When borrowers fall a few months behind, the lenders often send out
the Notice of Default which threatens to call due the entire balance.
However, this procedural step can be reversed. If the homeowner can make up
the missed payments the bank may agree to reinstate the loan, as if nothing
ever happened. Sometimes they will seek to add on something for their legal
fees and other expenses. Depending on the type of loan and the terms thereof
you may have the right to reinstate,
How An Attorney Can Help: Your attorney can work with the bank so that your
reinstatement can work smoothly. You do not want your money to wind up
being held in "suspense" and foreclosure proceeding anyway. You may or may not
want Loan Modification, but if you try to do your own reinstatement you may
be sent to the Modification Department anyway. A reinstatement should not
involve intrusive document requests, like a modification application.
Loan Modifications can take time, reinstatements are best done quickly.
Loan Modifications during foreclosure can result in additional bank legal fees
as the foreclosure case goes forward which they may want you to agree to pay as
part of the Modification process. If all you want is reinstatement, you don't
want to pay that.
A short sale is when the lender agrees to take less than the full amount owing to them in full satisfaction of the lien against the property,
thus allowing the property to be sold. Lenders can also call this "taking a haircut".
How An Attorney Can Help: Firstly, an attorney can work with you and your broker to put together a proposal to the bank and to negotiate terms and conditions.
This includes not only how much of a discount the bank will take but also issues like whether they will be forgiving the remaining loan balance or if they will chase you for it after the short sale. It can also include Relocation Expenses for you.