Banks are overwhelmed by foreclosures. Foreclosures are a problem for Redlands California Homes to Redmond Washington Real Estate. Some areas have so many foreclosures banks don’t want any more. They have threatened moratoriums on foreclosures. This is causing lots of shadow inventory. In a best case scenario banks will avoid foreclosure, there are several alternatives that can provide a better end result for both bank and borrower.

Selling Your Home (Usually as a Short Sale).  Home owners who have equity, can simply sell their homes as a method to prevent foreclosure. But, in the current market, most distressed borrowers don’t have equity. Some estimates show that 25% of American borrowers owe more than their homes are worth. It is possible to sell underwater homes if you can get a short sale approved.

Loan Modification – With the encouragement of federal programs, many banks are willing to consider loan modifications.In some cases, the law might require fradulaent loans to modify terms.

Deed in Lieu of Foreclosure — With this foreclosure alternative the default borrower simply quit claims their deed to the bank. It’s rare that Deeds in Lieu of Foreclosure actually happen. Experts advise banks to accept short sales and deeds in lieu of foreclosure, this decision is usually financially best for the banks. Banks have trouble nailing down the criteria they will require for a short sale on an individual, unique property.

Deeds in lieu of foreclosures have some other issues that can make them a big more complicated. With foreclosures, the junior liens get nothing and are wiped off the record. They receive nothing. Their lien is removed from their property and they get nothing. It takes these debts off of the title. However, the banks can still judicially try and collect the debts. Banks do still have statutory rights to try and collect their unpaid debts. With deeds in lieu of foreclosures, when there are junior liens, the lender is responsible for these debts.

Forebearance — With a forebearance agreement the lender delays his right to exercise foreclosure to give the borrower a chance to catch up on their payments. The success rate for forebearance is only about 5%. Most people have no idea what things are required to qualify. A good source of information for Salt Lake Utah Real Estate, regarding foreclosure alternatives is from HUD non profit organizations. Advise from these organizations is FREE. People can’t legally charge for loan modification help, unless they are licenced mortgage lenders. Beware of scams when seeking foreclosure alternatives.

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Filed under: Distressed Properties

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