Avoid Foreclosure
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Every day we have been helping homeowners facing challenges in meeting their mortgage payments. We would like to talk with you to discuss your situation and look at options to avoid foreclosure. We understand financial hardship and, of course, we do not charge for our services. Our only goal is to find the right solution for you. Below are some of our favorite web links describing various services available to you. Take some time to explore and then contact us to discuss your options. To visit a site, click the logo.
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You May Be Able To Save Your Home From Foreclosure With a Loan Modification
Loan Modification programs were established by the federal government and the mortgage industry in order to stop home foreclosure. They help foreclosure victims in default on their mortgages to find alternatives to home foreclosure. Every homeowner’s situation is unique and each lender has their own policies regarding the use of these programs to stop foreclosure.
Modification
A modification agreement is typically used when the homeowner has the ability to pay some of the past due payments and to continue making future payments, but does not have the funds to completely reinstate the loan. Typically, the homeowner's loan terms are modified in order to resolve the mortgage delinquency and to help homeowners who have a significant reduction of income that severely impacts their ability to pay, and will last past the foreseeable future. This agreement makes the mortgage more affordable for the customer.
Forbearance
A forbearance agreement is a written agreement between the borrower and the lender to enact a payment moratorium due to unforeseen circumstances wherein the property or employment status is affected. At the expiration of the term, the borrower pays the total arrearage in a lump sum payment or elects a repayment plan. This agreement is typically used when borrowers have a short-term reduction of income that severely impacts their ability to pay for a short period of time.
Repayment Plan
An informal repayment plan is typically offered to homeowners with the ability to make the payments towards the delinquency, but not the ability to pay everything that is due at once. A down payment on the arrearage is accepted from the homeowner, the account is segregated from the collection population and monitored separately while the homeowner makes the regular monthly payment plus a predetermined payment towards the arrearage. Foreclosure action is held during this process contingent on the successful completion of the plan. Upon completion of the plan, the loan becomes current.
Short Sale
The homeowner does not have either the desire nor ability to keep the property and is willing to sell the property to satisfy the debt. This option is utilized when the amount owed, less acceptable closing costs to sell the property, is more than the value of the property. The deficiency resulting from the sale is written off.
Deed-in-Lieu of Foreclosure
The homeowner has neither the desire nor the ability to keep the property. The homeowner is unable or unwilling to sell the property. The homeowner is willing to sign the property over to the lender in exchange for stopping the foreclosure action. Deeds in lieu of foreclosure are generally accepted only after all other options have been exhausted.
Extension
The homeowner has the ability to pay some of the past due payments and to continue making future payments, but does not have the funds to completely reinstate the loan. Partial payment is accepted and the balance of the deficiency is deferred until the end of the loan term. This option is utilized when the homeowner's hardship that caused the delinquency was temporary and has been resolved prior to execution of the extension.
Loan Modification
A formal loan extension, renewal or material change in loan agreement (i e. interest rate, amount of installment, and maturity date)
- Capitalize delinquent interest, escrow shortage, legal fees
- Spread over remaining term and extend term, only if necessary to qualify
- Contribution of at least one payment and more, depending on ability
- Subordination agreements may be necessary depending on arrears if there are junior liens
- Convert to required escrow account if taxes/insurance advanced
Forbearance/Repayment Plan
- If arrears, are less than 3-4 payments
- If debtor had previous loan mod
- If debtor defaulted within first 12 months
- Disposable Income is substantial
- Arrearages spread over 12-18 month
Short Sale
Borrower sells property to third party and lender accepts less than the full amount owing on the secured debt as complete satisfaction
- Verification as to other liens that may exist (bankruptcy schedule D)
- Request listing agreement
- Contact information for appraisal
- Request purchase/sales agreement
- Proposed net sheet reflecting amount going to service
- Obtain investor/insurer approval
Deed in Lieu of Foreclosure
Borrower deeds the property to the lender in satisfaction of the secured debt
- Must be faster than a foreclosure action (Texas/Georgia usually not considered)
- Inspection of property performed
- Title search conducted to assure there is no junior lien, judgments
Strategic Default: Inconceivable Assumptions Suddenly Conceivable
Until recently it was generally believed that only a small fraction of Americans would willingly choose to skip their monthly mortgage payment, aka "strategically default", when they found themselves stuck in a negative equity situation.
The logic driving this belief was based on the notion that borrowers wouldn't want to damage their credit profile or deal with the social stigma surrounding a public foreclosure. The assumption that most underwater borrowers will continue making their monthly payments (absent a life event) is factored into the analytics of risk managers, buyers and sellers of mortgage related assets, servicing managers, and regulators across the country.
What if this assumption is wrong? Is that inconceivable?
It wasn't long ago when conventional wisdom convinced us that lenders would never make loans to borrowers that had virtually zero likelihood of being able to pay the loans back. In a 2010 study conducted by the Cato Institute, it was estimated that there were over 27 million Alt-A and subprime loans in the system by mid-2008.
That's approximately 50 percent of all loans in the market. Remember when we thought home price would never fall on a national level? Never been done and won't ever happen, right? That assumption was shattered when home values nationally dropped between 30-50% from their peak in 2006, wiping out roughly $7 trillion of home equity in the process.
Fannie Mae recently published its latest National Housing Survey and exposed disturbing patterns and sentiments with American homeowners. For example, 46% of borrowers are "stressed" about their underwater mortgage, up from 11% in June 2010. That's an alarming four-fold increase in three quarters. That statistic becomes even more concerning when viewing the sheer number of borrowers faced with negative equity. At the end of 2010, which doesn't include the home price declines seen in 2011, CoreLogic estimated that 11.1 million homes, or 23.1 percent of all homes with a mortgage, were underwater. Think about those two stats this way - every morning, 46% of the estimated 11.1 million underwater borrowers wake up and debate why they should keep paying their monthly mortgage payment. Further weighing on borrowers is that 47% of borrowers surveyed reported higher household expenses than the year before …
From that perspective, it doesn't seem inconceivable that our assumptions might be off base again. Is principal forgiveness the answer?
Probably not, and here's why. Remember how many folks HAMP was supposed to save by giving them new loan terms? The number touted by the administration was over 4 million. In reality, the number is likely to come in around 500-750,000 permanent modifications. Imagine the scenario when a government sponsored principal reduction program is announced. Out of the 11 million underwater borrowers - you'll probably get three times as many borrowers applying for relief. Maybe one tenth of them will actually qualify and be granted a principal reduction. In the meantime, some 20+ million applicants would have stopped making payments to "qualify" or be considered for qualification. How many of them will be able to or even want to get current again after they are turned down?
Like it or not, we have got to find ways to stabilize home prices, reward responsible behavior among existing homeowners, and encourage home buying. We don't see any ideas on he table that would accomplish any of these objectives … and the effects are starting to show up in data.
