Posts Tagged ‘foreclosure options’
Thursday, September 29th, 2011
With the economy in turmoil and people scared to make big purchases, the real estate business is undoubtedly challenged. In difficult times some people panic, and I see that happening amongst distressed borrowers, yet there is a process to the situation that you need to follow in order to have a chance to save your home and your credit. I have blogged on this topic before and it is worth repeating.
If you are in a distressed situation you need to approach it methodically, even if you don’t believe that there are options. Foreclosure should be the last resort. Here are some steps you can take to try and avoid it:
1.Â Contact your lender. I know this sounds horrible, but you need to start somewhere. Some lenders, like Bank of America, actually have been stepping up to help people avoid foreclosure. You need to have all pertinent information ready when you call – your loan number, employment information, bank statements, etc. You want to see if you can qualify for a loan modification. This will take some time, but you need to get the ball rolling sooner rather than later, as soon as you discover you are unable to pay your mortgage or if you have a change of circumstance.
2.Â Contact a counselor if your bank cannot help you. There is a wonderful free counseling organization called HopeNow that can help you evaluate your situation and see what options may be out there for you to peruse. You can reach them at 888-995-HOPE. You can find them on the web at http://www.HopeNow.com.
3.Â Investigate ALL other possible options. If you are in the military, there are options that may be available to you. You may be able to qualify for a deed in lieu of foreclosure, refinancing, postponement, or a reverse mortgage if you are older and have equity in your home. There are stalling tactics you may be able to use while you find a way to get yourself on track. There are government programs that may help you if you are unemployed. Investigate all options, but do not feel overwhelmed. If you speak with your lender or a counselor you can whittle down the available options.
4.Â Short sale. When there is no other option a short sale is better than going through foreclosure. You need to speak with an experienced agent if you are considering this option. Make sure you understand all tax and credit consequences – speak with your accountant or an attorney. Many lenders will bless short sales, and it is a good idea to work with someone experienced because they can try to get lender approval at the get-go. Some lenders are even evaluating homes now and telling the homeowners what price they will accept on the short sale BEFORE the home is listed. You may also qualify for programs like HAFA (Home Affordable Foreclosure Alternatives Program), which allows you to collect up to $3000 from your lender toward moving expenses.
It is important to understand the foreclosure laws in your state and the consequences they carry. If you are having difficulties with your mortgage please do not just give up – you need to try and find a solution before succumbing to foreclosure. Do not walk away from your home either, as that is a voluntary foreclosure. If you spend a little time you may find a solution that lets you avoid foreclosure, so hang in there.
If there are any distressed property issues you would like to see addressed in this blog, please let me know in the comment section below. If you do not see the comment section, simply click on the title to this blog and then scroll back down.
Monday, May 16th, 2011
I read an alarming statistic today that “walking away” from one’s mortgage, an option to foreclosure that was popular in 2008, is now no longer viewed as morally reprehensible. In fact, a Fannie Mae survey of underwater homeowners (those with negative equity) found that 27% of them consider walking away – which today is called a strategic default – as a viable option to foreclosure.
Back in 2008 when I wrote my book, “Mortgage Walkaway Options,” the key focus was on options to foreclosure, with walking away as a last resort. My co-author and I urged homeowners to get educated and learn about other possible options before they walked away. At that time companies promising a bright future to homeowners who paid a fee to walk away were gaining deep pockets. They did not tell troubled borrowers that walking away was actually an intentional foreclosure, and many unknowing borrowers ended up with a foreclosure on their credit record when they may have been able to salvage it.
Most homeowners used to feel walking away was morally reprehensible, irresponsible. But even though strategic defaults have gone down the new study shows that this may no longer be the case. It is worrisome for several reasons, but what effect might it have on the housing market and on your property values?
The housing market will not come into a complete recovery until we clear out all the distressed property. If homeowners start walking away in large numbers this will take even longer. Obviously this will effect property values for a longer period of time.
More importantly, we need to find alternative ways to help struggling homeowners. People should not feel it is ok to turn their backs on an obligation to which they have committed. States are doing their part to help, organizations are fighting to get government help. We all need to seek the assistance available and try to find other ways to stay in our homes before resorting to walking away.
Monday, April 4th, 2011
Always the first to stir the mix, California is once again making strides by trying to shorten the short sale process with Fannie Mae backed loans. The California Association of Realtors (CAR) is working together with Fannie Mae to help Realtors get short sale approvals in a shorter time frame by leveraging technology and an assistance desk.
