OPTIONS TO EXIT GRACEFULLY FROM YOUR HOME


Below is a discussion of some options available to you if you do not wish to keep your home in
the long term. Remember, you can pursue these options even if you have received foreclosure
papers.

Foreclosure defense attorney Jeffrey S. Walters defends foreclosure actions

 

Foreclosure defense is a true defense to a bank’s attempt to foreclose on your mortgage. A foreclosure is a legal proceeding where your mortgage lender files a Complaint in the Superior Court in order to force your house to be sold in a sheriff’s sale.
 

Why would you want to defend the foreclosure if you are not looking to save your home for the long term?

 

You may have many reasons why you might want to defend the foreclosure even if you don't intend to save your home in the long run:

  • You may want to stay in your home until your children complete the school year.

  • You may want to stay in your home until your children graduate high school, which may not be for several years.

  • You may wish to stay in your home for as long as possible before you lose it, since that will help you save up money to rent a new home when you leave.

  • You may wish to stay in your home for as long as possible before you lose it, because you are experiencing unemployment or underemployment and cannot yet afford to move to a new home.

  • You may want to buy time to sell your home privately, because you do have some equity and would walk away with money from the sale.

  • You may want to buy time to sell your home privately in a “short sale,” even if you do not have any equity. Even though you do not have equity, a “short sale” will not hurt your credit as much as a completed foreclosure would. A “short sale” will be beneficial to you in the future when you want to buy a new home.

  • You may want to make sure that your lender has treated you fairly and has complied with all of their legal requirements, and compel your lender to demonstrate to you and to the court that they truly do have the legal right to foreclose.


If you are served with a Summons and Complaint for Foreclosure, we can help. Call attorney
Jeffrey S. Walters, Esq.
to discuss your options for defending the foreclosure.

 

Options to Exit Gracefully from Your Home

If home ownership is no longer affordable and you do not qualify for a modification or similar
alternative, there are options available to help you “exit gracefully” and avoid the financial and
emotional impacts of foreclosure:

1. Exiting gracefully after sheriff’s sale and possibly negotiating cash for keys
2. Short Sale (Traditional and HAFA)
3. Deed-in-Lieu (Traditional and HAFA)
4. Defending the Foreclosure
5. Bankruptcy

 

1. Exiting Gracefully After Sheriff’s Sale and Possibly Negotiating Cash for Keys

You can consider staying in your home until the sheriff’s sale is completed and the new owner
(usually the lender) contacts you about leaving. The new owner will usually attempt to work
with you to move peacefully. The new owner may offer you “cash for keys” whereby they will
pay you if you leave by an agreed upon date and leave the property in good condition. They may
also be willing to rent the house to you as a tenant. You can consider combining this with a
foreclosure defense in order to say in your home for as long as possible before making your
graceful exit.

 

2. Short Sale


Traditional Short Sale
 

A short sale occurs when your property is sold at a price lower than the amount you owe on the
mortgage, and your lender agrees to the “short” payoff. A short sale becomes an option if you
are behind on your mortgage payments, you want or need to leave the property, and do not have
the funds to pay the difference between the net proceeds from the sale of your home and the
mortgage. For delinquent homeowners and lenders, short sales provide a way to avoid many of
the costly impacts of foreclosure. A short sale may make sense if you:

 

  • Do not qualify for any options to keep your home, including HAMP, forbearance and reinstatement.

  • Owe more on your loan than the home is worth.

  • Don't think you can sell your home at a price that would cover your loan amount.

  • Want to try to lessen the hit to your credit score that a foreclosure would cause

Home Affordable Foreclosure Alternatives (HAFA) Short Sale

If you can no longer afford your mortgage and are interested in transitioning out of your home to more affordable housing, you may be eligible for a short sale through the federal Home
Affordable Foreclosure Alternatives (HAFA) , a component of the federal Making Home
Affordable Program. With this option, you will avoid some of the negative effects of foreclosure
and may be eligible to receive a payment of $3,000 to help you move to a new home. A HAFA
short sale may make sense if you:

 

  • Have a loan that is owned by Freddie Mac, Fannie Mae or a participating investor.

  • Do not qualify for, or did not complete a trial period plan through, HAMP.

  • Took out your mortgage on or before January 1, 2009.

  • Are behind on your mortgage payments.

  • Spend more than 31 percent of your pre-tax income on your mortgage payment (including principal, interest, taxes, insurance and homeowner's association dues).

  • Are unable to afford your mortgage payments because of a documentable financial hardship.

