Facing Foreclosure With Dignity or HopePosted at by ifydcat on category Personal Finance
In today’s economy, it is reality for many people that they are living in homes that are worth far less than what is owed on their mortgage. This is not your fault, though it is highly likely that you are the one paying the consequences for mistakes and bad business practices made by people you will never meet. If it has come down to you losing your home in this precarious economy, you are certainly not alone. Millions of Americans are in exactly the same place, so take heart and do not give up on the potential for either saving your home, or lessening the impact it will have on your life. Read on for some ideas on how to get through these trying times.
You purchased your home with good intentions, and giving it up can be both emotionally and financially devastating. However, if you are in the position where you must make a choice, do not overlook the concept of “strategic default.” This is basically the practice of giving up your home due to the fact that it is no longer feasible for you to keep it. It means that you give up rights to owning your home, and essentially give title back to the bank. Your credit will inevitably be damaged if you choose to do this, but you could very well benefit financially from relieving yourself of a property that may never be worth what you owe on it. Many, many people have chosen to go this route, and it is nothing to be ashamed of. It can, in fact, be the wisest choice you can make. The financial institutions who caused the housing market to crash by securitizing mortgage loans are the ones who are to blame. If it makes financial sense for you to relieve yourself of extraordinary debt on a home that is “underwater,” consider doing this.
If you are intent on saving your home at all costs, for whatever reason, then take a look at all the loan modification programs that are available. Admittedly, there are very strict requirements that must be met, and you must, above all, prove ability to pay, which is difficult under the strict rules that are in place. If you think you can qualify, however, apply for these programs. Most of them are underwritten by the government, so you have a much better chance of being approved than in previous times. If you do choose to modify your loan, you will likely be put on a “trial period”, in which you must make all payments in a timely fashion. It would be wise to have an outside party involved, to ensure that you will not be denied in the end. This could be a government entity or a private attorney, though the latter could be an expense that you cannot afford. Above all, be persistent and keep records of each and every conversation you have with the mortgage provider. Also, send all payments and correspondence via certified mail, with a signature required.
Your mortgage provider will likely offer you the option of conducting a short sale on your home. Before you agree to this, however, you must realize that this puts the burden on you to get the home sold, in order to save them the costs of foreclosure. Determine whether or not you actually gain any benefit from providing this service for them. Also, look into the tax implications, since most mortgage companies will send you a tax form at the end of the year, in which you will be responsible for taxes on the losses they incurred. Make them agree to take the losses without holding you liable for taxes, and get it in writing. Remember that short sales save the mortgage companies thousands of dollars, and you get stuck with the taxes because of it. Do not let them get away with this.
If your debt is excessive and the options do not appear to be in your favor, do not hesitate to exercise the right of every American to have a “clean slate” through bankruptcy proceedings. It can be the best decision you ever made, allowing you to start fresh and get on with your life. Just remember to find a new place to live, and get any credit or resources you will need to survive, before the bankruptcy appears on your record.
Use these insights to make a transition that works for your family, and do not be ashamed of circumstances over which you had no control. Start fresh and build a new life that is free from excessive debt.