If you have had a notice of default taped to your door or sent to you, please know you are not alone and you do have options, just do not ignore it.
We can help you understand the process and explore your options. The Notice of Default essentially serves as a formal notice that the foreclosure process has begun. From here, you should have a little bit of time and the good news is, your lender might be more motivated to work with you. In Nevada, if the property is owner occupied, you may have the option to participate in mediation. There, you can meet with a representative from your bank, so take advantage of this! You could have the option to negotiate a forbearance, a payment plan, a modification, a short sale, a deed in lieu of even a principal reduction. In Washoe County, the link for the forms can be found here at mediation petition.
- In a forbearance, your payments could be suspended for a period of time, typically for a hardship. Sometimes those payments are tacked on to the back of your loan, extending the term of your loan. Other times, they are divided up and absorbed into the payment, increasing the amount owed every month.
- A payment plan may give you the opportunity to catch up on past due balances, but your current mortgage payments will likely remain due.
- A modification is when your servicer agrees to renegotiate the terms of your loan. The term can be extended, interest rate can be reduced, or a you may see a combination of the two. There is typically a trial phase and the adjustments can be temporary. For example, in the fallout from the 2008 recession, it was common to see loans have a 2% interest rate for two years, 3% the following two years and then fixed at 4%. Some loans also had 1/3 (or so) of the balance not bearing interest at all. The thing to be mindful of is some of these have balloon payments at the end of the original term.
- A principal reduction is when the bank agrees to reduce the amount you owe. Principal reductions are very rare.
- A short sale is the ability to sell your house for less than you owe. Your agent should negotiate with your bank, so you don’t have to come out of pocket for closing costs. This allows you to be in control of the sale of your home. The ultimate goal is to have the debt considered settled or satisfied when the transaction closes. There may also be a cash for keys incentive.
- A deed in lieu of foreclosure is signing the house back over to the bank to avoid foreclosure.
- Do you have equity? You can sell your house and protect your equity. If you would like an automated value, click the Homebot link below for an automated value, instantly.
In any case, we advise you to seek legal advice. It is also a good idea to reach out to a HUD-approved housing counselor. Explore your options. If you have real estate related questions, let us know how we can help!
Christy Klingler. Realtor
