12 Options for Avoiding Foreclosure in Orlando

1) Documentation search – If you want to stall the process of foreclosure you can call the bank’s loss mitigation department and ask them to “Produce the Note”. The note is the original loan documentation that the homeowner signed to get a mortgage. Many banks are unable to find this paperwork. Why? Because your mortgage maybe serviced by another entity than the one you originally signed up with. It’s easy to understand how a loan that’s repackaged and sold multiple times could go through disorganization in the process.

At any rate, this strategy of asking your loan servicer to produce the note will buy you time if you are planning to implement another strategy to avoid foreclosure but it won’t free you from your debt obligation. In Florida, banks are ready to produce the note at the time of foreclosure date because that is the law. Even if the note is lost they can produce a lost note affidavit that will suffice.

2) Forbearance – Forbearance will not alter the original terms of the loan. But the bank will forgive you if you have a few months of missed payments because they approved of this beforehand. The missed payments will be either paid in one lump sum after a certain amount of time or staggered by being paid back gradually (on top of your normal monthly mortgage payments).

To be approved for forbearance you have to claim the reason for your inability to pay and how you are going to be in a position to pay this back in the near future. Hardship reasons are those that you would typically think of (job loss, sickness, death in the family etc.).

The main thing to remember is not to wait too long before applying for mortgage forbearance. By addressing your financial problem with your bank you can seamlessly move into an approved period of payment lapses and come out owning your house. Procrastination is what dooms this option for the typical borrower.

3) Reinstatement – In your loan agreement you will find a section called ‘Borrower’s Right to Reinstate After Acceleration’. There you will find the details about your reinstatement deadline. Some people are procrastinators by nature and for them paying their past due amount on the deadline day could backfire. They might forget about covering the associated fees which include:

A) Late fees
B) Property inspection fee
C) Attorney’s foreclosure preparation fees
D) Recording fee

Always make sure to base your reinstatement payment off the payoff statement which you can request from the mortgage company. By law, the mortgage company must promptly send it to you within 7 days from the date they get your request. Always provide the request in writing and send by certified mail so you have proof if the mortgage company doesn’t comply. If they don’t comply within 7 days you have your receipts to defend yourself against a foreclosure.

After receiving the payoff statement make sure that there are no mistakes. If you believe there is a legitimate mistake you can file a “notice of error” which may buy you time if you can’t produce the money to get caught up.

The danger in reinstatement is that in your exuberance to pay off the balance, you might put yourself in a bad position for future payments. If you do manage to get reinstated and are left with not enough for the next month’s payment then you are in default again.

4) Deed in lieu of foreclosure – Banks don’t like this option because if they are the primary lender, they have to pay off all secondary liens on the house. However, with no secondary lenders the Deed in Lieu of Foreclosure would be preferable because the process is expedited and the borrower is less likely to intentionally damage the house before leaving.

A deed in Lieu of Foreclosure might look attractive to a borrower because they can walk away from the ordeal without a foreclosure on their record. The problem is that the borrower gets nothing for the house despite the inflated prices of homes in Orlando. They simply walk away.

In a foreclosure, a borrower can get money back if proceeds of the sale at the courthouse steps is above what is owed. By the way, all secondary liens on the house is figured into this. So if you took out a home equity loan years back, this loan would have priority of getting paid before you get any money.

Although the Deed in Lieu of Foreclosure option is derogatory on your credit history, you can make an agreement with your bank so they will report that your debt is “Paid In Full”.

5) Government programs – Government programs exist to help you keep your home. In the past the largest and most well-known program was the Home Affordable Modification Program (HAMP). When HAMP rolled out under the Obama administration there were mortgage companies that were antagonistic towards it and foreclosed on the houses of people in the program.

Lack of oversight on the part of the government was part of the problem. Those who participated were told that they could have a 3 month trial period and after successfully making payments on time they could get a lower monthly payment. Some of those who flawlessly made payments kept on being told to fill out more and more paperwork. Often when it was sent in, the mortgage companies would say they lost the paperwork and ask for it again.

The HAMP program was discontinued in 2018 but there are a number of other programs to research if you need help keeping your home. The lesson learned from the failure of HAMP is to do your research before picking a government mortgage help program. Be skeptical but know that if you pick the right one and stay committed, you can be successful in keeping your home. Below are some valid programs to research and consider.

A) Principal Reduction Alternative (PRA)
B) The Home Affordable Foreclosure Alternatives Program (HAFA)
C) Home Affordable Unemployment Program (UP)
D) Second Lien Modification Program (2MP)
E) Home Affordable Unemployment Program (UP)
F) Second Lien Modification Program (2MP)

HUD-approved Orlando counseling agencies

1) COMMUNITY LEGAL SERVICES – 386-506-5384 – 122 E. Colonial Drive, Suite 200
2) GUIDEWELL FINANCIAL SOLUTIONS – 877-355-1763 – 122 E. Colonial Drive, Suite 200 ORLANDO, Florida 32801-1219
3) HOUSING AND NEIGHBORHOOD DEV. SVCS. – 407-447-5686 – 1707 Orlando Central Pkwy Suite 305 Orlando, Florida 32809-5759
4) INCHARGE DEBT SOLUTIONS – 877-251-1882 – 5750 Major Blvd Ste 320 Orlando, Florida 32819-7971
5) NACA – 847-704-6222 – 6861 W Colonial Dr. Orlando, Florida 32818-7830
6) OPERATION HOPE – 863-777-9355 – 5025 W. Colonial Drive Orlando, Florida 32808-7601

6) Cash for keys – The cash for keys option which has become popular in recent years, is much like ‘deed in lieu of foreclosure. In both situations the homeowner can just walk away from the house. But as the name implies, a cash for keys option gives an amount of cash (about 1% of the total loan) to the homeowner so he has at least something to live on for a few months. With this option the bank reports to the credit agencies that the loan was paid off, avoiding the negative credit ramifications that come with a foreclosure.

