With the avalanches of foreclosures, a person going into foreclosure can feel they are not going to receive help from their lender. This assumption is incorrect. Many lenders are inundated with foreclosures, and with the recent robo-signing scandal, lenders are taking more care and moving at a slower pace to begin the process of foreclosure.
If you feel yourself sinking into foreclosure, or if you have missed payments you will not be able to make up anytime soon, then it is time to contact your lender. Contacting the lender and reading the mail sent by the lender may be the first steps to avoid foreclosure.
Contacting your lender as soon as you realize that you have a problem may save you from headache and heartache later. If you experience a job loss, or reduction in hours or wages, or job relocation, these factors can result in less income. Provided the lender knows of your situation of a significant change in income, the lender may consider a loan modification for a short period of time.
If you had an interest only loan and the impending reset will become a financial hardship, contact the lender prior to the reset and negotiate for an extension. But remember the lender can only extend the time period as long as you do not become negative on the loan balance.
Many people often overlook a situation of major illness or death of a primary or secondary wage earner as a reason to contact their lender. The lender will take you situation into consideration prior to starting the process of foreclosure. You will have to notify and prove to the lender the situation will impair payments.
After successfully notifying the lender of your financial issues- you may have to try several times and talk with several people of varying attitudes- the lender will give you your options to avoid foreclosure. A foreclosure is expensive to your lender, and it is the route they least like. You may be able to do a deed-in-lieu of foreclosure, a short sale, loan modification, forbearance, etc. All the options have less of an impact on your credit rating and if properly negotiated the outcome may be better than you originally expected.
When in times of inflation not only does the dollar lose value, but real estate values will almost always go down. Now factoring in the housing crisis which has created a housing glut plus interest rates staying low to no movement upward, this is possibly one of the best times to invest in real estate. This is a buyer’s market, and many sellers are learning how to negotiate to not come up on the losing end of selling their property.
Granted the new real estate market is polluted with landmines, such as tighter credit regulations, an abundance of choices for buyers, and properties being devalued from their not so long ago highs. This current real estate market may look bleak to the average seller.
Times only look bleak if you do not learn how to navigate your current situation. There are many deals and duds in the real estate market of today, how will you make yours a deal not a dud?
By offering things that other seller’s including the banks will not be able to offer.
There are many first time and moving up home buyers seeking a home. Not all people have been hit by the credit crunch, so these are the ones that may fall out of escrow on a few properties due to the bigger better deal factor.
But there are other people who cannot get bank financing but are credit worthy. Remember tighter lending regulations is one of the reasons home prices are being strangled lower.
Offerings such as seller financing with a down payment, lease with the option to purchase, or rent/ lease per year. These are very viable strategies to get sell your property. Also offering an entertainment center for the living room or family room may also be a good idea (T.V. may or may not be included). If the buyer has children you may want to consider offering a Xbox or some other gaming system.
Making your property more attractive and move in friendlier than the next guy is a better way to get your property sold.
How do you sell your home in this foreclosure dominant market when you are not in foreclosure?
It almost seems easier said than done, selling a house in a declining market and you are not in foreclosure. Creativity is the answer. Throughout this blog there are suggestions for selling your home with creative financing. Many people balk at the notion of carrying a seller held first or even second. People want their money and they want it now. Most haven’t thought that taking payments is as good as taking a lump sum, and in some cases maybe better tax wise, please consult with a certified CPA for more details, advantages and disadvantage.
As for a seller holding a first lien and letting a loan servicing company handle the loan maintenance, this would be less of a headache in the long run. But, what if the person defaults on the loan?
As the lien holder you have the right to foreclose on the property. In most cases it will not be too difficult to file a foreclosure if it should come to that.
What if they damage the property?
The insurance should pay for the damages to the property. The first person responsible for the damages is the homeowner not the lender.
What if the new homeowner does have insurance, damages the property, and then defaults on the loan?
Well you may not be the best judge of character. But even in your possible poor judgment or “big heart”, which ever you prefer to think of yourself, as the mortgagor you will have insurance to cover the damage to the property and the foreclosure process to take back the property. A foreclosure unlike small claims court is a sure way of regaining the property in a situation of default.
What if I file foreclosure on a person who is paying me on time all the time?
This is very illegal. The courts will not only throw the foreclosure out but will also penalize you as the lender.