 

3. Deed-in-Lieu of Foreclosure

Traditional Deed-in-Lieu

With a deed-in-lieu, your lender may accept the voluntary transfer of the title of your home to
them in exchange for cancellation of your mortgage debt. This approach may have tax
implications for you, and it may not be possible if there are other liens against your home. A
traditional deed-in-lieu may make sense if you:

  • Do not qualify for any options to keep your home, including HAMP, a short sale, forbearance and reinstatement.

  • Are behind on your mortgage and have received a notice of default.

  • Have recently filed for bankruptcy protection.

  • Owe more on your loan than the home is worth.

  • Have tried, unsuccessfully, to sell your home at a price that would cover your loan amount.

  • Have no other liens or encumbrances on the property (such as a second mortgage, tax lien or homeowner's association lien) or the other lien holders are willing to cooperate in the short sale.

 

Home Affordable Foreclosure Alternatives (HAFA) Deed in Lieu

If you can no longer afford your mortgage and are interested in transitioning out of your home to more affordable housing, you may be eligible for a deed-in-lieu of foreclosure through the federal Home Affordable Foreclosure Alternatives (HAFA) , a component of the federal Making Home Affordable Program. With this option, you will avoid some of the negative effects of foreclosure and may be eligible to receive a payment of $3,000 to help you move to a new home. A HAFA deed-in-lieu may make sense if you:
 

  • Have a loan that is owned by Freddie Mac, Fannie Mae or a participating investor.

  • Do not qualify for, or did not complete a trial period plan through, HAMP.

  • Took out your mortgage on or before January 1, 2009.

  • Are behind on your mortgage payments.

  • Spend more than 31 percent of your pre-tax income on your mortgage payment (including principal, interest, taxes, insurance and homeowner's association dues).

  • Are unable to afford your mortgage payments because of a documentable financial hardship.

  • Could not sell your home under the HAFA short sale program after having listed it for sale for 120 days.

  • Have no other liens or encumbrances on the property (such as a second mortgage, tax lien or homeowner's association lien) or the other lien holders are willing to cooperate in the deed-in-lieu.


Be aware that all workout options affect your credit rating and some affect it more than others.
You should discuss all potential impacts with your lender.

 

Don’t Give Up!

It is important you understand what foreclosure means and why it is so critical to get help early to avoid it. The impacts of foreclosure are significant, including potential loss of equity in your
home and the negative hit to your credit score. The emotional impacts are considerable as well,
both for you and your family. For these reasons and more, be sure that you and your lender
explore all options to foreclosure and don’t give up.

 

4. Defending the Foreclosure

As discussed above, you may have many reasons why you would want to defend the foreclosure
even if you are not looking to save your home for the long term. You may not be ready to move
for reasons having to do with your children or your family. Or, you may want to delay your exit
for as long as possible due to financial reasons (saving up money to move or becoming
reemployed). Or, you may want to defend the foreclosure to make sure that your lender has
treated you fairly and to compel your lender to demonstrate to you and to the court that they truly do have the legal right to foreclosure. Or, you may want to buy time to market and sell your
home in a “short sale.” Or, you may feel that you don’t want to save your home for the long
term, but are not yet 100% certain of this decision. Therefore, you may wish to defend the
foreclosure while you come to a final decision about your long terms plans. If you have received
foreclosure papers, we can defend the foreclosure action, which will give you more time to
explore the above options. If you are served with a Summons and Complaint for Foreclosure,
we can help. Call foreclosure defense attorney Jeffrey S. Walters, Esq. to discuss your options for defending the foreclosure.

 

5. Bankruptcy

As discussed above, you may have many reasons why you would want to delay your exit from
your home even if you are not looking to save your home for the long term. At the same time,
you may have a lot of debt, such as credit cards and medical bills, and may have been thinking
about filing bankruptcy for a while. Your interest in filing a bankruptcy might be something you
want to do even if you did not have problems with your mortgage. This would allow you to
obtain a “fresh start” when you leave your home, unburdened by debt when you move to your
new home. In that case, rather than defend the foreclosure, you might wish to consider timing
your bankruptcy filing (which you wanted to do anyway) in such as way as to keep you in your
home for the longest amount of time, or to allow extra time to facilitate a credit-sparing “short
sale.” Call foreclosure defense attorney Jeffrey S. Walters, Esq. to discuss your options for dealing with the foreclosure and to evaluate if a carefully timed bankruptcy filing would be of greater benefit toyou than mounting a foreclosure defense.