Justin Asks… I recently lost my job and I’m wondering what the difference is between going through a foreclosure and simply walking away from my home and mailing the keys to the bank?

Justin this is actually a question that I hear more often than I would like to. Please understand that if you choose to simply mail your keys into the bank you are still the owner of that house. Therefore you will still be presented with the exact same foreclosure process – you just won’t be living in your home. Remember, if you decide to move out of your home at this time, you may also find outstanding mortgage payments increasing the balance of your loan and your credit report will be affected.

You do have a couple options:

  1. Request approval from the lender to list your home as a short sale. The national rate of successfully completing a short sale is about 30%, so this will be a challenging time! Yet with this being said, if you follow the proper procedures and prove your hardship you can complete a successful short sale. Keep in mind though that in many short sale cases, the lender can pursue you for the deficiency balance after closing by mailing you a 1099 for the amount they agreed to forgive
  2. Another option would be to request approval from your lender to file a “deed in lieu of foreclosure”. By doing this, you are simply telling the lender that you can no longer make any payments on your mortgage which means you are legally giving ownership of your home to the bank via some paperwork and it is immediate whereas a foreclosure takes months and months to complete. The bank will save time and money by avoiding a foreclosure and the process of completing it – so this is sometimes attractive to the banks.
  3. If you want to stay in your home, consider working with the bank to complete a modification of your current loan.  They may re-negotiate your mortgage terms   – which is a win/win situation for all – you get to stay in your home at a payment you can afford and the bank doesn’t add another property to its list of REOs ( Real Estate Owned)

If there are no options that will work for you, consider consulting a bankruptcy attorney to explore your legal rights and ramifications of the decisions you make.  You can also call the Colorado Foreclosure Hotline for advice –   1-877-601-HOPE or look them up on line at http://www.coloradoforeclosurehotline.org/.

I hope this answers your question Justin!

Meet Cheryl!

About Cheryl

As a successful business owner and community leader, Cheryl Braunschweiger is known and respected for getting things done with a degree of skill and enthusiasm that bring out the best in those around her - colleagues, clients and friends. The name of her business, ALMC Mortgage, reflects Cheryl's philosophy and personality. She says it stands for All Loans Must Close –a reflection of her determination to do whatever it takes to serve her clients. Cheryl has been in the mortgage lending business for 20 years. Read More About Cheryl
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