With the help of local multiple listing services (MLSs), agents will be able to provide accurate comparative market analysis data to pinpoint property valuations, thus providing the comprehensive information needed for faster approvals. The Fannie Mae Short Sale Assistance Desk will assist agents with the process.
The new system aims to provide agents with a response within one week that the initial submission was reviewed. If not received in that period the Short Sale Assistance Desk will aid agents in obtaining responses from the servicer. The goal is for agents to work with the servicers first, and then have the Assistance Desk step in if necessary.
The Short Sale Assistance Desk aims to get an initial response in 20 days, final property valuations within 30 days, and a final decision within 60 days of the original offer submission. That means a maximum of 60 days for short sale approval–this could make a big difference in the market.
To qualify for assistance the following requirements must be met: the first lien on the property must be owned by Fannie Mae, there must be a valid offer on the property, the agent must have a signed authorization form from the borrower and must be a member of the MLS.
This attempt by California is testament to the fact that states will be playing a bigger role in distressed property issues. Hopefully this will have a positive effect in making short sales shorter and strengthening our markets.
Friday, April 1st, 2011
In the latest attempt to speed up the foreclosure process, judges may soon become intimately involved with homeowners and lenders. Yesterday the Senate Judiciary committee approved the Limiting Investor and Homeowner Loss in Foreclosure bill, which will give judges authority to meet with homeowners and their lenders in foreclosure mediation proceedings. The bill will now go before the full Senate.
This act, while not as broad as past proposals to allow judges to modify mortgages, will basically give judges the authority to open lines of communication between lenders and distressed property owners. The goal is to help the homeowner avoid foreclosure and get the ball rolling on possible options.
The state of Rhode Island already has a similar program that has been successful. While this bill will not prevent foreclosures it may be a positive step in helping many homeowners, as many know too well that just starting a conversation with someone in the loss mitigation department can be beyond difficult.
Requiring lenders and homeowners to meet face to face adds a human element and prevents the homeowners from being seen as mere pieces of paper in a file on top of a crowded desk.
Saturday, March 20th, 2010
Loan modifications have become the preferred method of avoiding foreclosure over the last few years. Although many people are unsuccessful in obtaining them, and the government continues to create programs to entice lenders to grant more modifications, there is one aspect that is not often discussed in relation to those who obtain them: credit consequences.
Everyone knows that credit scores suffer after a foreclosure or short sale, but it comes as a surprise to many that the same occurs after a loan modification. After all, it is an agreement with the lender that keeps the borrower in her home and in good standing, with many of those borrowers never having missed a payment. Once the loan modification is complete it is not abnormal to have a 100 point drop in credit scores. Why?
The argument is that the homeowner is trying to do the right thing in modifying the loan, to avoid foreclosure or even a short sale. He or she has typically not missed any payments. So why be penalized? Everyone wins: the homeowner stays in the home and continues to make payments, albeit more affordable ones that reflect current market values. The lender avoids a short sale or foreclosure, losing thousands (or even hundreds of thousands) of dollars in fees and winding up with a vacant property to sell.
The credit rating industry justifies the hit by arguing that only those with financial difficulties seek loan modifications, thus other lenders and those who extend credit need to be aware of that fact.
This issue is just another thorn in the side of the embattled Making Home Affordable Program, which has only helped about 170,000 homeowners (although initially expected to help millions). For those lucky enough to be admitted to the program, there is a three month trial period under which the homeowner makes the new payments. If they are made on time and without any problems the applicant is granted the modification. The credit drop tends to occur during these three months, which could be a problem if the applicant does not qualify and then has to go through a short sale or foreclosure–at that point their credit score would have dropped immensely, with a potential double hit.
All in all this is just another hurdle for the troubled homeowner facing the possibility of not being able to make house payments. Although with a modification the credit score is not hit as hard as with a foreclosure it is still something to be aware of when deciding what to do.
Monday, March 8th, 2010
There is a new program on the horizon that aims to help homeowners who have not qualified with loan modifications become more likely to obtain their lender’s permission for a short sale. This could be big news for many, possibly eliminating millions of foreclosures. The clincher: homeowners could receive a payment in exchange for leaving their homes. Sound too good to be true?