7) Loan modification – This option takes months to be approved if you are at all, and while you’re waiting you intentionally stop making mortgage payments. Sadly, the vast majority of applicants for loan modification are not approved and find themselves 5 – 6 months in default.

Perhaps the low rate of acceptance for loan modification is because of people’s lack of knowledge of government programs for distressed borrowers (addressed in this article). These programs provide financial incentives to the banks to offset the ongoing loss in monthly payments and late fees. However, even working with one of these programs, the low acceptance level would make another option more viable (e.g. selling to a real estate investor).

About 3 years ago a law in Orlando began forcing the hand of all mortgage companies in Florida to work with borrowers more closely and with the intention to help. The law states that a bona fide decision maker must attend mediation meetings with borrowers. This prevents companies from rejecting applications based on false narratives like losing paperwork.

8) Real estate investor – Selling to a real estate investor in Orlando is a good strategy to avoid foreclosure for reasons that aren’t so obvious. Typically when a homeowner who is in default realizes that it’s time to sell he reaches out to a traditional real estate agent. This is a gamble because the house may not be be sold in the time before the foreclosure deadline. If the house does manage to get sold the homeowner could be paying 6% in commissions which is excessive.

When you deal directly with a real estate investor (i.e. house flipper) you can get the sale done quickly with cash in your pocket. This is ideal for anyone who is risk averse and wants to get back equity instead of giving it to a bank. Although there is a chance of getting equity back after a foreclosure it is usually a lot less than when working with an investor.

9) Short sale – When a homeowner is approved for a short sale the house is worth less than what he owes on the mortgage and he can prove that he’s not able cover his debt with his assets. If a bank approves a short sale the owner understands that he will get no profit from the transaction. He also understands that he must oversee a lot of the logistical work to get the sale finished.

One might wonder why he is motivated to be proactive to sell while coordinating schedules with a real estate agent, the buyer and the bank if he won’t take any of the profit. The reason is because if the short sale goes through he can avoid a foreclosure. A short sale translates into 2 years of not being able to buy a home whereas a foreclosure prevents him from buying a home for 7 years.

The process of selling a house through a short sale is usually protracted through many months because the bank serves as the intermediary. They can drag their feet for any reason, even when an offer comes in from a buyer that makes perfect financial sense. That is why only seasoned buyers are in the short sale space. They have learned patience through experience and are willing to stay committed to a future sale for the long term.

10) Assumption vs. ‘Subject to‘ – An assumption is when a buyer takes over the mortgage of a homeowner without having gone through a closing process. In this process the buyer takes over where the seller left off in terms of years left on the loan. Long ago assumptions were an integral part of the mortgage system but now banks don’t approve them. Instead, a close cousin called the “subject to” has become mainstream which looks similar but is fundamentally different.

In a “subject to” property transfer the sellers name on the deed is replaced by the buyer but stays on the mortgage note. The bank is never told about this switch for fear of bank enacting the “due on sale” clause which is found in the lending agreement. It states that if the name is changed on a deed that all of the balance of the mortgage must be paid in full.

Though this verbiage exists in lending agreements it is rarely enforced because the bank is happy to get payments after a long period of default. When the bank sees that all of the payments have been caught up by the buyer they don’t have to plan for a costly foreclosure.

The big caveat for all parties in a ‘subject to’ transaction is if the buyer fails to make payments during the course of the loan. The missed payments would be shown on the credit report of the former homeowner, not the buyer. However, this rarely happens because the buyer usually sells the home to someone who specializes in house flipping.

11) Bankruptcy – This stops the foreclosure process immediately. After the bankruptcy you will still be making payments to your lender. That is why before you decide to go bankrupt you should decide if you can abide by the monthly payment structure. Missing another payment could make your house go into foreclosure right after your bankruptcy (two strikes instead of one). Unfortunately, the majority of the time this scenario happens which puts the borrower in a worse predicament. The following Orlando address will be pivotal in your petition for bankruptcy. There you will meet with your lawyer so your oral petition can be recorded and presented to a judge.

Bankruptcy Court Clerk: 400 W Washington St, Orlando, FL 32801

12) Litigation – The trained eye of an experienced foreclosure attorney can look at your Assignment and Assumption agreement and know how your case should move forward. That’s why you have to validate the background of an attorney before hiring him. You want someone who can get to the heart of your mortgage’s ownership chain and find out what the discrepancies are.

For example, sometimes a mortgage is repackaged into a Special Purpose Vehicle before you even get to the closing table which is illegal. This Special Purpose Vehicle belongs to another entity that collects your payments and interest. This is different from the Aggregation Pool which belongs to the organization that originally held the mortgage.

Your trained attorney can ask for documents from the banking organization that currently holds your mortgage to see if your mortgage is still valid. In the past when a bank has realized that it has no legal right to collect money from you, they have just walked away from the table instead of fighting. Their motivation for walking away is not wanting to lose in court whereby they would lose the ability to collect from their other borrowers whose situation is identical to yours.

Conclusion

This article contains an exhaustive list of options that should be considered by anyone in Orlando who is facing a foreclosure. Since everyone’s situation is different, the order in which the options are presented have little meaning. The most important thing is to read and understand all of the content so that a borrower can accurately decide how to proceed in avoiding an emotionally taxing foreclosure.