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How can I avoid a foreclosure?
Homeowners that have found themselves in a situation where
meeting their mortgage payments are extremely difficult have
multiple options.
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Refinancing: Homeowners who
are current with their mortgage payments may be able to take
advantage of today’s mortgage rates and keep their home by
refinancing to a 30 or 15 year fixed rate using a Home
Affordable Refinance, from the Making Home Affordable
initiative. For more information regarding eligibility
criteria, visit
www.MakingHomeAffordable.gov.
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Sell and Bring Cash to Closing:
Although many homeowners today may not have the necessary cash
to “cure deficiencies” at closing, they may be able to liquidate
assets such as IRAs or Treasury Bonds to do so. By curing
deficiencies, or paying the difference at closing, homeowners
can avoid the credit damage that a foreclosure or short sale can
cause. Before considering the liquidation of assets for
closing, consult with a financial or tax professional.
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Lender Workout: Lenders will
often work with distressed homeowners to help them keep their
homes by reducing or rolling back interest rates, forgiving back
payments, adding them to the loan amount, or possibly recasting
the entire loan and wrapping all fees into a fixed-rate
mortgage.
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Deed in Lieu of Foreclosure:
A deed in lieu of foreclosure occurs when the borrower agrees to
trade the property to the lender in exchange for the
cancellation of the note. Market conditions as well as
state-specific laws influence whether and how a lender accepts a
deed in lieu of foreclosure. Typically, lenders are less
willing to consider a deed in lieu of foreclosure.
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Do Nothing or Walk Away: If
homeowners are simply unhappy that the value of the property is
less than what they paid or owe, they need to contact an
attorney for advice. Walking away from the loan or asking
the lender proceed with a short sale simply because the value
went down may not be a viable option and if it is, there will
most likely be additional financial consequences.
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