KEEPING THE PROPERTY VS. SELLING THE PROPERTY

If your monthly house payment (including property taxes and insurance) does not exceed 40% of your gross monthly income, it should be possible for you to keep the property. If the payment is greater than 40% of gross monthly income, consider selling or transferring the property to avoid negative impacts to your credit. The objectives in order of importance should be:

1. Keeping the property if possible.

2. Don't give away equity if you can keep it or liquidate and put it in your pocket.

3. Minimize damage to your credit. You will need it later on.

LENDER WORKOUT
Before exploring new options, have you tried to come to terms with your existing lender? Lenders want the loan to be current, not to have to complete a foreclosure. Can you make up the defaulted amount over a period of months? Can you re-write the note and include the defaulted amount? Can you give the lender a deed-in-lieu of foreclosure and preserve your credit? These are questions you should ask yourself and possibly your lender if you haven't done so already. They will want to know why the loan is in default and why you think you will be able to make the payments in the future. Temporary financial setbacks that have since been cured are the best candidates for this. Your lender will probably not be inclined to discontinue foreclosure proceedings if they have reason to believe they will have to start again in 6 months.

REFINANCING AND NEW JUNIOR LOANS
Basic lending guidelines will require all home loans will total up to less than 70% of the current market value of the property. If you have more equity than that, you should have no difficulty in obtaining a new refinance or 2nd Trust Deed to bring your loan current. Expect higher interest rates and loan fees.

LOANS TO GET YOU CURRENT
If you experienced a temporary financial setback that has since been cured and are going to be able to keep the property, first consider family and friends for a loan to get current. It's much cheaper than hard money loans, but MAKE SURE you will be able to pay them back. You do not want to put them in the position of having to foreclose to get their money back. Hard money loans are typically private investors who will lend money based on equity in the property. Credit and income are not issues of importance and loan approval is usually a matter of days with funding following shortly. Loan amounts will usually be enough to bring existing loans current, pay the financing costs and put some money in your pocket. Loans will be amortized over 30 years to keep the payments lower and the balance will be due in 2 to 5 years.

BANKRUPTCY

This is a major step that will have lasting impact on credit reports. Seek appropriate legal advice. If the Notice of Default or Lis Pendens has just been filed on your home, you have sufficient time to explore the options for new loans or selling the property. If the public auction is going to be held very shortly, Chapter 13 bankruptcy is a very common way to delay the sale. When you file bankruptcy, your financial matters fall under the jurisdiction of the courts which could limit your options. SEEK LEGAL ADVICE.