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Nevada Foreclosure Relief – KNOW YOUR OPTIONS

Nevada homeowners in distress have options. In the Carson Valley Nevada area, I see Notices of Default filed every day in every price range of home – from the $100,000s to the multi-millions. In many instances, those homes go to foreclosure, and I can find no effort by homeowners to otherwise mitigate that foreclosure. This saddens and concerns me greatly as a resident of the Carson Valley Nevada area. I cannot determine why the home was not listed as short sale, and there were no other documents recorded demonstrating that the homeowner took any action to otherwise save their home. I often wonder: Did the homeowner understand they had options? Did they know the alternatives to foreclosure? Here are several options to foreclosure any Nevada homeowner should consider:

1. Forbearance – Forbearance is a period of time where the noteholder allows the homeowner to pay a reduced amount – or sometimes nothing at all – for a set period of time. Forbearance is typically used during a period of unemployment, or where the homeowner is anticipating a large influx of money like a tax refund or a bonus, to allow them to bring the mortgage current at some point in the future.

2. Reinstatement - This option allows the homeowner to pay the delinquent amount in one lump sum, or a series of payments, all due by a certain date, to bring the loan back to it’s current state. This is frequently combined with a forbearance. An example of these two options working together would be: You lose your job and are out of work for three months. During that time you are actively looking for work and have a few good job opportunities on the horizon. During that time you fall behind on your mortgage. You contact your lender, and they forbear your mortgage payments for 6 months. However, they also put you on a reinstatement plan, where the full 6 months of mortgage payments are due at some specific point in the future – usually at the end of the 6 months. This often puts people behind the 8 ball, because unless you get a much better paying job, you won’t be able to earn the amount of money needed to pay the payments for the period of time you spent out of work. Forbearance and reinstatement are often the lender’s first efforts to aid a homeowner who is delinquent. When these options fail, the lender will consider more permanent efforts to bring the loan current, including loan modification.

3. Repayment Plan – This is a specific plan where the noteholder takes the number of payments missed and spreads them over a set number of payments in the future, allowing the homeowner to pay the delinquent amount over time, bringing the loan current at some point in the future. In some cases, where homeowners can demonstrate an ability to make the current payment due, but not cure the delinquent payment amounts, lenders take the payments past due and add them to the term of the note. For example, if you are consistently two payments behind, and are having difficulty catching up, but can make the payments from now on, the lender may choose to extend the term of your loan for the two months necessary to bring your loan back into a current state.

4. Refinance – This is a completely new mortgage and requires the homeowners to have the income, credit scores and equity to be eligible for a new loan. Since many homeowners are underwater – owing more than their homes are worth – this is not a common way in today’s real estate market to avoid foreclosure action. The loan modification is a much more common option.

5. Loan Modification - A loan modification is a written agreement between the lender (usually the first mortgage lender) and the homeowner that permanently changes one or more terms of the mortgage note, usually making the payments more affordable.

6. Short Sale – A short sale occurs when the seller sells the house for less than the seller owes to the bank, including the costs to sell the home.

7. Deed In Lieu – A deed in lieu of foreclosure, also known as a ‘friendly foreclosure’ is where the homeowner agrees to sign the deed back to the noteholder. Why would a noteholder – or investor – do a deed in lieu? If foreclosure is inevitable, it saves the investor time and money and is an easier process for the homeowner.

8. Bankruptcy - For those homeowners facing severe hardship, bankruptcy may be an option, and is available according to United States bankruptcy laws. There are several types of bankruptcy available, however the two most common for homeowners are Chapter 7 and Chapter 13.

• Chapter 7 (also known as liquidation bankruptcy) is where all of a person’s assets are sold and the money raised from the sale of the assets are used to pay off the debts. The debts are then cancelled even if the balances are not fully paid off. Certain assets can be excluded, such as a home under the Homestead Exemption, and assets without any equity are generally not liquidated.
• Chapter 13 (also known as reorganization bankruptcy) is where a person’s debt is put into a repayment plan generally lasting from three to five years. The payment levels are determined from the person’s income. At the end of the term, the outstanding amounts are discharged, eliminating any remaining amounts due. Sometimes past due mortgage balances can be included in the repayment schedule.

Foreclosure proceedings stop as soon as the homeowner files for bankruptcy. The person filing for bankruptcy then relinquishes control of their assets to the  Bankruptcy Court Trustee, who makes decisions regarding the disposition of any assets. If you are considering bankruptcy as a foreclosure relief option, we recommend you seek multiple qualified legal professionals who specializes in bankruptcy law and get at least two opinions before deciding upon bankruptcy as an option.

As you can see, there are several alternatives to foreclosure. Some may be more practical than others depending on your personal situation. However, one thing is clear. Waiting around for the problem to solve itself – or simply avoiding the problem altogether – will not help you. It will likely take you to the worst possible outcome - foreclosure. Foreclosure presents it’s own problems, including ongoing credit damage for up to 7 years. Nevada is also a recourse state, meaning most loans written in Nevada allow the noteholder to seek compensation for amounts owed – even after taking your home.

If you or someone you know is in financial distress, they have options. And the worst thing they can do – is do nothing. Contact us today to discuss your options. If you need to short sale, we can help you exit gracefully, retain your dignity, and get a fresh start.