The reasons for homeowners pursuing an alternative to foreclosure will often vary but in cases where servicers are continuing to make these plans available there have been improvements seen, specifically for services like GMAC Mortgage who continue to offer this alternative to foreclosure for distressed homeowners when foreclosure prevention plans may be of little help. While homeowners are often urged to take advantage of plans like modifications or unemployment forbearance programs that may be available from major servicers like GMAC Mortgage through HAMP, there are times when these short sales or deed in lieu of foreclosure plans are a homeowner’s only option.
Earlier this month, the Treasury Department released the latest information we have on these homeowner assistance efforts, which has tracked information for GMAC Mortgage through the month of June. In the area of short sales and deed in lieu of foreclosure plans, homeowners who were unsuccessful at getting a permanent home loan modification and had there from modification canceled saw an increase from 921 in May to 962 in June in short sale and deed in lieu of foreclosure plans that have been cumulatively made available. Also, for homeowners who are not accepted into a trial modification program, GMAC Mortgage saw an increase in short sales and deed in lieu of foreclosure plans from 7,121 in May to 7,534 in June.
Yet, homeowners question what this information may mean to them, particularly when many are still struggling financially and hoping that a modification plan will be made available so that they can keep their home. Obviously, these short sale or deed in lieu of foreclosure opportunities should only be used as a last resort, but there are arguments that homeowners may simply not fair much better in the case of these alternatives to foreclosure than had foreclosure actually taken place, but in terms of a homeowner’s credit history it could be seen in a more positive light.
If a homeowner is looking to reenter the housing market despite losing their home, proving that financial distress which arose was outside of the control of the homeowner, as well as showing that a homeowner worked with their servicer to agree upon an alternative like a short sale, may prove to future lenders that a consumer is responsible despite the fact that they will have some work to do when it comes to improving their credit score. There are some homeowners, like those in a negative equity situation, who are not so much worried about their credit score as they are paying on a home whose value has dropped well below what they owe on the mortgage, so this could be a more optimal choice in the view of some that comes to transitioning from a home to an alternative living arrangement like an apartment or rental property.
In the end though, homeowners will have to decide what route is going to be best for them but GMAC Mortgage homeowners, or any homeowner for that matter, are still being urged by housing counselors and financial advisers to explore all options that are available to save their home so that using one of these foreclosure alternatives may not be necessary.