Can Foreclosure Be Avoided Through Refinance Or Obtaining A Loan Modification From A Bank?

Key Takeaways:

• It is possible to avoid foreclosure through refinancing or by getting a loan modification from a bank. Generally, if you are facing foreclosure, it will be easier to get a loan than to refinance due to the state of your credit.
• You can also avoid foreclosure by pursuing a deed-in-lieu. This essentially means that you exchange the deed to the house for the remainder of what you owe, avoiding foreclosure and making it far easier to walk away and rebuild your credit.
• Attorney Fier also practices corporate and business law. He has longstanding business and corporate clients and can help all sorts of business owners choose the right type of business entity.
• The biggest mistake people make in forming businesses is not thinking ahead and having a solid shareholder/operations agreement. Attorney Fier can help you cover all your bases when planning a new business.

Yes, foreclosure can certainly be avoided through refinancing or getting a loan modification from a bank.

While both of those options are technically available, if a person is already facing foreclosure, it will be harder for them to get refinancing, because they will likely not have sufficient credit. Loan modifications, on the other hand, are much more doable with a less-than-stellar credit score.

There are other foreclosure alternatives, but unfortunately they aren’t very favorable to most people. They include options like doing a short sale, or simply doing a regular sale, depending on how much equity is in the home. With either a short sale or a regular sale, you can avoid a foreclosure.

You can also avoid foreclosure pursuing a deed in lieu of foreclosure. This is an option for situations in which you find that the value of the debt you owe is close to the value of the property. It involves essentially giving the deed to the property over to your lender in exchange for them not coming after you for the difference that is owed on the mortgage. They may even offer you an incentive, which would be some amount of money to move or relocate.

A deed in lieu will, of course, result in you ceding ownership of the property. However, it is definitely better than allowing a property to go into foreclosure. If you pursue a deed in lieu, you can start rebuilding your credit right away.

If you go through a foreclosure, you will face pretty serious repercussions when it comes to your credit. For example, you won’t be able to get another mortgage for four years after the completion of the foreclosure. For reference, the waiting period for a mortgage after declaring bankruptcy is two years.

If you pursue a deed in lieu, on the other hand, the waiting period to apply for a new mortgage is only 12 months.

So, there are alternatives to be considered when it comes to foreclosure. As mentioned above, short sale is one of those alternative options. However, I will say that if I am representing a seller/owner of a property, I try to not do short sales. In my experience over the years, many sellers/owners who say that they’re looking to do a short sale are actually just looking for a way to extend their time in their home. They may say they’re looking to pursue a short sale, but often, just saying that they’re open to that idea buys them time. As such, when push comes to shove, they often do not actually want to pursue the short sale. This can really waste my time and my colleagues’ time, so we generally do not take short sale cases unless we are on the purchasing side.

What Can An Attorney Do To Help Me Complete A Short Sale On My Residential Property In New York?

If you are, in fact, interested in pursuing a short sale on a New York residential property, an attorney can help in several essential ways.

As attorneys representing a short sale client, we can make sure that the short sale contract is consistent with the standards held by your lender, in order for them to accept the proposal. We also make sure that all your paperwork is put together and filled out properly.

But again, I generally find that unfortunately, many people who say they want to do a short sale do not actually want to do a short sale, and simply want to buy themselves time by saying they are open to that option. As such, they generally don’t cooperate with our efforts when we try to write up a contract that is acceptable to the lender, or even when we try to gather the necessary information and documentation for short sale paperwork.

Does Your Firm Practice Business And Corporate Law? If So, What Type Of Business And Corporate Law Does Your Firm Practice?

My firm does practice some business and corporate law. One of my corporate clients has been with me essentially since I graduated law school. He’s had me on retainer for around 35 years. In fact, I was the attorney that set up his corporation legally.

Currently, I look over his contracts, leases, and things of that nature. If, God forbid, he gets sued or has to sue someone, we will handle that corporate litigation process.

