Avoiding Foreclosure

If you don't pay your monthly mortgage payments over a period of time, the mortgage company can foreclose. This means you will lose title to your property and may be evicted from your home.

A foreclosure becomes part of your credit report and may adversely affect your ability to obtain credit in the future. To avoid possible foreclosure, it is helpful to have money saved to cover several months of your housing costs in case of an unexpected emergency, like job loss, divorce or separation, serious illness, or the death of a loved one.

What if You Cannot Pay Your Mortgage?

1. Call your mortgage company now!
As soon as you realize that you are unable to make your payments, talk about your circumstances with the mortgage company to which you send your monthly mortgage payment. Your options to retain your home are most effective when you are only one or two payments behind.

Too many people in financial trouble wait until the last minute to call their mortgage company. Some hope their problems will quickly resolve themselves. Others worry the mortgage company will rush to collection or foreclosure. The truth is: the longer you wait, the greater your chance of losing your home. If you are unable to make your mortgage payment, don't delay?call your mortgage company immediately. In a significant number of all foreclosures, the borrowers did not return their mortgage company's calls or written invitations to discuss payment options.

Depending upon your situation, your mortgage company may be able to provide you with temporary financial relief. Here are a number of alternatives to discuss with your mortgage company.

• Forbearance is an agreement to temporarily let you pay less than the full amount of your mortgage payment, or pay nothing at all, during the forbearance period. Mortgage companies may consider forbearance when you can show that funds from a bonus, tax refund, or other source will let you bring the mortgage current at a specific time in the future.
• A reinstatement occurs when you pay your mortgage company the total amount you are behind, in a lump sum, by a specific date. This is often combined with forbearance.
• A repayment plan is an agreement that gives you a fixed amount of time to repay the amount you are behind by combining a portion of what is past due with your regular monthly payment. At the end of the repayment period you have gradually paid back the amount of your mortgage that was delinquent.
• A loan modification is a written agreement between you and your mortgage company that permanently changes one or more of the original terms of your note to make the payments more affordable. Common loan modifications include
  • Adding missed payments to the existing loan balance
  • Making an adjustable-rate mortgage into a fixed-rate mortgage
  • Extending the number of years you have to repay

2. Contact A Non-Profit Housing Or Credit Counseling Agency
Non-profit housing and credit counselors can help you analyze your financial situation. They also can help you organize a budget to pay your mortgage and other monthly expenses?without your mortgage company's direct involvement. Finally, these agencies can help you find and take advantage of local services or programs that provide financial, legal, medical or other support.

You can find a credit counseling agency in your local phone book or by contacting the U.S. Department of Housing and Urban Development (HUD) at (800) 569-4287 on weekdays between 9:00 a.m. and 5:00 p.m. Eastern time. You can find a list of HUD-approved agencies on their web site.

What If You Can No Longer Afford to Keep Your Home?

If you cannot or do not want to keep your home, your mortgage company can work with you to avoid foreclosure. This can help reduce the negative effect on your credit reputation. There are several different ways this might occur depending upon your financial circumstances:

• An assumption permits a qualified buyer to take over your mortgage debt and pay the mortgage payments, even if the mortgage is non-assumable. As a result, you may be able to sell your property and avoid foreclosure.
• If you can sell your house but the sale proceeds are less than the total amount you owe on your mortgage, your mortgage company may agree to a short payoff and write off the portion of your mortgage that exceeds the net proceeds from the sale.
• Your mortgage company may agree to a deed-in-lieu of foreclosure if you agree to voluntarily transfer title of your property to your mortgage company in exchange for cancellation of your mortgage debt. In most cases, you must attempt to sell your home for its fair market value for at least 90 days before a mortgage company will consider this option. This option may be unavailable if there are other liens on your home, such as judgments from other creditors, second mortgages, or tax liens.