What if the person interested in the property does not have a down payment but qualifies for a home loan?
As the owner of the property you could extend the new potential homeowner a seller held second. Also remember as the second lien holder you would be the last to get paid in the event of a foreclosure, or your loan could be wiped out entirely. Being wiped out but not paid.
So why hold a second mortgage, if I could lose it, if there is a foreclosure?
Holding a second mortgage which will be due and payable in 5 years or even less improves the odds of recouping the loan. If the new homeowner should miss a payment to your second mortgage, then that could signal that they may be encountering financial turmoil; so foreclosing after one and half missed payments maybe an option for you to consider.
So remember creative financing maybe the best way to deal with a declining housing market in a credit crunch economy.
Resolutions can be made at any time of the year. Most people tend to make them at the start of the year for various reasons. A change in year can make you feel like a fresh new start; new calendar year means last year is in the rearview mirror. A time to make a resolution of reigning in bad habits, letting go of junk food and cigs, and or creating new beneficial habits.
But ever notice how resolutions are broken before January is finished. Maybe you have already broken a few of the things you promised yourself you would do. Well do not fear picking up where you left off is also a fresh start. You promised yourself, you made your resolutions; you had hopes of implementing and completing the promises you made to yourself. Promises, resolutions are not made to be broken but are a measure made by you for yourself.
Do not let you off the hook for a next year do over. It takes time to make a resolution a habit, give You 40 days. Make sure to write down your resolution with the benefits you will receive next to each resolution. If you have slipped off your resolution then reign yourself back in and recommit to YOU.
The Ostrich Effect has affected many homeowners. Many homeowners believe the new halting of foreclosures by Bank of America, JP Morgan Chase, and Ally Financial will keep their homes from going into foreclosure.
Sadly this is not the case.
This new halting has become yet another reason for homeowners to bury their heads in the sands of denial. The best bet is to not bury your head and find a solution that will work for you.
Many people in foreclosure do not understand they have options. Foreclosure should not be looked at as a failure but as one of life’s learning experiences.
No matter what made you go into foreclosure, whether it was buying more home than what you could afford, or taking out a second to buy a vanity item such as a more expensive vehicle, or taking exotic vacations, or losing hours at work and/or employment, illness of death of spouse, or maybe you were just horrible with finances.
No matter what your individual circumstance burying you head is not the answer to moving on while going through a foreclosure.
One of the First things a property owner should do when going into foreclosure, is to admit there is a problem, call the lender, then plan a strategy. Many people have their homes going into foreclosure because they felt there was no other option.
Deed-in-lieu of foreclosure is becoming very popular and has less impact on your credit than letting your home go into foreclosure. A Deed in lieu of foreclosure allows a property owner to exchange the title of the house to satisfy the loan. Many lenders are doing Deed-in-lieu of foreclosure for various reasons, mainly to cut down on the cost of a foreclosure.
Many investors have also used Deed-in-lieu of foreclosure to help home owners facing foreclosure. An investor would satisfy the late payments and penalties plus any outstanding loans against the property for a Deed-in-lieu of foreclosure. So if you are a home owner who has lost employment or has had a significant reduction in hours this may prove to be a savvy strategy to end your foreclosure nightmare. This is just one technique which could help alleviate your stress and get you back on your feet.
For help please call or email us no matter what your situation, whether upside down on your mortgage, equity without ability to pay, probate (no matter what stage), divorce, or ugly house syndrome we are here to offer you our help.
In this upside down economy, in particular the housing market, short sales are on the rise. So if you have tried without success to have a modification to your loan, then you may want to consider a short sale to avoid foreclosure.
It is simpler to say “short sale” than to do a short sale to completion. But don’t worry short sales when done properly can work in the favor of the home owner and the lender.
The basic definition of a short sale- when the lender agrees to accept less than what is owed on the balance of the property loan. So if you have a loan of $400,000 on a property and you have run into a financial hardship the lender may consider a short sale when you have fallen behind in payments. This does not mean you stopped making payments because you wanted to take an exotic trip, or wanted to have a shopping spree at Nordstrom’s. So with a loan of $400,000 and you have an offer on your property for $300,000, then the lender may allow you to sell the property short of the $100,000 difference.
