Underwater borrowers these days have many options… and bankruptcy does not have to be one of them. Often time, a borrower comes into my office, has stopped paying his or her mortgage, and has reached the conclusion, albeit the erroneous one, that filing for bankruptcy is the only way. Many have been provided wrong or inaccurate information from the neighbors or friends, or have drawn these conclusions on their own, because they have simply not been educated on the many options that exist for underwater properties.
While a bankruptcy can wreak havoc on your credit report, and such derogatory information can last for many, many years, other loss mitigation options are less damaging to a borrowers credit and can allow the borrower to obtain a new loan and recover from the nightmare quicker.
For instance, a short sale. In a short sale, the borrower remains in their home until the sale gets to closing. This may mean many months of nonpayment of the mortgage, which while damaging to a credit report, at the time the closing takes place, the lender will most likely report the sale as “settled for less than agreed” or simply “settled”. The lender will also remove the mortgage balance and replace it with a zero balance on the credit report, which may automatically improve the borrowers debt to asset ratio. Usually borrowers are able to purchase homes and obtain new loans within a year with this option.
There is also a loan modification option with a settlement of the second loan. Many lenders are approving loan modifications these days at record speed. Moreover, they are making huge principal reductions, as evidenced by our recent client who obtained a $300,000.00 mortgage write off under the Making Home Affordable program and a new interest rate of 2%
The second lender, if the property is upside down, may agree to accept a 10% settlement for their loan and cancel the loan altogether. This means the borrower can keep their home with a mortgage value of what the property is worth. Again, avoiding bankruptcy all together.
A deed in lieu of foreclosure also allows the borrower to deed the property back to the lender, with a possible write off of the mortgage is properly negotiated and primary residence of the borrower. Again, this option avoids bankruptcy.
So for all the borrowers out there that think bankruptcy is their only option, think again. While many bankruptcy attorneys like to have the borrowers believe this (and I am not knocking any colleagues here) many are simply not knowledgeable enough to provide other options. Bankruptcy is all they know.
At the Law Offices of Jacqueline A. Salcines, PA, we make it our business to know all the possibilities that exist and all the programs out there to assist homeowners. Attorney Jacqueline A. Salcines, Esq. personally sits down with each and every prospective client to run their numbers and qualify the person for one of the programs above. If you don’t qualify, then we do not take your case on.
But most important, we are here to help. We know how damaging bankruptcy is to your credit and will do everything in our power to have our clients avoid that.
Our offices are located in the heart of Coral Gables. Call for a free evaluation of your case today.
LAW OFFICES OF JACQUELINE A. SALCINES, PA 706 S. DIXIE HIGHWAY SECOND FLOOR CORAL GABLES, FLORIDA 33146 TEL. 305 . 669. 5280 J.SALCINES@SALCINESLAW.COM
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