Loss mitigation is a strategy used by homeowners and lenders who want to avoid foreclosure. This article explains what it is, how homeowners and lenders end up having to make use of it and how it benefits both parties.
Going into foreclosure is stressful and a financially threatening ordeal, so homeowners should promptly find a solution because usually time isn't on their side.
Homeowners who took out a mortgage to finance the purchase of their home may find themselves unable to keep up with their monthly payments. Sometimes they will be delinquent for several months. This could be due to several reasons, but whatever was the cause, it's something emotionally and financially devastating.
To avoid further losses, the mortgage lender will start the foreclosure process or the events that may lead to the auction sale of the property to try to satisfy all the late and unpaid mortgage payments by the homeowner, plus expenses.
Both the bank or mortgage lender and the homeowner or borrower wants to prevent a foreclosure for his or her own reasons.
The homeowner may want to keep the property so his or her family has a place to live. If they let the foreclosure proceed, it may stay on their credit records for years making it difficult for them in the near future to qualify for anything requiring good credit.
Lenders or banks would rather not foreclose property. The costs to foreclose a property can reach a sum of $30,000. They prefer not to take back the property because buying and selling real estate is not their business.
There are various ways to prevent foreclosure. One of those ways is to put up the property for sale with a real estate agent, but some believe that solution is not as easy as it sounds.
Loss mitigation, on the other hand, may be the solution to saving the homeowner's property and allowing the lender to minimize losses. It's the process of using a third party to help negotiate a payment plan suitable for both parties.
The loss mitigation go-between will ask the lender to consider lowering your rate, changing the terms and devising an affordable repayment plan
Using a third party to get forclosure help is ideal because homeowners may be too emotional to think straight for themselves and lenders may prefer dealing with someone who knows industry practices.
Regardless of which method a homeowners chooses to stop a foreclosure, taking the necessary steps as soon as possible is critical. Proposing and negotiating a way to pay off the home loan with the lender is also one of those things that homeowners shouldn't delay.
Life may seem to be at a standstill when someone is experiencing financial turmoil, especially when it may cause him or her to lose a home. However, hope comes when the homeowner takes immediately action and contacts his or her lender to arrange negotiations with a loss mitigation expert who will see that both parties arrive at a win-win solution for all.
Copyright © 2008 by Jack Chan, All Rights Reserved
Wednesday, April 9, 2008
How To Spot A Foreclosure Rescue Scam
As the number of foreclosures increase in the U.S. Housing Market, so does the opportunity for foreclosure rescue scams. If you find yourself in the precarious position of facing an imminent foreclosure proceeding you should be on the lookout for these scams. The worst thing you could do to yourself is to fall victim to a scam. How do I know if I am being scammed, you might ask. The purpose of this article is to paint a picture of how it might look if you were approached by a scammer.
What is a foreclosure rescue scam?
The first thing you need to know about spotting a scam is to know what a scam is. A foreclosure scam consists of a couple of things: you , your home, and someone approaching you either in person or via mail who wants to help you. This other person is someone who wants to offer their services to get you out of foreclosure to save your home.
However, what can end up happening is that you can lose your equity if you have any to begin with. You can also end up paying a lot of money for no forwarding action that results in getting your situation cleared up. Another outcome might be that you totally lose your house to the person "helping" you and be forced to move out. And finally, you can end up with little or no time to really make a difference with your mortgage company once you find out that you have been scammed.
How Do I Know If I Am Being Scammed
Imagine this scenario. You have gotten behind on your mortgage payment by a couple of months. You get a letter in the mail from your lender that informs you that they have started foreclosure proceedings. Shortly after that, you get a phone call, or someone even knocks on your front door, or a letter in the mail from a rescuer. The rescuer offers to stop your foreclosure with one phone call, they offer to buy your home, and they might tell you that you have options, or they might offer to get you some money to catch up your debt. They might even ask you to sign over your deed. The rescuer seems a little hurried or insistent to get you to meet with them because of your situation and that there is no time to waste; they are trying to show you that they care.
Let's take the case that you decide to meet with them. In the first meeting with them they promise things like "a new beginning", a "chance to start over", or a "fresh start". You might begin to feel relieved already because you need to hear something positive about your situation. The rescuer might even give you some testimonials from folks that they supposedly have already helped. True as they might be, consider that foreclosure bailout programs don't work for everyone and why your situation.
During the initial stages of working with rescuer, they might tell you to stop talking to any lawyers, or the mortgage company to allow the rescuer to take over the negotiations etc. While this might seem like a relief to you, what you do not realize is that it sends the wrong message to your lender. It sends the message that you done trying to work things out; it will probably end up in cutting off your ability to refinance or work out a forbearance plan with the lender. It also shortens the time that you do have to save your home.
If you are a victim to a foreclosure rescue scam, eventually you will notice that you are not getting anywhere using the rescuer. By the time you realize it, it will probably be too late for you to do anything about it. You will either lose your home to the rescuer, depending on what type of scam it is, or you will lose your home to a foreclosure process. In either case you will most likely be out a substantial amount of money and equity.
