Following the 2008 financial crisis, the United States has seen the largest expansion in our economy in our history. Typically recessions occur every 7- 8 years and we have been recovering and expanding now for 11 years. This means we are long overdue for a recession. Everything seemed stable until this pandemic made headlines. When we first learned of COVID-19 no one would have imagined the repercussions and severity of its impact. Unfortunately millions of Americans were immediately out of work and filing for unemployment. It has created massive uncertainty for our economy and has quickly proved to be a serious indicator of yet another global recession. We have recognized that many people are now put into a hard place and face obstacles such as foreclosure on their properties. The goal of this blog is to provide you with your options and explain them to you so you can recognize what course of action best suits your needs to accomplish your goals.

Foreclosure refers to the legal process which takes place when a lender such as a bank attempts to recover the balance of a loan from a borrower that has stopped making payments. Foreclosures increase during recessions due to the lack of employment opportunities. When homeowners cannot afford to pay their mortgage anymore the bank will begin by filing a lis pendens which indicates that the foreclosure process has begun. If you are one of the millions of people who have received a lis pendens notice do not panic! We understand it is stressful, but you have a few options that may solve your problems.

In the worst case scenario you lose your home to foreclosure. This means you walk away from the property with no money, you’ll have damaged credit for life, and the debt can follow you for life. Foreclosure is something that you should most definitely avoid.

Your next option would be to work with the bank to do a loan modification. This will reduce your payments to a reasonable amount that might allow you to keep the property. It is a great option to keep the property, however you need to qualify for it based on your income. If you owe more than what the property is worth I recommend against it. If you qualify for a loan modification that means you qualify for a mortgage. This means you can have a fresh start instead of a second mortgage on your property!

Another option is giving the property back to the bank. This is called a deed in lieu. There are really no benefits to this, especially if you have other debts such as liens or judgements that will still haunt you. You won’t make any money from the property and it takes a lot of work to get done. After all that work you walk away with nothing and possibly still in debt.

Your final option requires you to sell the property, but completely removes all of your debt. This is called a short sale and it is great because it takes about as long as giving the property back to the bank, but eliminates the entire mortgage debt balance, any credit card debt, child support, judgements, or liens you may have. You can also get a minimum of $3k to relocate from the bank. This provides you with a clean slate and a fresh start. It will save your credit, which we all know can eventually save you money or make buying other assets easier.

The best option for you really depends on your specific circumstances. I would only advise doing a loan modification if you owe less than what your house is worth. Otherwise, it makes no sense to take out a second mortgage when you can have all your debt eliminated by doing a short sale. I would only recommend a deed in lieu of foreclosure if you have no debt outside of the mortgage of that property. Short sales are a great option for people who are strapped on cash because when you work with Leverage Companies we provide you our service at no cost. We will fight to get you a fresh start, debt free, and money in your pocket instead of walking away with nothing but a damaged credit score and still in debt.

We understand that many people may be facing these difficult circumstances and if you need any advice on your specific situation please contact us! Thank you for taking your time to read this blog post and we look forward to bringing positive changes to the members of the communities in which we operate.