Beware of Scam Artists

Predatory lenders often target people in financial distress. They try to panic you into high cost mortgages, making financial problems worse and increasing your risk of losing your home. Predatory lenders usually offer loans with

• High interest rates
• Broker fees
• Unnecessary costs like pre-paid life insurance
• Unaffordable repayment terms

Here are some tips to protect you from predatory lenders:

• Be suspicious of anyone who offers you "bargain loans," whether they mail, fax or e-mail an offer to you, call you on the phone, or come to your door.
• Beware of promises of "No Credit? Bad Credit? No Problem!" and offers that are only "good for a very short time".
• Avoid lenders who encourage you to borrow more than you need or more than the value of your home.
• Beware of terms that change at the last minute or offer next-day approval based on prepayments or up-front fees.
• Do not sign anything you do not understand. It is your right and duty to ask questions.
• Beware of phony credit counseling agencies charging high fees for financial counseling services you can get for little or no charge through non-profit agencies. You can find a list of HUD-approved agencies by visiting their web site.

REMEMBER:Anything that sounds too good to be true usually is! If you suspect a predatory mortgage company is targeting you, call your local office of consumer affairs, the Federal Bureau of Investigation, an approved credit counseling agency or your local Don't Borrow Trouble campaign.

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Options If You´re Behind On Your Mortgage Payments:

I am late on my mortgage payments and might be heading to foreclosure.
    What options are available to me?    

I understand that as a homeowner, falling behind on your mortgage payment or dealing with the dreaded possibility of foreclosure can be a traumatic experience and an extremely stressful prospect. If for whatever reason you are currently behind on your mortgage payments ? or foresee that you will soon be unable to continue making your payments ? take heart: you do have options. The best thing you can do in this situation is to get fully educated on your options and to be proactive about solving the problem.

As a Loss Mitigation Specialist, I am here to help you identify and implement the best possible solution and to help you avoid foreclosure. Following a thorough analysis of your situation, I can work with you to help you come up with the appropriate solution for your particular situation

Quite understandably, many distressed homeowners simply give up and give in to the foreclosure process, often without being fully aware of the options available to them. Depending on your particular situation, the following options may be available to you:

Reinstatement:  With a reinstatement, the homeowner brings the mortgage current by making up for all missed payments and paying any late fees and penalties.

Forebearance:  Typically, when foreclosure is a result of a temporary loss of income, the lender may agree to a forebearance wherein they will allow the homeowner to delay payments for a short period or negotiate a payment plan to make up for missed payments over the course of several months. The lender may also agree to some combination between reinstatement and forbearance, enabling the homeowner to delay payment for a short period and then bring payments current by a specific date.

Loan modification:  With a loan modification, then lender will agree to allow the homeowner to add the amounts due to the back of the loan. This agreement consists of adding the past-due payments and penalties to the remaining principal, so that the homeowner can pay-off the past-due amounts and penalties over the life of the loan.

Repayment plan:  A repayment plan enables the homeowner to submit payment of a portion of the past-due amount and penalties with future payments until the past-due amount and penalties are paid-off.

Deed-in-lieu:  Also known as voluntary conveyance, with a deed-in-lieu of foreclosure the borrower voluntarily transfers title back to the lender to avoid foreclosure. The lender then releases the borrower from the mortgage and repossesses the property.

Short sale:  Also known as a real estate short pay-off or a pre-foreclosure workout, a short sale is an agreement with a lender to accept less than the amount owed by a borrower via a sale of the property to a third party. With this agreement, the lender releases the borrower from the mortgage, thereby preventing foreclosure.

+ What is a short sale?

Also known as a real estate short pay-off or a pre-foreclosure workout, a short sale is an agreement with a lender to accept less than the amount owed by a borrower via a sale of the property to a third party. With this agreement, the lender releases the borrower from the mortgage, thereby preventing foreclosure.

+ What are the advantages of a short sale?

Minimize damaging impact to credit:  Foreclosure can remain on your credit for up to seven years while a short sale usually gets reported as a "settled debt" and is significantly less damaging. With a short sale, your FICO score will not be as negatively impacted as it would be with a foreclosure, and you will be able to get into a new home much sooner as well.

