Answer:
Several weeks ago we answered a BuyandHolder’s question about how to avoid foreclosure on one’s house. We focused on the various ways to negotiate a “deal” with your mortgage lender.
This week we’ll discuss solutions beyond your lender, such as renting and short sales. But first, to repeat two sources previously mentioned that provide outside assistance:
1) If you have an FHA-secured loan, contact the Department of Housing & Urban Development at: 800-255-5342,
www.hud.gov/foreclosure/index.cfm for details on how to stay (or get) out of foreclosure.
2) Even if you don’t have an FHA mortgage, the FHA may be able to help, converting your loan to a more affordable government-backed mortgage through the HOPE For Homeowners Program (H4H): 800-225-5342, www.hud.gov/hopeforhomeowners. The H4H program, runs through September 2011.
And, here are two more:
3) If you’re a veteran, check with the Veterans Administration for information on the Veterans’ Benefits Improvement Act of 2008: 877-827-3702, www.homeloans.va.gov. It enables vets to convert subprime loans and ARMs to guaranteed VA loans.
4) The Mortgage Bankers Association (www.homeloanlearningcenter.com) has consumer information and links to helpful resources. Click on “Foreclosure Prevention Resource Center” on the right.
Renting Your House
A viable solution for keeping your house, co-op or condo may be to rent it. If you can live elsewhere, you could rent out the entire house. If you can’t bunk up with family or friends, then look into renting a bedroom or, depending on the layout of your house, several rooms – perhaps to a college student, a teacher or a seasonal worker. Unused space over a garage or the garage itself could also provide income that you can use to pay your mortgage.
Or, you might be able to turn your house into a short-term corporate rental. A surprising number of companies have budgets for helping executives who are relocating, or for employees who regularly travel on business assignments.
Tip: Check with companies within driving distance of your house as well as with: www.corporatehousingbyowner.com.
Finally, you could rent back your own foreclosed house via Freddie Mac. This program allows homeowners to stay in their homes by renting them back -- once the home has been acquired by Freddie Mac through foreclosure.
This gives you time to find a new place to live and, although you are required to pay market-value rent, you will not be making mortgage payments.
Doing A Short Sale
If in the final analysis, you cannot rent out your property nor renegotiate the terms of your mortgage and if your home is now worth less than what you owe your lender, you may want to consider what is known as a “short sale.” Your lender, of course, will need to grant approval for this solution.
In a short sale, you sell your home to a new buyer at an agreed upon price and your lender then forgives the remaining amount due on your mortgage.
It enables you to get out of your mortgage without foreclosure and without filing for bankruptcy. Note: A foreclosure remains on your credit report for 7 years, while bankruptcy is there 10 years. Both make it more difficult to get a mortgage in the future.
A short sale does two other things. One, it makes it possible for the buyer of your home to purchase it at a good price. And, two, your lender isn’t left with a difficult-to-sell piece of property.
However, a short sale might affect your credit score, depending on how it appears on your credit report. If you go this route, talk to your lender about reporting the sale in the least possible negative manner.
$TIP: Under The Mortgage Forgiveness Debt Relief Act of 2007 Law, signed by President Bush in late 2007, sellers are no longer required to pay taxes on the amount of debt forgiven in a short sale. This protective piece of legislation is in effect through 2012. It applies to mortgage restructuring and debt forgiveness in connection with foreclosure on a principal residence for amounts up to $2 million ($1 million if you file a separate tax return).
Good luck!
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