As real estate values have plummeted in recent years, Michigan’s unemployment rate has reached a record high, leaving many Michigan homeowners in a very difficult financial position. Some homeowners have faced layoffs and sudden unemployment, leaving them unable to make monthly payments, while other homeowners find themselves “underwater,” burdened by large mortgage payments on homes now worth much less than the original mortgage amounts. .
While foreclosure may seem like the only option available to these Michigan homeowners, there are ways to avoid foreclosure. Foreclosures are financially damaging to mortgage lenders as well as homeowners, and it is often in the bank’s best interest to avoid foreclosure. Recent federal stimulus packages and tax incentives have made accepting alternatives to foreclosure more attractive than ever to mortgage lenders.
Avoid Home Foreclosure By Short Selling
In short sale agreements, banks and mortgage lenders allow homeowners to sell their homes for less than the original loan amount. Banks can still hold homeowners responsible for the remaining balance between the original mortgage amount and the short sale amount, known as a “deficiency,” but this arrangement allows homeowners to avoid crippling credit damage of a foreclosure. Short sale agreements are beneficial to mortgage lenders, who are spared the large legal fees associated with foreclosure, as well as potential property damage and the liability of managing a vacant foreclosed home.
While short sales have a negative impact on homeowners’ credit histories, credit bureaus consider short sales to be a deal and therefore much less damaging than foreclosures. In many cases, Michigan mortgage lenders will forgive homeowners the remaining deficiency, allowing them to get out of short sale debt free.
Avoid Foreclosures Through Short Refinancing
A short refinance, also known as a loan modification, is similar to a short sale in that the mortgage company allows the owner to refinance the subject real estate for less than the original purchase amount. As with short sales, homeowners may still be liable for the deficiency, although in some cases this remaining balance may be forgiven. Short refinances are ideal for homeowners whose mortgages have collapsed due to property depreciation. In loan modification agreements, homeowners can keep their homes while reducing their mortgage payments to payments that reflect the property’s current market value. Again, there is some credit damage associated with loan modifications, but this damage is less than it would be in foreclosure. Short refinances benefit lenders, who avoid the high costs associated with foreclosure.
How to Find Help to Avoid Home Foreclosure in Michigan
Navigating these alternatives poses an enormous challenge for individual homeowners and real estate agencies who are not well-versed in the latest mortgage laws and real estate practices. Getting mortgage lenders to agree to short sales and short refinances is often a difficult process, and completing these transactions without the help of a foreclosure transaction specialist can be tedious and unsuccessful. In many cases, individual homeowners and real estate companies that do not specialize in foreclosures will not be able to complete the loan modification or short sale in time to avoid foreclosure.
Enlisting the help of a Michigan foreclosure real estate specialist significantly increases a homeowner’s chances of success in avoiding foreclosure.
