Repayment period and Foreclosure - How to use the opportunity to avoid another11 Feb 2010
Few homeowners are even aware of the concept of having additional time after their house has been foreclosed that they can still remain in the property and attempt to refinance or sell. After all, the sheriff sale is just before the eviction, right? Well, not always, as some states allow foreclosure victims a set period of time, known as a redemption period, where the bank is not able to evict them or take over the property. But even when homeowners are granted a period of several months to keep their home, time is not on their side.
The homeowners will have to begin immediately planning their solution to the foreclosure if they mean to take advantage of the redemption period. As soon as possible after the county sheriff sale, it would be best to come up with some options, especially if the redemption is less than six months long. It can take at least a month for most methods to stop foreclosure to be completed from beginning to end, so foreclosure victims will not have much time left if they wait until much of their redemption has already expired.
Although the options that may be used during the redemption are somewhat limited, those who wish to keep their homes can try numerous options. The lender will not be willing to establish a repayment plan at this date, nor will they be able to modify the terms of the loan, as the property has already been sold at auction. But the mortgage company is also more interested in getting their money paid back to them, so many of them are willing to consider any other option that would avoid having to pursue the eventual eviction process.
Thus, it is in the best interests of both homeowners and banks to try a few different things to get the defaulted loan paid back, or at least avoid the worst of the consequences of foreclosure. Refinancing may be an option, but the owners may have to pay down the amount of the loan so that it is possible to qualify for a mortgage just after foreclosure. With longer redemption periods, these foreclosure victims may have been able to recover from the financial hardship and have saved up some money that can be used for a new down payment. Mortgage companies who specialize in poor credit loans but consider the equity position in the property may be willing to give them a new loan despite the foreclosure, if the homeowners can put down enough to create some equity.
Otherwise, it may be the best solution to try selling the home, even if it is at a short sale, where the foreclosure victims would pay less on the loan than the total amount owed. The bank may just be willing to take less at this late date, rather than have to evict their former clients and then sell the property through a Realtor on the open market. If the homeowners have a friend or family member who can buy the house for cheap and then set up a leaseback or rental agreement to let them keep living there, then a perfect solution may be reached. There are also private investors that specialize in these types of arrangements, and can give foreclosure victims the second chance that they need to reestablish an on-time housing payment history, which would allow them to refinance within a year or two.
But even if no solution works to keep the foreclosure victims in the home for the long term, the redemption period can be extremely useful to create more financial stability. If there is no way to save the home, then the previous owners should just try and save up as much money as possible, or use the money that would have been used to make the mortgage payment to eliminate other debt. That will help keep their credit looking as clean as possible just after the foreclosure, even though there may be no other option than to end up losing the home for good. However, if these previous homeowners can get out of debt and establish a savings plan, then it will be much easier to buy a new house down the road, as well as not go back to the Foreclosure ever again.
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