Options While Current
Your Options While You Are Still Current
If you are still current on your mortgage, you hold maximum leverage. The bank's investor is furthest from recovering the property, which gives you the strongest position to negotiate a clean exit with the least damage.
Being Current Is Your Strongest Position
California law, combined with federal rules, can stretch the foreclosure process to 10 to 12 months or more of non payment when an attorney properly leverages every anti foreclosure protection. That time is your leverage. The further the bank's investor is from actually recovering the property, the more motivated the bank is to reach a resolution that works for you.
That leverage is lost a little more each month you go without paying. So if you are still current, protect that position before you act. Do not let the bank talk you into stopping payments before you understand your strategy.
Strategies While Current
Deed in Lieu While Current
Submit a deed in lieu package to the bank while you are still current. You hold maximum leverage because the investor is furthest from recovering the property. The servicer has a duty to put a viable offer in front of the investor now.
This is often the most satisfying result for a homeowner who wants to protect credit. You are doing something proactive, you are giving the bank a clean exit, and you are still giving yourself the chance to avoid the worst damage. Pair it with a simultaneous low cost listing so that if the right buyer appears, you exit even more cleanly.
Short Sale While Current
Starting a short sale while current maximizes leverage. The servicer must put the offer in front of the investor now, because the investor stands to lose more the longer it waits.
It is harder to do, but it protects your credit and your time. The approval letter must mirror California Code of Civil Procedure Section 580b so you do not accidentally turn a non recourse situation into a taxable event with the IRS.
Conventional or Low Cost Listing
If your property is worth around what you owe, or a little less, list it now with a 1% or flat fee agent who can negotiate buyer agent commissions down.
In the right circumstances, buyer agents will work with reduced commissions if it helps their buyer buy the property and helps you out. This keeps you current, preserves your payment history, and may let you exit with no derogatory event at all.
Loan Modification (Only If You Want to Keep the Home)
A loan modification is for a homeowner who genuinely wants to keep the property and can document the means to pay a new, slightly lower amount.
Be very careful if the bank says you must stop paying to be considered. We see a pattern of banks using up the first three or four months of non payment and then denying people who had little chance of qualifying for a good modification in the first place. Each of those months is leverage you may never get back.
10 to 12+ months
of possible non payment when an attorney leverages every California and federal protection
Each month
you go without paying, your leverage shrinks
Act early
determine your best strategy while you are current, before the clock works against you
The bank and its investor are not always aligned with you. The servicer may be paid more while your loan stays in review, even if that review goes nowhere. Understanding your leverage before you talk to the bank is the single most important thing you can do.
Want This Reviewed for Your Situation?
If instead of going through the guide you would like to talk to an attorney, we offer a free consultation. Or continue to the options for homeowners who are behind but have no Notice of Default yet.
Want This Reviewed for Your Situation?
Every situation is different. Get a free, no-obligation review with John McConnin, California Attorney & Broker.
(858) 324-8855