Minimize financial exposure/liability:  In many foreclosure situations, the lender will ultimately sell the property at a significant discount once they foreclose and repossess the property. The homeowner can then be financially liable to the lender. While the same may be true with a short sale, the difference is with a short sale the homeowner is still involved in the process and can therefore contribute their input and have more control over the sale price of the property and the potential associated liabilities. In a foreclosure, however, once the lender repossesses the property, the homeowner is typically defenseless with respect to what follows next.

+ How do I qualify for a short sale?
    What criteria must I meet to be considered in a "hardship" situation?

In order to be eligible for a short sale, a homeowner must be able to prove to the lender that they are a victim to a "hardship" and are therefore unable to continue making payments on their mortgage.

A hardship situation is one that is the result of some extenuating circumstance that forced the borrower into a position where they can no longer afford their mortgage payments. While every situation is unique, some common examples of hardship include:

  •   Unemployment or loss of primary income source
  •   Inability to work due to health crisis
  •   Mounting medical expenses
  •   Employment relocation
  •   Failure of business
  •   Bankruptcy
  •   Death of spouse or significant other
  •   Divorce or separation

+ What do I need to do to get started?

In addition to the homeowner proving hardship, lenders require a specific set of supporting financial documents to consider a short sale.  Contact me today and I can help you get started.

+ When should I begin the short sale process?

As soon as you possibly can.  Foreclosure situations tend to be extremely time sensitive.  The sooner we can begin the negotiations with your lender, the greater the chances of a successful resolution.  There is no need to wait until the lender sends you a notice of default or initiates formal foreclosure proceedings against you.  Time is of the essence!  Please contact me today for a free consultation.

+ How much will a short sale cost me?

Absolutely nothing. 

+ How long does a short sale typically take to complete?
   Can the process be expedited if I am imminently facing foreclosure or an auction date
   has been set?

Every short sale situation is unique and follows its own timeline.  Typically a short sale is completed within one to four months from the time we have an offer to purchase the home and a  complete short sale package that can be presented to the lender.  Having said that,  I have successfully negotiated a short sale in as little as four weeks.  Timing depends on how quickly we can begin negotiating with your lender. If you are imminently facing foreclosure or even if an auction date has already been set, the process can certainly be expedited and I´ve even had lenders postpone the auction date.  Please contact me today for a free consultation so that we can be of immediate assistance to you.

+ What effect will a short sale vs. a foreclosure have on my credit?

Foreclosure can remain on your credit for up to seven years while a short sale usually gets reported as a "settled debt" and is significantly less damaging.  With a short sale, your FICO score will not be as negatively impacted as it would be with a foreclosure, and you will be able to get into a new home much sooner as well.

Credit Counseling experts say that a foreclosure will typically reduce a borrower´s FICO score by 250 to 280 points and the borrower would usually need to wait more than 36 months before a lender will offer any kind of interest rate that makes sense.   A short sale, on the other hand, will typically only result in an 80 to 100 point hit to the borrower´s credit and a significantly shorter waiting period before buying another home, usually about 18 months or less.

+ What is my potential liability after completing a short sale?  What is a deficiency judgment?

As with all foreclosures, there are several potential tax and liability considerations when doing a short sale.  With a short sale, however, these potential tax and other liabilities are typically less frequent and less severe.  You´ll need to check with your tax attorney depending on the state you are in.

Tax ramifications:  After completing the short sale your lender may decide to issue you a 1099 for the difference between the price your home sold for and what you owed, and you can later be taxed by the IRS on this amount as income.

It is important to note that if specific criteria are met, the IRS may release the borrower from this tax liability.  Furthermore, Congress is currently considering legislation that would eliminate this taxation of so-called "income" due to cancellation of debt.

Lender recourse:  In some states and with certain types of loans, lenders can pursue a court decision called a "deficiency judgment" making you personally liable for the remaining amount owed to them above the short sale price. In some cases, the lender may ask you to pay a portion of the difference back in the form of an IOU.

The lender has sole discretion whether to pursue a deficiency judgment in those instances when a deficiency judgment is permitted.  However, I diligently apply myself to every short sale case with the goal of negotiating with the lender to eliminate a deficiency judgment, minimize your tax liability, and to consider your debt as settled.

