A.D. Cantelmo Property Management
Our Business is Property Management in Orange County California
Options to avoid Default
Loan Modification
A loan modification is a
permanent change in one or more of the terms of a borrower's loan, allows the
loan to be reinstated, and results in a payment the borrower can afford.
Loan Terms that May be
Changed
Reduce
interest rate. Change
from an adjustable rate to a fixed rate. Reduce
principal amount. Reduce
or waive late fees or other penalties. Lengthen
the loan term.
Since the modifications are made at the discretion of the lender,
they use specific financial analysis criteria when determining which
modifications to offer a borrower. The goal in providing a borrower with
a loan modification is to bring the delinquent mortgage current and give the
borrower a new start.
Sell the Property
If
the borrower is in default and knows that sustaining payments in the future
will be difficult, he or she can opt to sell the property. Although
selling the property is difficult, especially if the borrower is emotionally
attached, the proceeds of the sale can cover the delinquent amount and help the
borrower start fresh.
If
the borrower owes more on the loan than the property’s fair market value, the
borrower can attempt to negotiate a short sale.
A short sale is a
sale of encumbered real property that produces less money than is owed to the
lender. The lender essentially decides to accept a loss on the loan and
release the property from the mortgage or deed of trust. In a short sale,
the lender can either accept or reject the proposed sale. The defaulting
borrower’s financial status and the current conditions of the real estate
market influence the lender’s decision to consider a short sale. A lender
also takes into account whether the financial loss incurred in accepting a
short sale is less than pursuing foreclosure. The short sale is a quicker
transaction and less costly than a foreclosure.
For
the borrower, the negative impact on his or her credit report is not as severe
as a foreclosure although there might be certain tax implications involved with
the short sale. In addition, short sales spare homeowners the
embarrassment of having their name(s) published in the local newspaper for
trustee sales.
Deed in Lieu of Foreclosure
If
the previously mentioned remedies do not help the borrower, a last resort is to
exercise a deed in lieu of foreclosure. A deed in lieu of foreclosure
is a voluntary transfer of the property back to the lender. When this
occurs, the lender avoids a lengthy and costly foreclosure proceeding.
Typically, a lender resists a deed in lieu of foreclosure when the total debt
exceeds the fair market value for the property. Negotiations between the
borrower and lender must occur and both parties must voluntarily agree to a
deed in lieu of foreclosure.
In my business of Property Management in Orange County
California, I have dealt with homeowners who were in a position that they
needed to do a short sale and it is a much better process then it was a few
years ago, but it still is an arduous task and will take quite a bit of effort
to get it done.
A.D. Cantelmo Property Management Specializes in
Property Management in Orange County Ca.