Saying yes to foreclosure, walking away when it makes sense
Oversized mortgages, a downsized economy, and sloppy or outright fraudulent lender practices have led to an enormous increase in home foreclosures over the last five years. But as scary as it might be to think about losing a home to foreclosure — the fear of foreclosure for many Atlanta homeowners can be worse than foreclosure itself. In some situations, in fact, walking away is the only choice that makes any sense.
Unfortunately, many homeowners don’t realize that there might be alternatives to simply accepting whatever foreclosure terms a lender is willing to give them or that the foreclosure process can be used to their benefit.
Instead, they continue to struggle with making monthly payments on a house that in all likelihood isn’t worth anywhere close to what they owe on it. Some stay on the treadmill because the fear of foreclosure is overwhelming. Others do so out of a needless sense of shame or guilt. There are other reasons as well.
The reality is that Atlanta area residents facing foreclosure are not alone. The average homeowner has seen 60 percent of his or her home’s value disappear since the real estate market first crashed. By some estimates, one out every 196 homes in the state of Georgia is currently in foreclosure (to say nothing about the number of homes already foreclosed on).
What options do homeowners have? Refinancing or a loan modification can help some people save their homes from foreclosure but may be difficult to obtain. Getting your lender to agree to let you sell the house for less than you owe (a short sale) is another option but can be difficult to arrange as well.
You could even declare bankruptcy, which may or may not allow you to save your home but will stop the foreclosure process and buy you some time. As drastic as that might seem, slowly building and maintaining a clean credit clean for three years after a bankruptcy discharge will make you eligible for an FHA mortgage again.
The option that will work best for you will depend on your situation and other factors. Figuring out what the “right” option is, that’s the hard part — and it often requires professional advice.
Source: The Atlanta Journal-Constitution, “Nothing wrong with default,” Michael R. Bang, March 13, 2012