A bankruptcy may stop a foreclosure and allow a homeowner to reorganize his debt and keep his property. The reality however is that most of the time this is not the case and the bankruptcy only stalls the foreclosure. If the homeowner is not able to make the payments after bankruptcy the house will foreclose anyway.
The other major drawback to bankruptcy is that it makes it very difficult for the homeowner to sell his property once he enters the process. It makes it near impossible to negotiate a short sale. The only possibility is if the trustee of the bankruptcy agrees to release the property from the proceedings and allow it to be sold.
Certified Distressed Property Institute, LLC, 2008
A Deed-in Lieu (DIL) of Foreclosure is sometimes referred to as a “friendly foreclosure” since the homeowner essentially gives the Deed back to the bank. Because this may prevent the bank from go through lengthy (and costly) foreclosure proceedings, they will sometimes forego their right to a deficiency judgment. The bank agrees to take the Deed back in exchange for the property and the homeowner and back part ways with no further recourse.
This solution often only works when there is only one bank holding a note on the property and there are no significant junior liens on the property. If the homeowner has equity, this is usually not a good route to take. Why forfeit your right to that hard earned equity?
As with other foreclosure alternatives, the bank will only accept a DIL if you cannot make your mortgage payments. Also like the other alternatives, it is often less damaging to your credit than a foreclosure. Keep in mind, the bank will not present this as an option to you because this has to be done by you voluntarily. To maximize your chances of your lender accepting a DIL, do not wait too long – approaching them one week before the home is to be auctioned will often not work.
If you or someone you know is falling behind on their mortgage, please call me at 703-403-0536 or email me at patrick@patrickduffyrealtor.com. I’m here to help!
A Loan Modification is a change to one or more of the terms of a loan. For example, this could take the form of a lower interest rate, as in going from 7.5% to 5.5%. Or, it could involve extending the term of the loan, as in going from a 30 year term to a 40 year term. Whatever the case may be, the goal is to reduce the mortgage payment to one that the homeowner can manage and allow them to maintain ownership of their home. In many cases, the lender seeks to reduce the mortgage payment to 31% of the homeowner’s before tax income. For example, if you are making $5,000 each month – the terms of your loan would be modified so that your mortgage payment does not exceed $1,550 each month.
To obtain a Loan Modification, the homeowner must exhibit a verifiable hardship that makes it impossible for them to make the payments on the current terms of their mortgage. The hardship could be one or more of many things such as job loss, illness, death, payment increase due to interest rate adjustment, etc. Much like when the homeowner applied for their mortgage, they will apply for the modification and supply the lender with needed documentation to substantiate their case for the need of a loan modification.
Once initially approved, the lender will place the homeowner on a trial modification (trials periods can range from 3-6 months) in which the homeowner will have their payment reduced and will have to exhibit that they will be able to make the payment. After the successful completion of the trial period the modification will be fully reviewed and either granted or denied.
This was a brief overview of what a Loan Modification is and the process involved. If you would like to pursue a Loan Modification, I urge you to do some research. As always, I am here to help you with alternatives to foreclosure at phone: 703-403-0536 or email: patrick@patrickduffyrealtor.com.
Links:
Forum with over 20,ooo members, sharing their loan modification stories (successes and failures) – http://www.loansafe.org
Our second foreclosure alternative to look at is forbearance (or repayment plan). Think of forbearance as reinstatement on a payment plan rather than in one lump sum. Much like the reinstatement we looked at yesterday this is a good option for homeowners experiencing a temporary hardship and the homeowner will be required to pay their lender what they are owed.
In some cases the lender will tack the missed payment and fees onto the end of the scheduled loan amortization, however it is much more likely to be given a period of time in which to pay the delinquencies. Forbearance will often require income documentation from the homeowner showing that they have the wherewithal to comply with the terms of the repayment plan.
Forbearance Example
Homeowner misses four payments on a $2000 per month mortgage and the foreclosure process has been started.
