What is Pre-Foreclosure?  Pre-Foreclosure is when a homeowner is behind or delinquent on their mortgage payments and the mortgage lender has filed a “Lis Pendens” or written notice of lawsuit pertaining to foreclosure of real estate. 

What does this mean to the homeowner?  Prior to Lis Pendens filing by the mortgage lender, the homeowner should have been notified of late or delinquent payments, and provided an opportunity to become current.  Once the Lis Pendens has been filed by the mortgage lender, this signifies the start of the foreclosure process. 

What can the homeowner do?   There are various options for the homeowner depending on their desires, hardships, and financial abilities.  These various options may vary with credit or financial consequences.  Below are some of the options available:

• Do Nothing; If a homeowner opts to do nothing, they will likely lose their home at Sheriff’s Sale or Auction (Foreclosure).  A foreclosure may appear on your credit report for up to 10 years.
• Payoff/Refinance;  Refinancing the loan and/or paying the loan off entirely; plus any delinquencies and fees owed to the mortgage lender.  The new loan (debt) may be at a higher interest rate due to recent defaults, and will likely cost in refinance fees.
• Reinstatement;  Paying the entire default amount, plus interest, attorneys fees, late fees, taxes due, missed payments, and all other associated fees.  If agreeable with the mortgage lender, this will allow yo to maintain the existing mortgage loan and terms.
• Loan Modification; Existing mortgage lender agrees and modifies the terms of the existing delinquent loan. Often, delinquencies, late fees, default amounts, etc…usually get placed on the back end of the loan and become additional principal owed and can increase monthly payment.
• Forbearance; Lender may authorize a repayment plan based on homeowner’s financial hardship.  May result in temporary payment and/or penalty reduction or suspension. Again, deficiencies usually get placed on the back end of the loan and become additional principal owed and can increase monthly payment.
• Deed in Lieu of Foreclosure; Mortgage lender agrees to take ownership of the property; often considered a “voluntary foreclosure”.  This will still appear as a foreclosure on credit reports for up to then years.
• Bankruptcy; Can liquidate or reorganize debts.  Chapter 7 can attach to credit reports for up to 10 years.  Chapter 13 can attach to credit reports for up to 7 years.
• Sale;  Some homeowners may have equity in their homes, and have the ability to sell the home, settle any deficiencies with the mortgage lender, and walk away with proceeds in their pocket!  Contact us to check your home value and potential equity!