Anne Arundel County Real Estate

As you may or may not know, foreclosures are on the rise - even here in Anne Arundel County.

The main reason for this is that more and more people are buying homes that they cannot ever afford to pay for.

Why are they doing this, you may ask?

One reason is that they are getting caught up in adjustable rate mortgages that seem okay up front, but do a lot of damage when things change. But no matter why you are up against foreclosure, you probably want to know what your options are.

In most cases, if you are faced with foreclosure you are not going to be able to get around this. But this is not always true, so you will definitely want to give it a try. After all, anything that you can do to keep your home would probably sound good to you. In many cases, if you get in touch with your lender early enough they will help you to avoid foreclosure. The problem is that most people usually do not do this. Instead, they wait until they get their foreclosure in order to get worried.

As a general rule of thumb, if you feel that you are going to be up against foreclosure in the near future, you need to get in touch with your lender. In fact, call them the second that you begin to miss payments. This way, they will know that you are not trying to hide. In turn, they will be much more inclined to cut you some slack any maybe even work out a way for you to get back on track.

If foreclosure has yet to set in, but it is coming and your lender is not willing to help, you may want to look into selling your home. This is far from keeping your property, but at the same time it is much better than having it repossessed. When this happens, you are not going to get anything out of your home. You would be much better off selling your property, and then working with your lender in order to get things taken care of.

All in all, if you are facing foreclosure, keeping your home is going to be a difficult task to accomplish. But with that being said, it is far from impossible.

You will want to act desperate and do whatever you can in order to stay in your home. Sometimes this is enough if you have a willing lender, but other times it is not.

Financial troubles could be in store for thousands of homeowners if the dire foreclosure forecasts come true. But homeowners facing foreclosure do have options, says Judon Fambrough, a lawyer with the Real Estate Center at Texas A&M University.”They can pay off the debt before the foreclosure sale begins, refinance the debt with another lender, or sell the property and pay off the debt,” he said. “However, these options may not be practical for homeowners who lack funds, good credit, or the time necessary to sell the property before foreclosure.”

Fambrough says another, lesser-known option is available. The homeowner can request a deed in lieu of foreclosure (DILF).

A DILF conveys the property back to the lender in exchange for cancelling the debt. The lender’s consent and cooperation are required. DILFs offer several advantages over traditional nonjudicial foreclosures under deeds of trust, the most significant of which is that the homeowner’s credit is unaffected.

In addition, Fambrough says DILFs are quicker, requiring fewer than the minimum 41 days needed to foreclose on a home under a deed of trust. DILFs are also more confidential and less expensive.

“The major costs of a DILF are deed preparation and the recording fee,” Fambrough said. “But lenders may require the debtor to pay for a title search and an appraisal before agreeing to the DILF.”

The title search determines whether there are other liens on the property, and an appraisal substantiates the property value. Often, if a property has more than one lien, or if the property value does not greatly exceed the amount of the debt, lenders will not agree to the DILF.

Under certain circumstances, a lender can void the arrangement or foreclose even after agreeing to a DILF.

“The arrangement could be voided if there was a lien or encumbrance on the property that the homeowner did not disclose or that the lender had no knowledge of,” Fambrough said.

Fambrough points out that, in some cases, homeowners may find foreclosure a more attractive option than a DILF.

“If the property value exceeds the debt, and the debtor decides to foreclose, any excess revenue generated by the foreclosure sale will go to the debtor,” he said. “This is not the case with a DILF. Debtors forfeit their equity.”

Before executing a DILF, Fambrough recommends the homeowner talk to a financial advisor about possible income tax consequences that could result from the debt forgiveness.