Distressed Mortgage Relief
Getting relief for a distressed mortgage loan depends on your home loan lender. Many borrowers experience hardship from job loss, divorce and illnesses and in an effort to save their credit and house, they seek help from their lenders. Lenders do have hardship provisions to help distressed owners, but relieving mortgage debt isn't commonplace. Borrowers must meet certain requirements.
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Mortgage Loan Modification
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Loan modification is a type of help commonly sought by distressed owners. Some borrowers have trouble paying their home loan because they're dealing with interest rate increases from an adjustable or interest-only mortgage, or because they deal with economic pressures that trigger payment problems. Lenders carefully review each request for a loan modification. They check a borrower's assets and present debts, and those who meet the criteria can receive a lower home loan payment via an interest rate reduction.
Mortgage Short Sale
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Difficulties selling a house in a troubled real estate market increases the likelihood of foreclosure if behind on payments. Borrowers don't want to lose their house to foreclosure, and not surprisingly, lenders don't want a stockpile of foreclosed properties. When foreclosure becomes a real possibility because of default, lenders may consider allowing a borrower to short sell a property. Short sales are essentially real estate transactions that occur when borrowers sell the house for less than the home loan balance.
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Payment Option
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Mortgage lenders require monthly payments. But when circumstances stop a borrower from making a payment temporarily, such as job loss, losing the home to foreclosure becomes imminent -- unless a lender steps in and offers relief. Mortgage loan forbearance is a type of relief for distressed mortgage holders that allows them to skip one or a few house payments for a certain number of months.
Deed in Lieu of Foreclosure
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Signing over the deed to your home and walking away is another relief provision intended to avert a home foreclosure. This type of help is a possibility only after you've attempted to sell your house (must list house for at least 90 days), and only after your lender reviews your circumstances. A deed in lieu is typically a last resort to avoid mortgage foreclosure. Lenders reclaim the property and release borrowers from the home loan debt.
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