Reinstatement Amount
4 months @ $2000/mo.
$8,000
Late Fees
$400
Legal Fees
$1,600
Processing Fees
$300
Total Reinstatement
$10,300
The lender allows payments to be broken up over the next 12 months:
Total Reinstatement
$10,300
Reinstatement Pmt 12 mo.
$858
Current Payment
$2,000
Monthly Repayment
$858
Total Monthly Pmt
$2,858
Once the homeowner completes the 12th repayment, the mortgage would go back to its original amount.
NOTE: a mortgage will not be fully reinstated until the payments are made in full. If the homeowner misses just one payment along the way, they can end up in the same stage of the foreclosure process they were in prior to the forbearance plan.
In my first of a series of posts on foreclosure avoidance options, we will look at the quickest way to “get back in the good graces” of your lender – reinstatement. Unfortunately due to the homeowner’s hardship situation, it is often difficult to pursue this route. However, if the reason you have missed payments is temporary, this option allows you to reinstate your mortgage all the way up until the bank sale.
To have your mortgage reinstated, you quite simply have to pay the lender what they’re owed to bring you current. In order to due this, you will contact your lender and request the amount needed in the form of a reinstatement letter. Keep in mind this letter often is time sensitive, usually requiring the full amount in one payment within 3o days.
Once reinstated, go ahead and keep making those payments.
Reinstatement Example
Homeowner misses four payments on a $2000 per month mortgage and the foreclosure process has been started.
Reinstatement Amount
4 months @ $2000/mo.
$8,000
Late Fees
$400
Legal Fees
$1,600
Processing Fees
$300
Total Reinstatement
$10,300
As you can see, this option will often require a sizable lump sum payment. Due to the difficulty of coming up with that payment, other options may need to be explored – which will be covered in the coming days. The next foreclosure avoidance option in my series of posts will be Forbearance.
In a previous post, I provided a list of alternatives to foreclosure with a brief description of what they are. In the coming days, I will provide a closer look at each of the alternatives. Following is the list of options that we’ll delve into.
Reinstatement
Forbearance or Repayment Plan
Mortgage Loan Modification
Deed in Lieu of Foreclosure
Bankruptcy
Service Members Civil Relief Act
Sell the Property
Short Sale
Please visit my blog over the coming days to read more about these alternatives. As a Certified Distressed Property Expert, I am trained to handle this most difficult of situations, homeowners facing foreclosure. You are not alone and I am here to help you. In the meantime, feel free to call or email me anytime at 703-403-0536 / patrick@patrickduffyrealtor.com. A wealth of foreclosure resources can also be found at www.NorthernVaShortSaleHelp.com.
Selling a home is complicated and full of legal issues that anyone considering selling “by owner” needs to be aware of. However, two of the most important things you need to know in order to be successful as a FSBO (for sale by owner) home seller have nothing to do with legal issues.
Maximize Exposure
It takes more than just sticking a “for sale” sign in the front yard to get the right people to see your home. It is very unlikely that you will sell your Woodbridge home to a neighbor, or anyone in the neighborhood just driving by. It can happen, but that group is very limited. For sale signs help, but they don’t usually sell the home on their own.
It’s important to advertise in as many places and as many ways as possible including on the internet, in homes magazines and in the local MLS (Multiple Listing Service).
Know Your Buyer
The next thing that is complicated for an individual selling their own Woodbridge home is knowing which buyers are looking in earnest, which are just being nosey, and which have the ability to actual make good on an offer.
Along with exposure this is one of the biggest reasons FSBO sellers often end up turning to a good real estate agent. They have the ability to make sure buyers who come to view your home are ready, willing and most of all able to make a purchase.
If you would like more tips on selling your home “by owner,” subscribe to this blog. It’s free, fast and easy.
By now, everyone knows that, just like the Dot Com bubble, the real estate market grew its own bubble to a degree that it finally popped. Foreclosure numbers went up, sales went down and everyone, from the government to lenders to John Q public, started looking around for someone they could point a finger at and blame.
