The definition of a foreclosure bailout loan: a secured loan obtained by a mortgagor in order to save an owner-occupied house that is under foreclosure. It is a refinancing loan and it comes with a set of rules and with its own set of problems.
As you can find from the definition of foreclosure, the mortgagor is facing an impending foreclosure after missing some payments and failing to bring the loan current over three to six months. So, as you expect, a foreclosure bailout loan will come with a higher interest rate. To get a foreclosure bailout, though, the borrower must still have a good credit score of 500 and above.
Most lenders usually come with a few options to help the borrowers in financial distress, and they might come with a proposition to refinance a mortgage. If your lender did not make you an offer, then the next safest place to find a trustworthy lender is through a broker. Brokers send the case to the lenders who are more likely to offer a foreclosure bailout loan. Otherwise, trying to find a private lender could be risky because there are many scams and tricky offers for debtors facing foreclosure.
The Office of the Comptroller of the Currency(OCC) has published many tips for avoiding mortgage modification scams and foreclosure avoidance scams. As bad as it may sound, there are people who take advantage of vulnerable debtors on the verge of losing their homes. They have no mercy and those who take the bait end up losing even more money while their foreclosure is progressing. Before signing any documents, search for the company you are about to work with on the Better Business Bureau website and check it’s rating. Companies (including banks and private lenders) who deserve your trust are rated A+ or have earned BBB accreditation. Avoid hard money lenders at all costs!
Another condition imposed on those who need a foreclosure bailout loan is to have high equity in their homes, preferably of at least 40%. Those who have built less than 20% equity in their houses might qualify for the HOPE for Homeowners Program dedicated to FHA Insured loans.
There is good news for mortgages backed by Fannie Mae or Freddie Mac, too. Ask your lender if you qualify for the Home Affordable Modification Program (HAMP) or the Home Affordable Refinance Program (HARP).
HOPE NOW is another great non-profit organization that helps people facing changes in their lives that have had a negative impact on their monthly income: people who have been furloughed, unemployed, seniors with fixed income or families filing for divorce. As written on their website: “HOPE NOW is a non-profit alliance between counselors, mortgage companies, investors, regulators, and other mortgage market participants.” Here you may also find free legal advice and assistance.
After reading this definition of a foreclosure bailout loan, you can see they are not for everyone. You don’t have to feel discouraged. Communication with your lender is very important and it is not for their best interest to foreclose upon your property. They earn a lot more if you continue to pay every month for as long as possible. Make even small payments/partial payments just to show that you do your best and opt for a foreclosure bailout loan only if it is not making your life harder.