+ Why would my lender agree to a short sale?

In most distressed mortgage situations, foreclosure is a last resort for all parties involved.   Simply put, both the homeowner and the lender usually want to avoid foreclosure at all costs.    That is why lenders have come up with various alternatives to foreclosure, which they are typically very motivated to pursue prior to going to foreclosure.

A short sale gives the lender the ability to cut its losses upfront thereby avoiding the expense and time of a foreclosure and potentially greater losses.  Lenders want to make loans, they do not want to be in the business of owning and managing real estate.  Whether the lender chooses to go through with a foreclosure or agree to a short sale, they are taking a loss either way, but in many cases they would take less of a loss with a short sale and resolve the matter in a comparatively shorter time frame.  In nearly every case, a short sale offers a better return on the lender´s investment than a foreclosure does.

+ What is your relationship with lenders?  Why shouldn´t I negotiate with my lender directly?

As a loss mitigation specialist, a local realtor and an independent third-party,  It is because of my objectivity and neutrality that homeowners and their lenders can count on me to be an impartial driver of the loss mitigation process.  My goal is to stand apart from the crowd because I strive to equally serve all parties to the transaction, and affect a win-win outcome for all.

I  firmly believe that just as most borrowers use a professional to initially get into a mortgage, it is in their best interest to do so if they are in the unfortunate position that they need to get out of a mortgage.  At best, you only get one shot to negotiate your way out of foreclosure, and while it is certainly possible to negotiate with the lender yourself, it may be in your best interest to get a trained professional to negotiate on your behalf as there is less emotion involved.

Most lenders´ loss mitigation departments are understaffed, and the overworked loss mitigators are usually overloaded with all parties vying for their attention.  Unfortunately, the loss mitigator can be very difficult to get a hold of, and when you finally do get through, you have very little time with which to make your case.  Furthermore, the added stress of foreclosure in itself makes it difficult for a homeowner to effectively and calmly negotiate their way out of foreclosure.

I understand how to collect, prepare, and effectively present the information that lenders require to seriously consider a loss mitigation solution such as a short sale.   I have excellent working relationships with the lenders´ loss mitigation departments and can leverage my network and expertise to help you solve your problem.  Please contact me today for a free consultation so that I can be of immediate assistance to you.

+ What role does the realtor have in a short sale?
    Will you work with my real estate agent or must I work with you?

As a Loss Mitigation Specialist first and a Realtor second, my goal is to help you to stay in the home.   When it comes time for you to happily move because of your own free will, not because of unfortunate circumstances forced upon you,  my goal is that you will think of me.   With our current economy so bad with so many good people losing homes because of bad loans they got into, it´s my way of helping today  and maybe secure future business tomorrow-good business that is.    I have the capability of working a distressed property situation and have effectively negotiated with lenders to keep people in their homes.  If financially it doesn´t make sense to stay in the home, I have successfully completely short sales and helped the people find other suitable living quarters in the process.  

+ What role can an investor have in a short sale?
    How can I be protected from unscrupulous investors taking advantage of me?

Investors often play a valuable role in a short sale, in that, in order to successfully complete a short sale an offer must be made on the property that the lender will accept as fair market value.  An investor can step in as a buyer and be the crucial link to making the short sale possible.  Unfortunately, there is no shortage of sharks and vulture investors on the prowl in the foreclosure arena looking to take advantage of distressed homeowners.  Beware of these scammers!

These individuals and companies often market themselves as expert negotiators and loss mitigators when in reality they simply make "lowball" offers on the property that the lender will most likely not accept and that will waste precious time in a very time-sensitive situation, or worse, will lead to the lender foreclosing on you and repossessing your home.  Even on the off-chance that the lender does accept their offer your potential tax liability can be much greater.  By working with me, a licensed realtor as well as a trained loss mitigation specialist, I can help protect you from these unscrupulous investors.   We will only have your property marketed to qualified, serious buyers who are prepared to make fair offers, including my network of pre-screened legitimate investors.

+ How does filing for bankruptcy impact my ability to do a short sale?