The hard truth is that placing blame doesn’t do anyone any good, especially those trying to save their Woodbridge homes. The truth is that it’s time to do what Americans have been doing since the country was founded – picking ourselves up off the ground, dusting off and working with what we still have. Thanks to new acts such as the “Helping Families Save Their Homes Act of 2009,” it’s even more possible to do that.
If you’ve been dealing with the possibility of foreclosure, you may have missed the news, so here are a few uplifting highlights that can make all the difference:
If you rent your Woodbridge home and the home is foreclosed upon, you have to receive a 90-day eviction notice. You can’t just be preemptively kicked off the property. As well, if you have a lease you have to be allowed to live on the property until the lease is up unless:
a) the new owner wants to move in and make it his or her residence or
b) state law says the lease can be terminated on notice.
Although three months doesn’t seem like a lot of time, that’s three months you wouldn’t have had in most states before the Act was passed.
Lenders and homeowners are now receiving incentives for successful loan modifications and refinancing under the Making Homes Affordable Program. According to the White House government website, “Servicers covering more than 75 percent of loans in the country have now begun modifications and refinancing under the Administration’s MHA Program.”
One of the biggest challenges to homeowners is finding out who owns the mortgages on their homes. This can make it incredibly difficult to discuss refinancing or modification with the mortgage owner. Thanks to the Act, you have to be informed whenever your loan is sold or transferred to another party. Now, you always know who has control of your mortgage and who you need to talk to.
Dealing in the current real estate market can be hard. If you’re already struggling financially, it can be even harder. Try to keep abreast of the current laws that can help homeowners and families keep their Woodbridge homes!
If you can’t qualify for loan modification or refinancing, and are considering a short sale, I am a Certified Distressed Property Expert®who can help. Call me at 703-403-0536 or email me at patrick@patrickduffyrealtor.com for more information.
Many facing the possibility of being added to the number of foreclosures in Woobridge are frightened, often frustrated and feel helpless. It’s understandable; nobody wants to lose their home. However, those feelings often lead to being victimized by loan modification con artists who promise freedom from foreclosure for a little bit of money and leave victims in their wake.
Here are a few tips to protect yourself from scams that could take you one step closer to becoming one of the foreclosures inWoodbridge:
1. Never believe a guarantee. No one, company or individual, can guarantee loan modification or that your lender won’t foreclose. If the loan modification company starts spouting guarantees, walk away.
2. Never sign over power of attorney. Sometimes, con artists will tell you that if you sign over your house to them, their good credit can help save your home. This is never a legitimate proposal and no legitimate company will ask you to do this.
3. Never spend thousands of dollars. Fees higher than $6,000 should be dismissed. Often, scam companies will charge absurdly high upfront fees to help. While some counselors will charge you a fee, those costs are added up after the loan closes, NOT before they even do anything. As well, any company charging over $4,000 needs to have a proven high quality of service and level of success.
4. Always talk to your lender first. Many loan modification scam artists will tell you to stop communicating with your lender. Communication is key, however, since your lender owns the note and will, ultimately, approve or deny the modification. Talk to your lender to find out how to refinance or restructure your payment.
5. Always check with the Better Business Bureau before hiring a “rescue” company. You can check with the Attorney General or Real Estate Commission as well.
6. Always look for free services first. Many foreclosure specialists can help, and will do so free of charge if you can’t afford them. As well, the U.S. Department of Housing and Urban Development (HUD) has approved housing counseling that will provide foreclosure prevention services, also free of charge.
When you’re already faced with the possibility of being one of the foreclosures in Woodbridge, you need help – not someone who will push you further across the line. Be careful when looking for loan modification help.
If your loan modification has been denied and you need to do a short sale instead, I can help. As a Certified Distressed Property Expert® (CDPE), I am equipped with the knowledge and tools to manage a successful short sale transaction.
