Foreclosure Severity Can Be Reduced

October 29th, 2007

The prediction is gloomy. Foreclosures will rise further and the number could well touch 2 million by the end of 2008. The Joint Economic Committee of Congress is in a huddle over the matter and will soon be issuing a report.

Imperative steps have to be taken to reduce the severity of the foreclosure crisis.

The property can be sold to a buyer before the auction to allow for some equity to remain.

The next option is opening a dialogue directly with the lender. For the lender the foreclosure sale involves time and money. This being so the lender might be willing to agree to grant time for the borrower to catch up with the dues, while continuing with the current ones.

If the first two options do not materialize then one can file for bankruptcy (Chapter 7). This will delay the foreclosure sale. By it debts are wiped clean after liquidating assets.

The other option is to take shelter by filing bankruptcy – Chapter 13. Under this chapter assets are kept under court supervision and debts can be paid in instalments.

Fifthly a short sale might give relief. By it the lender agrees to sell the unit at a price less than the loan amount and waives off the balance due.

The last rather impetuous recourse to the foreclosure insult is mailing the keys to the lender and just walking away. It is best to consult an attorney because the lender could sue the borrower for some dues unpaid.

An accountant should also be consulted because any kind of deed transfer involves tax matters.

The tips to borrower also include advice about what not to do. It will be foolish to sign over the deed title to another company on assurances that they will return it soon. These are all false promises. In all likelihood whatever equity is left will be pulled out and the property will lapse in to foreclosure.

Another thing to avoid is to go for a second mortgage with a higher rate of interest. A property with equity will soon attract sharks who will offer loan up to 70% of the equity value. The interest will be nearly 18%. That apart there will be a fee. These companies lick their chops and sharpen their knives when the inevitable default will start and they will carve the carcass.

Via