Reinstatement of the Note

Reinstatement is simply bringing the account current by paying what you are behind.  This seems like such an obvious option of saving your home that you may think it should not be listed as a foreclosure alternative.  You may also be thinking that if you could afford to pay all of what you are behind, you would not be behind on your payments and you would not be on this website.  Not so fast.  There are a couple of points relating to simply reinstating the note that may not be obvious at first glance.

First, even though you do not have the money to pay all of the arrears on the note, have you exhausted all possibilities of obtaining the funds?  The purpose of this article is not to advocate getting further into debt to save your house in all situations.  If you have lost your job, or if your hours have been cut at work, going and getting a loan to pay off your mortgage arrears may not be a wise decision.  Especially if you will just get behind on the loan again next month.  But there may be situations that exist where a person could obtain a loan to pay off the arrears and the person can afford to pay his/her mortgage on the new loan going forward.  If you fell behind on your payments because of a situation that you have now recovered from, this may be an option in saving your home.

Additionally, perhaps this would be a good time to consider asking for a loan from the bank of “Mom and Dad”.  No one enjoys asking friends and family for help, but in the right circumstances, it may be worth it.  The same caveat applies here as applies to a loan from a financial institution.  If your circumstances are such that you cannot afford to pay your mortgage even after the loan is reinstated, it may not make sense to borrow money to reinstate a loan you can’t afford to pay anyway.

The second issue with a reinstatement of the note is whether and when your security instrument allows for a reinstatement of the note.  Each state has different security instruments (Texas uses a “deed of trust”) and each security instrument contains different provisions, but it may be possible that you lose your right to reinstatement after certain conditions occur.

For example, Texas has a fairly standard security instrument that is used in a large number of home purchases in Texas which states that a borrower loses his/her automatic right to reinstate the loan if it is within 5 days of a foreclosure sale of the property.  What restrictions are in place relating to your right to reinstate your loan will be dependent on your state’s laws and the security instrument in place on your property.  Check your security instrument (it should be in the packet of documents your received when you purchased the house) to see what it has to say about the right to reinstate.

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