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Role of foreclosure settlement cash raises fear in South Carolina

A couple of months ago, distressed homeowners welcomed the announcement of a settlement with major mortgage lenders for their deceptive foreclosure practices. Now, portions of the $25 billion settlement are being disbursed throughout the 50 states. South Carolina leaders are questioning how to best utilize the foreclosure settlement funds.

The state of South Carolina is receiving a total of $32 million in cash to help provide respite for foreclosure victims. However, the funds are being handed to each state's attorney general in order to be distributed as they see fit. In South Carolina, the attorney general has left it up to the legislature to decide how the funds should be used.

Some people believe the funds should not necessarily provide direct relief to homeowners, as they are intended. Rather, some lawmakers believe the funds should be used to attract more jobs to the state. They argue that jobs will be helpful in providing debt relief.

This potential move comes on the heels of news that the foreclosure crisis in South Carolina may not have reached its peak quite yet. According to a report from RealtyTrac, a national real estate organization, foreclosures will continue to increase in frequency throughout the state. In fact, another wave of foreclosures is just beginning.

News that the foreclosure settlement money may not be used to provide direct mortgage relief may be disconcerting to those homeowners on the verge of losing their homes. This only fuels earlier concerns that the settlement did not go far enough to protect financially-strapped homeowners.

Fortunately, there are alternatives to foreclosure that can provide the kind of reassurance South Carolina families on the verge of foreclosure deserve. Aside from direct relief payments from the settlement, bankruptcy, short sales or a deed in lieu of foreclosure may be viable options.

While bankruptcy and short sales are becoming increasingly popular options to avert foreclosure, a deed in lieu of foreclosure can be a viable way to speed up the process. Under this particular arrangement, borrowers give the house's deed to the lender in exchange for a cancelation of the mortgage, which will end foreclosure proceedings. Lenders must agree to this before the process moves forward. This is not necessarily a simple task, so getting the best arrangement from a lender may involve some complications. At the same time, there may be a better solution waiting for overwhelmed homeowners.

Source: WSPA-TV News, "Mortgage Settlement Money May Not Be Going To Help SC Homeowners," Diane Lee, May 8, 2012

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