Home in Queens, NY Under Foreclosure
Using Loan Modifications To Stop Foreclosure: The Lowdown
May 12, 2019
Avoiding Foreclosure Through Short Sales
Avoiding Foreclosure Through Short Sales
July 16, 2019

The moment of been faced with a foreclosure can be quite overwhelming for most homeowners. Poor knowledge and understanding of mortgage and its terms have been the cause of Waterloo for most homeowners, and what’s more, they are always unsure of what to do. Also, most homebuyers aiming to get a good deal in real estate invariably think first about buying a foreclosure. However, they are always far away from the reality of what a foreclosure fully entails.


Understanding foreclosure

Foreclosure is nothing short of a legal process whereby a lender moves to reclaim the title of a mortgaged property (by means of a court order). This will only take effect once the borrower is unable to pay off the debt. Once it is certain that the homeowner living in the house is unable or unwilling to continue making mortgage payments, the lender that provided the loan to the borrower is legally free to take back the property. The lender might choose to sell off the property, upon the sale, applies the sale proceeds first to the due amount and pays the remainder if there’s any to the borrower. The borrower will always remain liable for the due amount in case of shortfall in proceeds of the sold property (when the proceeds are not enough to clear the whole debts) or if the property is unsold.

Loan modifications, forbearance agreements, and short sales no doubt provide a good option for homeowners to get a good deal on properties and alternatively, for beating a foreclosure.


Short Sale

A short sale is a transaction in which the seller does not actually own the home that is being sold but had it mortgaged. The term short sale defines when a homeowner sells his or her property for less than the amount owed on their mortgage. In other words, the seller is placed to be “short” of the cash needed to repay the mortgage lender fully. Basically, the bank or lender opts to a short sale just to recoup a portion of the mortgage loan owed to them.

A successful short sale equates that the seller’s lender is willing to accept a discounted payoff to release the existing mortgage. However, short sales help eliminate many hassles associated with the mortgage loan, such as closing the books on the homeowner loan, and the lender gets a portion of their loan repaid.

Home sellers involved in short sales usually send an aggregation of documents to their mortgage lender. One of the several documents includes a hardship letter stating why you can’t fully repay your mortgage loan, along with the filing of records like tax returns that can buttress your claim as being unable to repay the home loan.


Benefits of short sale

Evade potential home foreclosure; short sale of homes is a sure means of evading a potential foreclosure early, freeing you from the emotional and psychological impacts that come with foreclosure.

Personal credit score; short sale can save the seller from low credit scoring in the event of foreclosure. It is highly preferable from a personal credit score point of view to go for a short sale as it keeps the seller in the game and presents the seller with a better chance of picking a new home down the line.

Saves on home sale fees; The issue concerning charges and commissions related to home sale under short sale is shouldered by the bank or lender as against the most conventional home sale.

Reduced price; this is a huge advantage to the home buyer.


The downside

  •         Dependence on the lender
  •         No profits from sales for the seller
  •         Less cash for a future home purchase
  •         The long time needed to process paperwork


Loan Modifications

In America today, the home market foreclosure is at an all-time high and affects many homeowners who never believed they could lose their home to foreclosure. Many homeowners are under the crunch of higher interest rates coupled with the slowing economy. A loan modification can be the only way for a homeowner to save the biggest investment of their lives; their house.   Negotiating with the bank for a change in your home loan can be an overwhelming process for many homeowners. The reality of the current market is one of steep declines in real estate values ​​nationwide coupled with tighter creditworthiness requirements.

A loan modification is the most suitable response to a borrower’s long-term inability to repay the loan. It is a permanent of restructuring the mortgage where some of the terms of a borrower’s loan are adjusted to provide a more affordable payment. The modifications typically involve a reduction in the principal balance, interest rate, or an extension of the length of the term of the loan as the case may be. A lender might be open to modifying a loan after weighing the implications of doing so against that of default or foreclosure. For you to be eligible for a loan modification, you must provide all necessary documents to your lender, show you can’t meet up with your present mortgage payment due to financial hardship, and complete the trial period given to attest of your ability to meet up with the new payment.



  •         Reduced interest rates
  •         Reduced principal balance
  •         Extend loan duration


  •         Poses a risk to credit score
  •         Potential for extra incurable tax



Forbearance literally implies to ‘hold back.’ It is a temporary relief granted by a lender by not exercising its legally enforceable right of foreclosure against a defaulting borrower. It is basically a special agreement between the lender and the borrower to delay a foreclosure. It may take the form of extra time given to the borrower by the lender to come up with the overdue payment in return for the borrower’s promise to make regular payments in the future. Forbearance is generally considered to be sufficient in law to make the borrower’s promise of timely payments an enforceable contract.

The terms of a forbearance agreement are negotiated between the borrower and the lender. The possibility for such an agreement depends on the likelihood that the borrower will be able to resume the monthly mortgage payments once the temporary tolerance is over. Also, the lender may approve a full or only partial reduction in the borrower’s payment, depending on the size of the borrower’s need and the lender’s confidence in the borrower’s ability to catch up at a later date.

In some cases, the lender grants the borrower a complete moratorium on making mortgage payments for the grace period. Other times the borrower is obliged to make interest payments, but not to pay the principal. In other cases, the borrower only pays a portion of the interest with the unpaid portion, resulting in negative amortization. Another forbearance option is that the lender reduces the borrower’s interest temporarily.


Bottom Line

A forbearance arrangement is quite different from a loan modification. Forbearance arrangement is designed to provide a short-term solution for borrowers who seem to be faced with financial downs but for a short duration, whereas, a loan modification agreement serves as a long-term solution for borrowers who will never be able to repay an existing loan. On the other hand, the short sale provides a near ultimate solution to borrowers with perceived challenges of meeting up with loan, eliminating all the hassles associated with mortgage loans.


Contributed by: 

Empire Foreclosure Defense 70-50 Austin St, Forest Hills, NY 11375 (718) 673-2294


Empire Foreclosure Defense 131 west 169 st Bronx, NY 10452 (347) 220-8559

1 Comment

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