There are many different entity options for people who are endeavoring to set up a business. As a business attorney who handles some corporate legal matters, I can help a client discern which entity option is right for them, and then help them set it up.

If they’re just starting out with a small business, or they’re starting a one-person business or a family business or something of that nature, an S Chapter corporation will be sufficient. However, if the business structure is larger or more complex, we would usually go for a C Chapter corporation. Then there are also additional options, like LLCs and LLPs and PCs.

We have set up every type of business entity, and they all have different purposes. The right entity structure for a given business depends on the business itself—or rather, the people who are putting together the business. Specifically, it depends on what the people starting the business want to do and why they want to do it. We can give them the best options pursuant to the details they give us about what they want to do with their business.

In addition to what they want and what they’re currently doing, it also depends a lot on what they’re planning on doing moving forward. Most times, when you’re purchasing property as a small holder, then you’re going to hold them in LLCs or LLPs. This is largely important when it comes to tax ramifications.

We can discern what the best type of entity might be for one of these companies that exist to hold property. We do this by talking to the client about what they plan on doing and what the various parties that might be involved. We ask about their net worth, the net worth of the parties involved, and what the founders are looking to do or take advantage of. Based on what they tell us, we can show them how to best protect themselves in terms of liability.

In addition, we always make sure to tell the client what it’s going to cost them going forward to be a corporation, and what the comparative costs might be to stay a partnership. We do our best to make it clear what those two options might mean to them, including any potential repercussions.

What Are Some Common Pitfalls People Encounter In Setting Up Companies And Corporations?

One of the biggest mistakes people make when setting up corporations is not to have a good shareholder agreement. One of the biggest mistakes people make when setting up LLCs is not having a good operating agreement. These two agreements function similarly in each entity type respectively.

Shareholder agreements and operating agreements so often become pitfalls because people fail to take into consideration all the possibilities in the future of the company. This is difficult to do, because when you’re first starting a business, you’re not thinking about “what-if’s” or planning years and possibly even decades into the future. In those beginning phases, you’re not thinking about retirement. You’re not thinking about disability. You’re not thinking about death of a shareholder and the interactions of that particular entity with the shareholder’s estate.

Crafting a truly comprehensive shareholder agreement/operating agreement is one of the reasons why setting up a company or corporation takes so long (if done properly).

Sometimes clients will come in and want a rush job. They’ll ask why we can’t just set up a corporation on the fly. I tell them that I’d be happy to help them with that, but they will have to sit down with me and tell me about their situation. We really must go over what it is they’re planning on doing and if they’re planning on doing it with multiple shareholders—and if so, we need to discuss what each shareholder is looking for, as well as what they think they’re going to get at the end of the transaction.

It truly is a matter of spending time to get down to brass tax. Sometimes, people come in and ask us to form a company or corporation and don’t even know what they want until we start asking about it. Once they start talking, then they start to flesh these ideas about the company out—or find that they still have some thinking to do.

Ask someone like that a question like, “Do you want life insurance to have buyout agreements for everybody if somebody becomes disabled and/or passes away?” Or simply ask them how they’re going to handle disability and life insurance. Often, they will come up empty and tell you to put a pin in it while they do some more thinking.

Sometimes, the unique circumstances of the business owner/founder will factor into these decisions. We had one such client recently. When I asked him about life insurance, he told me that he’d love to get life insurance, but he’s had cancer, and no one will give him a policy for life insurance. This posed a unique question of how to get life insurance worked out for the purposes of the company.

In that case, as in many cases, the answer was that you have to work it out with the shareholders and see what they’re willing to do, and then see if and how we can make that happen.

So, it’s essential to have a good shareholder’s agreement/operating agreement that covers as many contingencies as possible. That is one solid, proactive step you can take to avoid future business disputes.

We also have a good faith policy that technically avoids our own services, but is best for the client. Specifically, we usually suggest arbitration clauses in the agreement, so that if there’s a problem or an issue, you can at least attempt to solve it in a way that’s quicker and less expensive than a full lawsuit.

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