Reinstatement

The borrower pays the entire past due amount to bring the loan up-to-date.  This includes all late charges and any fees/costs associated with a foreclosure action.

• Brings the borrower’s account current in the shortest amount of time
• The borrower needs a large payment to fulfill this requirement
• Potential sources of funds could include:
• 401K plans
• Stocks/Bonds

Repayment Plan

Allows the borrower to distribute late payments over a period of time, usually no more than 12 months

The delinquent portion is added to the usual mortgage payment during the repayment period.

• Brings the account up to date after the repayment period
• The borrower will be able to retain the home if they stick with the repayment plan
• The circumstances leading to the delinquency have been resolved
• The borrower’s total monthly payment may increase during the repayment period
  
  

Loan Modification

A loan modification is an agreement that restructures the terms of the borrower’s loan, including any combination of extending the term, adjusting the interest rate, and/or reducing a portion of the principal.

A Loan modification may involve capitalization of past due amounts to bring the loan current.  It is important to stress that modifications do not put the payments on the end of the loan. 

A loan modification is not limited to a vehicle that only capitalizes past due amounts.  Terms can be extended; rates can be adjusted down to accommodate the borrower’s lower ability to pay for the negotiated term, shared equity could be used to reduce the principal amount to lower payments.

• Changes the mortgage note terms and gives borrowers a fresh start
  
  
• Brings an account current at time of loan modification

• To qualify, the borrower must have experienced a permanent reduction in income

• Hardship has been resolved but the borrower does not have sufficient funds to reinstate or enroll in a repayment plan

Refinance

Refinance is the repayment of debt from the proceeds of a new loan using the same property as security. 

Unlike a loan modification, in which the original loan is modified, refinance involves payoff of the original loan and creation of a new loan

• Borrower must be able to qualify for the new loan

Forbearance

A signed agreement between the borrower and the lender.  The plan itself may call for reduced payments or even a temporary suspension of payments due to reason for default (hardship). 

• Forbearance plans are appropriate when a borrower is willing to pay but has a temporary hardship rendering him or her unable to reinstate the loan.
• Of all of the retention options, forbearance is the most subjective and requires the most documentation. 
  
  

Short Sale

A short sale is an agreement to allow the borrower to sell the property for an amount less than the total amount due.

Short sales involve willing borrowers who acknowledge they can no longer afford the collateral/property.  Usually this involves the borrower listing the property for sale with an agent.

• The borrower no longer has the ability to pay
• Total due exceeds the fair market value of the property
• Borrower must supply a detailed hardship letter
• Borrower must document income.

Deed-in-Lieu of Foreclosure

A deed in lieu of foreclosure (DIL) is an agreement in which the customer agrees to deed (give) the property back to the lender in exchange for cancellation of the debt.

Deeds-in-lieu of foreclosure involve a willing borrower who acknowledges that he/she can no longer afford the property. 

• The common deed-in-lieu candidate has tried to short sale the property but had no acceptable offers.

Cash for Keys

A cash for keys offer is an arrangement a lender may make with a borrower in which they are given a cash settlement in exchange for vacating his or her  home.

• If the homeowner accepts, a moving date is set.  On moving day, an agent for the lender will meet with you to inspect the property, accept your keys, and give you a check for the agreed upon amount.