What is the most feared financial event in most people's lives? Job loss? Bankruptcy? Children? Divorce? For the vast majority of those who own their own home, none of the above. Foreclosure is frequently the most feared financial event imaginable. For most homeowners, the fear of foreclosure is enough to paralyze an individual into thinking irrationally and therefore compounding a very unfortunate situation.
There are a myriad of reasons as to why homeowners are faced with foreclosure, but most foreclosures in New Mexico originate in one form or another as a result of an adverse life event such as divorce, a death in the family, or health issues. Unfortunately, when life gets back to normal, homeowners often find themselves back at work, several months behind on their mortgage payment, and staring face to face with an individual delivering a summons to notify the homeowner that their bank is filing a claim against them. Also known as foreclosure.
At this point, you ask, "What options could I possibly have?" Most foreclosure counselors agree that the following are 7 options you can take to avoid foreclosure:
1. Do nothing.
Doing nothing will do nothing but speed up the foreclosure process. Best skip to option #2.
2. Borrow from family to re-instate the loan with the bank.
Many homeowners have family who understand their situation better than any bank or lending institution. Should you find yourself in foreclosure and you have family with the means to help, it is time to put your pride aside and ask for help.
3. Borrow from your 401K plan at work or IRA as a hardship loan to reinstate your loan.
Most 401k plans allow you to "loan yourself" money as a result of a hardship such as foreclosure. However, remember that you need to pay yourself back. Otherwise, you could be hit with major tax ramifications and/or penalties.
4. Borrow from your credit cards to pay off the remaining debt on your mortgage loan.
Depending on your credit card balances and available credit vs. your total remaining debt, you may be able to borrow enough from your credit cards to pay the re-instatement costs in full!
5. Re-finance the property.
There are many mortgage brokers and direct lending institutions who deal solely with individuals who have poor credit or who are in need of a quick transaction. Beware, however, of predatory lenders who try take advantage of your situation for their own benefit. If you have time, shop around to see which lender and/or program meets your needs the best.
6. Sell the property.
When selling your property, chances are you don't have a lot of time. If you need to sell quickly, you are best off selling to a reputable Real Estate Investor. Make sure the investor has references, and make them prove their track record. If done correctly, these companies can turn a bad situation into a good one by purchasing your home and giving you cash at closing to move on to your next chapter in life.
7. Negotiate a forbearance plan or loan modification with the bank.
If you have some money saved, you may be able to negotiate the time frame in which you pay the arrearage back to the bank. However, most people need more time than the typical foreclosure timeline allows to save enough money to enter into a repayment program or loan modification. Some Loss Mitigation or Foreclosure Counselor companies are able to slow the Foreclosure process down so the borrower can save as much money as possible to present to the bank. So as not to enter into an agreement with a "fly by night" operation, make sure the company you are dealing with has referrals and that they are members of the local Better Business Bureau.
This is not an exhaustive list of options to avoid the formidable New Mexico foreclosure process. These are just the basics. With that in mind, foreclosure can be a daunting experience. But with the right attitude, tools, and know how, it can be avoided and become a positive memory of goal setting, persistence, and creativity that you can build on in the future.
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