The reason for a short sale has to be legitimate. The major reasons you need a short sale may be due to your loan resetting to higher payments than your income can handle, or loss of employment or job transfer, or loss of spouse, or a life threatening illness.
Whatever your reason short sales are a pain and a joy all at the same time.
The joy is when the short sale is approved; the pain is in getting the short sale approved.
A short sale is the step the lender does not like, but it is better than a foreclosure for all concerned parties. The lender has to agree to satisfy the loan for less and is therefore losing money; a foreclosure also costs the lender money. But a short sale may be better for the lenders bottom line, than disapproving the short sale to favor a foreclosure.
A short sale has a better approval rate if the difference in the loan amount and the amount being “forgiven” can be substantiated. This means the area your property is located in has to have comparable properties selling for lesser than the loan amount. With so many areas these days having upside down mortgages that may not be too difficult to prove. A local Realtor can give you the areas comparables.
As for the amount being “forgiven”, the difference between the loan and the selling price, this has to be negotiated. If you do not negotiate debt forgiveness you may find yourself with a 1099-C for the difference, which adds to your income. Many Realtors and investors are advising people that they do not have to negotiate the debt forgiveness. This is not true.
You still have to negotiate debt forgiveness. The form for your taxes is form 982 but your lender has to approve this debt forgiveness, and as we all know if you do not ask you will not receive. Remember the lender is already taking a loss in your short sale, what would make you think the lender will happily give you debt forgiveness if you do not ask. Even the Making Home Affordable website advises all home owners when performing a short sale to negotiate debt forgiveness.
So although short sales can take a long time and can be tedious, they can give you a fresh start towards an improving financial situation. Debt forgiveness has to be negotiated with the lender in a short sale. And when tax time comes along you can use form 982 to have the forgiven portion of your loan, forgiven from income on your taxes.
With the high number of foreclosures, a person can fall prey to foreclosure schemes and scams. The predators want one thing from you, and that’s your hard earned money. With so many legitimate companies and what seems to be almost the same number of scam “companies” how can you discern the real from the fake?
Please do not confuse this article with home loan modification; this article is about foreclosure companies. Loan modification companies are different from the type of businesses to which I am referring.
First, if the company asks you to pay for services, or has you pay to an account for services, more than likely they are scammers. Companies which help people out of foreclosure will not charge for their services.
If they have you makedeposits to an account and you do not have a new loan with the company, then they are possibly taking your payments for their own benefit. You should continue to make your payments to your lender during the process. If you are required to make payments to the stop foreclosure company instead of your lender this should be a red flag for you. Giving them your payments may end in a foreclosure auction of your home.
If the company makes aguarantee of helping you end your foreclosure, they are probably are not out for your best interest. Find out how they plan to end your foreclosure. The unscrupulous will make guarantees which no one can actually make. No one knows if your lender will or will not cooperate in stopping your foreclosure. Also remember with the amount of foreclosures and the mounting of even more foreclosures, lenders are inundated with a pile of files on their desks, or at least the desk of the loss mitigator.
If you decide to work with a foreclosure company and you reside in the same town with them, and they refuse to meet with you, this is a big red flag. Whether the person is an investor or middleman to investors they will want to meet with you. If they do not require you to take pictures of the house and/or will not come to your property to take pictures, then you may want to question, why.
If you are dealing with a for foreclosure company outside of your area they will more than likely arrange for the BPO (Brokers Price Opinion) with a local appraiser and may obtain photos from a local Realtor, or a free lance person in your area.
Stopping your foreclosure may take time, especially with all the foreclosures lenders are dealing with at this time. Most companies will give you periodic updates as to the progress of your foreclosure, but also call your lender to be updated by them as well.
Some foreclosure companies are home based business, but they are legitimate businesses with a business license. A home based business is more likely to have a post office box, but even larger companies with offices are also starting to have a post office box for various reasons. All companies are registered with the state, whether an limited liability company (LLC), limited partnership (LP) or corporation, so make sure and check with the state the company is located in for their registration.
The local police department may also provide service in finding out if a business is legitimate or not. Check with the better business bureau for complaints. If others have been wronged in some way, there may be a negative file with the better business bureau.
So even though you may be frustrated going into foreclosure remembering that legitimate companies will not make guarantees, ask for money, or dodge you when you start asking more questions, they are there to help you.