This new aggressive approach stems from a brutal fact: over five million homeowners owe more than their homes are worth and face the possibility of foreclosure. The government, who has formulated other plans to assist with loan modifications, is hoping that this new plan will prove more helpful than it’s predecessors.
Set to roll out April 5, the new program focuses on short sales and getting their approval. Here’s how it works: if a homeowner has tried unsuccessfully to obtain a loan modification from it’s lender the lender will now be compelled to accept a short sale. The lender will be given $1,000. If there is a second lien holder it will be given $1,000. And the cherry on the cake: the homeowner will be given $1500 as “relocation assistance.” In return the lender will agree not to come after the borrower for the difference between the sales price and what was owed on the balance (the capital gains).
Assuming this plan actually works, what are the benefits?
1. Less foreclosures. This is good for neighborhoods and homeowners and the housing market.
2. The homeowners’ credit will not be affected as negatively as if there had been a foreclosure.
3. Chances are that the homes will not be left in such a poor state, since the homeowners get a financial gain from the deal (the $1500).
4. Lenders will save money by not having so many foreclosures on their hands.
5. The housing market will likely benefit, as short sales will no longer take mysterious amounts of time, thus reducing inventory and getting more homes sold.
So, will this one be the one that works and benefits all those parties involved? There are naysayers out there but I sure hope so. It sounds interesting and going after the short sale is definitely better than letting millions of homes go into foreclosure. It is not the cure for the housing woes, but it’s a start. Let’s hope it works.
Friday, November 6th, 2009
The newest program in the Federal arsenal to help homeowners who are facing foreclosure is called the Deed for Lease program. Created by Fannie Mae, this program will allow homeowners to essentially become tenants in their homes for 12 month periods (including the possibility of renewal at the end of the lease). In exchange for this right the homeowner will agree to deed the home back to the lender, as well as other requirements.
Here are the requirements in a nutshell:
1. The primary mortgage must be financed by Fannie Mae (they finance about 31 million home loans so there is a good chance they finance yours)
2. Borrowers must live in their home as a primary residence
3. Any secondary mortgage holders must agree to release the borrower from loan obligations (this I see as the biggest challenge to this program)
4. Rental rates will be fixed at market rates but no more than 31% of the renter’s gross income (another potential problem, since 31% of gross income may be less than market rental rates)
As I indicated in the parenthesis above, there are issues with this program that will need to be ironed out. While it sounds great in theory it may not effectively help many. It will depend a great deal on the second lien holders willingness to forgive debt (and if short sales are any indication this may be an issue–the reason many short sales do not go through is BECAUSE second lien holders are not willing to forgive the debt and walk away).
It is clear that the Feds are continuing to try to help struggling homeowners, but to what extent this new progam will work remains to be seen. If anything it is another avenue that a desperate homeowner can try. If you are interested in what other options may be available to you please email me for a download of my book, Mortgage Walkaway Options. My email is email@example.com.
Wednesday, November 4th, 2009
The dreaded short saleâ€šÃ„Â¶you find a property at a great price, make an offfer, and wait. Many times the bank takes months to respond, creating frustration among buyers, sellers and agents. I personally groan when I pull up properties for clients and see they are short sales; although I do show them to my buyers I tell them up-front that it could be a long time until the bank responds to their offer, so not to give up searching for other properties.
As a lisitng agent of short sales I feel I have a little more control, but only because I am willing to bombard the lender dailyâ€šmultiple times a day if necessaryâ€što get paperwork and answers. But as agents dealing with these types of properties know, every lender has it’s own policies and every short sale can be dramatically different from the previous one...but maybe not for long.
The newest buzz is that one of the largest lenders, Bank of America, is switching over to a new short sale system that will make the process easier for everyone involved. They are doing this via an electronic platform that will allow them to streamline the process, eliminating mounds of paperwork files for each transaction.
Timelines will be streamlined and everyone involved in the transaction will be working in real time to get the offers accepted and close the transaction in the time it takes for a normal sale to go through. Parties to the transaction will be able to log into they system to see status updates electronically 24 hours a day. The electonic platform will also automate decision-making for the lender, handle offer approvals in a speedy fashion and comply with all government programs.
It seems lenders have finally figured out what we agents have been screaming for years: that short sales benefit THEM too! They save the lender money and time, and get a property off the lender’s books; after all, the lender does not want to own all these homes. Short sales are a win-win for everyone involved.
As with most great ideas, hopefully other lenders will play follow-the-leader and make short sales a pleasant experiences for everyone.