In part 1, we discussed three ways to avoid foreclosure in Summerlin. It covered Nevada’s Foreclosure Mediation Program, filing Chapter 13 Bankruptcy, and taking advantage of the Home Mediation Program. In this post, we will look at other options for avoiding foreclosure.
The Federal Housing Administration uses FHA insurance to insure mortgages. The FHA will reimburse the lender if a borrower defaults on their mortgage.
If your mortgage loan has FHA insurance, you might have additional protection from foreclosure. Along with insuring the lender’s investment, the borrower has a right to the loss mitigation process.
Loss mitigation is a process that involves the lender and borrower working together to avoid default. With loss mitigation and potential reimbursement, it helps the lender be more flexible with the borrower.
Forbearance could be another avenue toward avoiding foreclosure. With forbearance, the lender allows you to pause or reduce payments for a while. The purpose is to give borrowers time to get their finances in order.
It is important to remember that you are not getting out of paying. Any reduced or paused payments will need to be covered. Repayment often occurs during refinancing, a home sale, or additional payments added to the loan.
You also need to be aware that it can hurt your credit score. However, forbearance is usually more desirable if the alternative is a default. I would never recommend this process since a Short Sale will help you recover quicker and faster than just giving your home back to the bank. More than likely they will also report this as a Foreclosure on your credit report. This reporting usually stays on your credit for at least 7 years.
You can also contact the Department of Housing and Urban Development (HUD) for free counseling services. HUD counselors can help you understand your options and connect you with resources that may help.
A short sale is when a homeowner lists their home for less than what is on the mortgage. A short sale is usually a last resort for homeowners on the verge of foreclosure.
While it can be a way to avoid foreclosure, there are drawbacks. The lender has to approve a short sale since it will not cover the mortgage. There is also a possibility the lender could go after the remaining amount of the unpaid mortgage. In the state of Nevada, The lender can only pursue 1 action against you so most of the time I get a “Full Release Letter” which states that the lender or investor cannot come after you once they agree to the short sale.
A short sale is better than having a Foreclosure on your credit report. A Short Sale may impact your credit as well but your recovery time is usually within 2 years after a Short Sale has been completed. Be sure to check out my Las Vegas Short Sale Information page!
If you are experiencing difficulty making your mortgage payments, please do not hesitate to reach out for assistance. The team at Urban Nest Reality is here to help you through this difficult time.
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