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After Forbearance: Next Steps if You’re Still Struggling

If you’re coming off a pandemic forbearance plan and are still financially struggling, you may be worried about potential foreclosure. Rest assured that mortgage companies prefer to avoid foreclosures and there may be solutions available to help you keep your home. However, if you’ve decided your best option is to move to more affordable housing, your mortgage servicer (if you’re a Mr. Cooper customer, that’s us) may be able to help you do so without facing foreclosure. Here are three options to consider. Bear in mind that the sooner you start a conversation with your servicer about these, the better.

1. Selling your home in a traditional sale

Selling your home could help you pay off your mortgage, protect your credit, and potentially cash out any home equity you’ve earned. This may give you enough money for a down payment on a new home or sizeable savings. Given the recent rise in home prices, you may also discover you have more equity than you expect. Mr. Cooper customers: Learn more about your home’s estimated value and equity here.

It’s important to note that home values can also go down, especially when foreclosures flood the market. This may be the case as other struggling homeowners go into foreclosure, and in a worst-case scenario, your mortgage could be considered “underwater,” which is when a homeowner owes more on their home than it’s worth. Homeowners who would like to sell their home but are underwater can look into selling their home through a “short sale,” which is described below.

2. Selling your home through a short sale

If your mortgage is already underwater, a short sale may also allow you to avoid foreclosure. If approved, the owner of your mortgage will allow you to sell your home for less than you owe on the mortgage. You will be able to walk away with no future financial obligation to your mortgage servicer or investor, and relocation assistance may be available to help you move out of the property.

A short sale may have tax consequences and/or impact your credit, so you’ll want to contact your tax advisor to discuss these potential effects.

3. Executing a Deed in Lieu of Foreclosure

A Deed in Lieu of Foreclosure (DIL) means you voluntarily transfer ownership of your home to your lender, the lender terminates the loan, and the remaining balance due is forgiven. This solution may have tax consequences and/or impact your credit, so you’ll want to contact your tax advisor to discuss these potential impacts. As with a short sale, you will have no future financial obligation to your mortgage servicer or investor, and relocation assistance may be available.

Note that if there are other liens and judgments against your property, those must be paid off or removed prior to finalizing the DIL. You may also be eligible for assistance in removing some or all of these liens or judgments.

If you’re a Mr. Cooper customer, whichever path you decide on—whether to stay in your home or find more affordable housing—we’re here to help you make a choice you feel confident in. If you’re nearing the end of your forbearance, please explore the solutions that may be able to assist you or call us at 866-316-2432.

Tradenames and trademarks used in this blog post are the property of their respective owners. Nationstar Mortgage LLC d/b/a Mr. Cooper is not affiliated, associated, or sponsored by any of these owners. Use of these names and trademarks is not intended to and does not imply endorsement, but is for identification purposes only. Information provided does not necessarily represent the views of Mr. Cooper. Information is subject to change without notice.