Mortgage debt settlement has become an increasingly popular concept, with rising foreclosures and government bailout programs designed to help struggling homeowners. Mortgage debt settlement can take one of two forms: you can restructure or modify your mortgage with your lender, adjusting the principle that you owe if you are underwater on your house, or you can arrange a short sale if you are underwater on your house. With the former, you keep your home while with the later, you sell your home.
Mortgage debt settlement is more difficult to negotiate than standard debt settlement, such as settling credit card debts, since a mortgage loan is a secured loan. Your home acts as collateral, so if you do not pay the full amount owed on the mortgage, the bank has the option of taking your home and selling it. However, if your property values have fallen, it is possible that you may end up owing more on your mortgage loan than the home is worth, so the bank will thus be unable to recoup the amount they loaned you if they foreclose and sell. When the bank knows you owe more than the house is worth and that they will not be getting their money back through a foreclosure, they may be more willing to allow for a mortgage debt settlement.
If you find yourself facing problems paying your mortgage and you want to settle your mortgage debt, you need to consider which of the two major options for settling mortgage debt is best for you. Generally, you can try to:
Deciding on how best to achieve mortgage debt settlement is complicated, and getting legal advice is important to make sure you make the best decision. Your lawyer can help you to decide how best to arrange a debt settlement and can work with your lender to arrive at a deal that works for you.