ul><li>Less cost then foreclosure </li></ul></ul><ul><ul><li>Less damaging to credit than foreclosure </li></ul></ul><ul><ul><li>Lender may offer “cash for keys” </li></ul></ul>
  11. 11. Other Options <ul><li>Refinance if eligible (depends on equity) </li></ul><ul><li>FHA Secure or FHA HOPE loans </li></ul><ul><li>Some lenders may have their own special programs. See for a list of participating HOPE Alliance lenders </li></ul><ul><li>For active duty military personnel: Service Members Civil Relief Act </li></ul><ul><ul><li>Reduced home loan interest rate </li></ul></ul><ul><ul><li>Suspension of monthly payments while on active duty </li></ul></ul>
  12. 12. Arizona Foreclosure Prevention Taskforce <ul><li>Established to reduce residential foreclosures in Arizona and the impact of foreclosures on families and communities </li></ul><ul><li>Members include non-profit housing counseling agencies, financial institutions, community development organizations helping to reduce and prevent residential foreclosures in Arizona </li></ul><ul><li> </li></ul><ul><li>1-877-448-1211 </li></ul><ul><li>(Calls taken by “Don’t Borrow Trouble” program) </li></ul>