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5 Common Questions Homeowners Have About Default

With a number of homeowners facing foreclosure or default there are a number of common questions that can come in handy. provides some insight into the answers to these very common questions.

  1. Should I intentionally default on my home mortgage? The desire to strategically or intentionally default on your home mortgage may sound tempting… cash is more valuable than credit; however, there is a better option. Following Section 702 in the Obama Act, there is an option that allows for a third-party to take possession and make a ‘bona-fide’ offer to the bank. This will show that your debt has been settled and can help you avoid having to file foreclosure, which could ruin your credit for 7 years.
  2. As a borrower, what are some ways I can gain leverage with my mortgage holder? One option is to establish a ‘substitute mortgage’- a security pledge that is offered to the seller’s lender, with a third party for a lesser amount of the current payment. This will result in a significant amount of collected funds that can be used as negotiating leverage to release the borrower from the debt, or dictate terms for a loan modification in the borrower’s advantage.
  3. Why have loan modifications and foreclosures become the predominant answer for so many in distressed property situations, and why can this be problematic? Real estate professionals consider the short sale process to be too complex. Since they are not very comfortable with the overall transaction they can sometimes forego an option that would be in the owner’s best interest.
  4. Why is a short sale strategy more advantageous than a loan modification or foreclosure approach? The reduced payoff in a short sale can release you from the debt obligation. It allows you to re-establish your credit faster and re-enter then market much wiser. A loam modification actually builds a debt trap around the borrower who is emotionally attached to a property, milking the borrower for ever last penny. A foreclosure ruins a homeowner’s credit and takes a much longer time period to recover from.
  5. Is it true that borrower’s in default need a ‘General Public Disclosure’? Many homeowners are not aware of the ‘alternatives’ to the foreclosure process. One document that helps to outline your options is the General Public Disclosure. It will also help homeowners to identify what the best option is for them.

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