Repayment Plan May Help Prevent Foreclosure
Mar 11th, 2008 @ 12:32 PM by MortgageMentor
Millions of homeowners are currently experiencing foreclosure proceedings. About half of delinquent borrowers with loans are contacted by their bank and offered some sort of repayment option. Lenders prefer to work out loans because the cost is thousands less than going to foreclosure or repossessing a home. Borrowers who agree to enter such a plan may be up to 80% less likely to lose their homes than borrowers who do not. There are several alternative plans usually offered by Fannie Mae, Freddie Mac and the FHA. Let’s take a look at the terminology used for some of those now.
Short-Term Forbearance. This allows the borrower to suspend a few payments or reduce payments for up to half a year in order to allow them to get back on their feet.
Partial Reinstatement. In a partial reinstatement, you make your regular monthly payments and pay off the miss payments and agreed upon amounts over a year. This allows you to catch up on lost payments due to short term income reduction.
Long-Term Forbearance. Much like short-term forbearance, long-term allows a suspension or a reduction of payments over several months, and possibly up to a year. It deals with more serious delinquencies.
Loan Modification. In this scenario, the lender may lengthen the entire loan term, or reduce your interest rate. It is a permanent change to your agreement, allowing you to avoid foreclosure by changing the structure of your mortgage.
Partial Claim. A partial claim works a lot like a second mortgage. The borrower signs a promissory note that says he will repay the lender when the house is sold. The lender in turn, brings the mortgage payments current.
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Good post on some of the options that may be available to homeowners in foreclosure. Too often, then reason they give up and walk away from the house is because they just don’t know that they can escape the process, let alone how to do it. But the more people are exposed to the possibility of avoiding foreclosure, the better the chances they will research some of these options if they run into financial trouble.