RESOURCES :: Foreclosure and Short Sales

These days home owners are confronted with many unique challenges. One of the most devastating things to occur to a family is the loss of their home. Unfortunately, this loss is happening a lot right now through foreclosure. There are many people who do not understand the process as well as some of the remedies available. It's our hope that the following information will be beneficial. Please give us a call at anytime if you need more information or if you would just like to talk about your situation. Home ownership is the cornerstone of the American way of life. We are here to help as much as we can. Please realize, if you have lost a home to foreclosure you can buy again in the future.

What is a Foreclosure?
The company that holds the loan on your home has a right to take ownership of the property through a process called foreclosure if you stop making your monthly payments. There is a foreclosure time line.

Usually after 45-60 days the lender will send a demand letter giving the owner 30 days to pay the delinquent amount.

After 90 days a Notice of Default is filed. The NOD is the beginning of the foreclosure process. The document is recorded giving the owner Constructive Notice. The owner then has 90 days to bring the loan current, this time period is called Reinstatement Period.

If the loan is not brought current during the Reinstatement Period a Notice of Trustee Sale will be recorded.

Usually after 21 days of the Notice of Trustee Sale, a foreclosure sale can take place at public auction. The property can be sold to a third party bidder or revert back to the lender for a specified amount.

Many people become overwhelmed with what is happening and they quit opening their mail. Please read your mail! It is very important to know where you are in the process.

You have options!

Call Your Lender

Ask for the loss mitigation, work out, asset recovery, or home preservation department.

A. If you have a temporary problem there are usually three ways the lender might help you:

1. Reinstatement: The lender agrees to accept the total amount owed in a lump sum

2. Forbearance: The lender allows you to reduce or suspend payments for a short period of time after which another option must be agreed on to bring your loan current. This is usually a good method if you know you will have the money to bring your loan current at a specific time in the future.

3. Repay Plan: You may be able to arrange an agreement to resume your payments with a portion of the past due payment added each month until you are caught up.

B. If you have a long term or permanent problem the lender might help you with

1. Modification. Your loan might be changed in one or more of the following ways:

a) adding the missed payments to the existing balance;
b) changing the interest rate, including changing an adjustable rate into a fixed rate; c)extending the number of years you need to pay the loan off.

2. Claim Advance. If your loan is insured, you may qualify for an interest free loan from the guarantor to bring the account current. The repayment of this loan might be delayed for a few years.

C. If Keeping Your Home is Not an Option

1. Sell. The lender will usually give you a certain amount of time to sell your home to pay off the amount you owe. You will need to hire a real estate professional.

2. Short Sale. If the property value is less than the loan amount (in addition to other amounts like closing costs, commission fees, taxes) the lender must approve a "short sale"

3. Deed-in-lieu. This is where the lender will let you 'give back the house' to forgive the debt. They usually require that you try to sell the house first.

4. Assumption. The lender will sometimes allow a qualified buyer to assume your loan.

5. Bankruptcy. Please contact an attorney for which option might best suit you.

With loan modifications and short sales the lender will determine if the owner is eligible based on hardships. A hardship can include a loss of a job, a divorce, medical problems/expenses, a death or other difficult situations. The lender will also want to see a budget that the owner's expenses exceed their income.

Loan modifications and short sales will usually not be approved if there is no hardship, if you are current with your payment, or if it is an investment property, or a second home. It also becomes difficult to get approval if there is a second loan involved.

It is important to seek legal and financial advice as to whether a short sale or a foreclosure is in your best interest.

Some Resources

HOPE NOW, www.hopenow.com, 877-462-7555 has counselors available. They offer free tax and legal advice

U. S. Department of Housing and Urban Development (HUD), http://www.hud.gov/foreclosure/index.cfm has a guide, "Tips for Avoiding Foreclosure" and "Help for Homeowners Facing the Loss of Their Home", http://www.hud.gove/offices/hsg/sfh/econ/econ.cfm. They also have a hot line, 877-HUD-1515 or 800-569-4287 or just www.hud.gov

Fannie Mae, http://www.fanniemae.com/aboutfm/borrower_resource.jhtml has information on the streamlined modification program

Freddie Mac, http://www.freddiemac.com/corprate/buydown/english/avoiding_foreclosure has a guide "How to Avoid Foreclosure"

Don't get scammed!
Unfortunately there are people targeting distressed homeowners.

Please do not sign any documents under pressure or duress. Take your time to read and understand anything you sign.
Don't sign agreements with blank lines or spaces.
Don't sign your deed over to a third party or to any transaction that allows you to rent the property and buy it back later.
Do not pay your mortgage to someone other than your lender without the lender's prior written approval.

Do
Read your mail. Be proactive. Contact your lender as soon as you fall behind in your payments.