Most “workouts” mean sweating more, but loan workouts often let homeowners work things out with lenders to keep their home and stop the foreclosure process. They can help people relax a little.
Reinstatement is one of the more common workouts, along with other alternatives to foreclosure like mortgage modifications and special forbearance plans.
In a reinstatement the borrower pays the past due amount in one lump payment, bringing the loan up to its current balance.
Main advantage of reinstatement is a chance to start again
A house in foreclosure is so behind in mortgage payments that the bank begins the process of seizing the house and selling it to recover their money. The big advantage of a reinstatement is that keeps people in their own home.
Florida banks do not have to accept reinstatement, but they want to arrange reinstatement for homeowners who can probably handle it financially.
Disadvantages are expense and risk
Reinstatement is an expensive alternative to foreclosure. The homeowner makes one payment covering all missed mortgage payments, late fees and interest.
Depending on how far along the foreclosure processes has gotten, the bank may want the costs of marketing the house, inspections and attorney’s fees. Such costs rise every day, so it is essential to explore reinstatement as soon as possible.
Finally, reinstatement leaves the homeowner with the same ongoing monthly bills for the mortgage, just as before. Only now, the homeowner has a second loan to pay if they got the reinstatement funds by taking out another loan.
Knowing the exact amount needed to reinstate
If reinstatement seems like an option, the lender can give a formal quote for the cost. That quote is a commitment to an amount and usually includes an expiration date.
Sometimes, a lender is willing to combine reinstatement with other workouts, such as mortgage modification. It might matter if the loan for reinstatement comes from the same lender.
Regardless, it is important to remember that most lenders are thinking and acting in their own interests, not to help a homeowner in foreclosure. It is usually critically important to get advice and information from independent experts whose job is to help people facing issues like foreclosure.