By Beth Hayes, Staff Attorney, Montana Legal Services
You might be in a situation where it is not realistic for you to keep your home. There are still options available to you to avoid foreclosure and prevent further damage.
- Assumption: Assumption is an option for a third party to take over your loan. When a mortgage is assumed, the property is transferred to a third party, and that third party takes over the payments on the mortgage. Not all loans are assumable, so check with your lender/servicer. When a mortgage is assumable, the property can be transferred, and the person to whom it is transferred can pick up the payments on the mortgage.
- Short Sale: A short sale is the sale of the property for less than the amount due on the mortgage in order to avoid foreclosure. The consequences of a short sale on your credit report are less dramatic than a foreclosure. Your lender/servicer must agree to a short sale, and you should be sure that your lender/servicer will agree to accept the lesser amount from the short sale as full payment for your obligation on your mortgage. You cannot sell your home to a family member in a short sale. Most lenders/servicers require that the house be listed for sale for at least 90 days at its current appraised value.
- Deed-In-Lieu of Foreclosure: A deed in lieu of foreclosure (DIL) is a voluntary transfer of property to the lender/servicer in exchange for forgiveness of your mortgage debt. A DIL is possible only when you have no junior liens on the property. Your servicer/lender must agree to this, and will often require that you try to sell the home before they will accept a DIL. You should be sure that your lender/servicer will agree in writing not to pursue you for any amount you still owe on your mortgage
- Cash for Keys: Ask your servicer/lender about any cash assistance they might have for homeowners willing to leave their homes. This money will assist you in your relocation.
If you decide that to pursue one of the above options to leave your home, it is still important to stay in touch with your lender/servicer. Most of the above options take time and cooperation from the servicer/lender, and will also require that you work with a realtor, so be sure to explore these options before it’s too late.For further advice and assistance, contact a HUD Certified Foreclosure Housing Counselor.