A difficult economy, job losses or reduced hours and a shuttering of storefronts across the nation is making it more difficult for many Chicagoans to meet their financial commitments. While letting the family home go into foreclosure is not an easy decision, it can seem like the easiest solution to debt relief. But if not done properly, you could be in more trouble down the road.
Discussing your unique situation with an experienced foreclosure defense lawyer will open up options that you may not be aware of. The procedures for short sales, foreclosures and loan modifications require an in-depth knowledge of state and federal law, and going up against big banks without legal aid can result in omissions that can cost you dearly.
Going into foreclosure
Illinois has one of the highest foreclosure rates in the country, and Chicago tops the list of large cities with the greatest number of foreclosure filings (REO’s) as of November 2020.
There are some situations where foreclosure is advisable. If the homeowner has an underwater mortgage, the current value of the house is less than the amount owed on the mortgage. Even if the mortgagee is making payments on time, because the principal owed is greater than the market value of the home, it may be best to go this route.
In a strategic default, the homeowner simply stops paying the mortgage, allowing it to go into foreclosure. Unfortunately, if the proceeds from the foreclosure sale are less than the outstanding balance on the mortgage, the bank can go after the homeowner through a deficiency judgement.
A short sale is one option for avoiding foreclosure while allowing the homeowner to walk away from the mortgage. Although the short sale would also relieve the banks of high foreclosure costs, banks are often resistant to this option. In the case where the bank has been unresponsive to the mortgagee’s economic hardship requests, allowing the home to go into foreclosure can force negotiations with the bank that will result in a short sale or other loan modification options.
A deed in lieu is another way of avoiding a foreclosure. In this case, both parties come to an agreement that allows the mortgagee to give the bank the deed to the property in exchange for forgiveness of the mortgage. In either a short sale or a deed in lieu, however, it is best to secure a waiver of deficiency from the bank.
Having legal counsel to help negotiate with the banks often leads to better results than going it alone. Lenders will generally wish to avoid foreclosures, and getting them to negotiate will open up other avenues that are advantageous to the mortgagee.