As real estate property values have plummeted in recent years, Michigan’s unemployment rate has risen to 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 with large mortgage payments for homes that are now worth far less than their original mortgage amounts.
While foreclosure may seem like the only option available to these Michigan homeowners, avenues for avoiding foreclosure do exist. Foreclosures are financially damaging to mortgage lenders as well as homeowners, and it’s often in the bank’s best interest to avoid home foreclosure. Recent Federal stimulus packages and tax incentives have made accepting alternatives to foreclosure more enticing to mortgage lenders than ever.
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 may still hold homeowners accountable 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 the crippling credit damage of being strapped with a foreclosure. Short sale agreements are beneficial for mortgage lenders, who are saved from 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 do have a negative impact on homeowners’ credit histories, these sales are viewed as a settlement by credit agencies and are consequently far less damaging than foreclosures. In many cases, Michigan mortgage lenders will forgive homeowners the remaining deficiency, allowing homeowners to walk away from the short sale debt free.
Avoiding 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 homeowner to refinance the real estate property in question for less than the original purchase amount. As with short sales, homeowners may still be held liable for the deficiency, although in some cases this remaining balance may be forgiven. Short refinances are ideal for homeowners whose mortgages have gone underwater due to property devaluation. In loan modification agreements, homeowners are allowed to keep their homes while lowering their mortgage payments to payments which reflect the property’s current market value. Once more, there is some credit damage associated with loan modifications, but this damage is less than it would be in a foreclosure. Short refinances benefit lenders, who avoid the high costs associated with foreclosure.
Finding Help Avoiding Michigan Home Foreclosure
Navigating these alternatives poses an enormous challenge to individual home owners 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 usually a difficult process, and completing these transactions without the help of a foreclosure transaction specialist can be tedious and fruitless. In many cases, individual homeowners and real estate companies which do not specialize in foreclosures will not be able to complete the loan modification or short sale in time to prevent foreclosure.
Enlisting the help of a Michigan foreclosure real estate specialist significantly raises the homeowner’s chance of success in avoiding foreclosure.