3 Things Homeowners Can Do When Their Home Is “Under Water”

The recent U.S. recession is the worst since the famous Great Depression of the 1930s. Bankruptcy filings skyrocketed, the unemployment rate was extraordinarily high and home values decreased significantly from their 2007 highs. Many homeowners learned that they owe lots of debt – a home that is worth less than what they owe on it, no way to refinance and no way to sell the owe because of it. It’s known as being under water.

Homeowners may feel like there is nothing more than can do except walk away from the mortgage, allow the home to go into foreclosure and file for bankruptcy. Still, there are other options to bankruptcy – and have the home gone from their hands.

1 – Chapter 13 Bankruptcy

A bankruptcy is one way a homeowner can stay in the home – if that’s what he/she wants. It’s done by filing a Chapter 13 bankruptcy, which allows them to catch up on the missed payments and reduce the amount they owe on their home. This is known as “cram down” and has numerous benefits to help homeowners keep their home.

2 – Deed In Lieu Of Foreclosure

A homeowner can give the bank the home, avoiding any foreclosure process and the additional costs that are included such as:

- Collection costs
- Interest on the mortgage
- Attorney fees

This process is known as a “Deed-in-Lieu of Foreclosure” and, even though many banks don’t like this option, it is an option.

It’s not uncommon for the bank to ask homeowners for small payments toward the difference in the mortgage balance and the home’s value. With the help of a knowledgeable attorney, negotiations regarding the deficiency amount and the terms can provide homeowners with substantial financial relief.

3 – Short Sale

Ina short sale, the homeowner is given approval from the bank to sell the property to another part for less money than what is owed on the home. This process isn’t very quick, and getting an attorney who has experience with it can really help speed it up. When offers are made on the home, the bank has the information the attorney has prepared to give the homeowner quicker answer to sell or not sell the home.

A homeowner who is underwater and having financial issues should not consider foreclosure based on the bank’s terms. Rather, with the knowledgeable attorney, homeowners can negotiate a better deal with the bank, stop any foreclosure process and give them some control during the process.