Article by Dale Stouffer.
What is a foreclosure rescue scam?
The first thing you need to know about spotting a scam is to know what a scam is. A foreclosure scam consists of a couple of things: you , your home, and someone approaching you either in person or via mail who wants to help you. This other person is someone who wants to offer their services to get you out of foreclosure to save your home.
However, what can end up happening is that you can lose your equity if you have any to begin with. You can also end up paying a lot of money for no forwarding action that results in getting your situation cleared up. Another outcome might be that you totally lose your house to the person "helping" you and be forced to move out. And finally, you can end up with little or no time to really make a difference with your mortgage company once you find out that you have been scammed.
How Do I Know If I Am Being Scammed
Imagine this scenario. You have gotten behind on your mortgage payment by a couple of months. You get a letter in the mail from your lender that informs you that they have started foreclosure proceedings. Shortly after that, you get a phone call, or someone even knocks on your front door, or a letter in the mail from a rescuer. The rescuer offers to stop your foreclosure with one phone call, they offer to buy your home, and they might tell you that you have options, or they might offer to get you some money to catch up your debt. They might even ask you to sign over your deed. The rescuer seems a little hurried or insistent to get you to meet with them because of your situation and that there is no time to waste; they are trying to show you that they care.
Let's take the case that you decide to meet with them. In the first meeting with them they promise things like "a new beginning", a "chance to start over", or a "fresh start". You might begin to feel relieved already because you need to hear something positive about your situation. The rescuer might even give you some testimonials from folks that they supposedly have already helped. True as they might be, consider that foreclosure bailout programs don't work for everyone and why your situation.
During the initial stages of working with rescuer, they might tell you to stop talking to any lawyers, or the mortgage company to allow the rescuer to take over the negotiations etc. While this might seem like a relief to you, what you do not realize is that it sends the wrong message to your lender. It sends the message that you done trying to work things out; it will probably end up in cutting off your ability to refinance or work out a forbearance plan with the lender. It also shortens the time that you do have to save your home.
If you are a victim to a foreclosure rescue scam, eventually you will notice that you are not getting anywhere using the rescuer. By the time you realize it, it will probably be too late for you to do anything about it. You will either lose your home to the rescuer, depending on what type of scam it is, or you will lose your home to a foreclosure process. In either case you will most likely be out a substantial amount of money and equity.
Article by Dale Stouffer.
How to Avoid Foreclosure
If you are late on your mortgage payments and fear your lender may foreclose on your home, then you should learn about the different ways you can avoid it.
This article discusses ways that involve your lender or loan servicer and ways that don't have to include them.
I will also mention a couple of things you can do that doesn't stop a foreclose, but will at least minimize your financial exposure. After you finish reading this article, you should feel some relief because you'll have practical and realistic ways of handling your situation.
Negotiate With Your Loan Servicer
When you are having trouble paying you home mortgage, you should immediately talk with your loan servicer. If you do and don't miss more than two or three payments, then they will more likely be cooperative. They can help you in several ways.
They can reinstate the loan, meaning that if you're able, you can pay what was late plus fees.
They can create a repayment plan that includes what you owe into your regular payments.
They can perform a loan modification that would change such things as the interest rate, the term of the loan or adding the missing payments to the loan balance.
If they think you are experiencing a temporary financial hardship, then they can give you a payment forbearance, which allows you to stop making any payments until you are once again able. However, once you are able to resume you must pay your regular payment and everything you owe in a lump sum.
If you are no longer able to afford the mortgage after considering the previous options, then a deed in lieu of foreclosure allows you to transfer title of the property to the loan servicer in exchange for canceling the remaining debt. However, the lender is not obligated to do this, and you still may owe taxes on the debt forgiven.
Things You Can Do Without Your Loan Servicer
Having and honest talk with your lender is the best strategy for saving your home and credit rating. However, there maybe a time during negotiations when you feel you still can't meet their requirements no matter how much you plead with them.
That is when you may consider professional help. You may want to hire a real estate agent to sell your home and use the proceeds to payoff the entire mortgage. This will save your credit rating. However, this strategy will work if you can close a deal before the foreclosure date. If you don't have enough equity, then you would still owe your lender the difference.
Other options include refinancing your loan at lower rates to making use of foreclosure prevention or loss mitigation experts who may charge fees to do much of what you can do on your own, but may only be good if they are legitimate and honest.
Your Last Resort
If your financial world falls apart, your last resort may be to file for bankruptcy. Under Chapter 13, you may be able to keep your mortgaged home. However, the courts will require and approve a repayment plan that uses your future income to satisfy your debts. After making all payments during a three to five year period, you obtain a discharge of some debts.
Bankruptcy isn't free. You'll have it on your credit records for ten years, making it difficult for you to get a loan for another home or financing a car payment.
This article has discussed the ways to handle your foreclosure using your lenders help and the help from third parties. It has also touched upon bankruptcy as a last resort. I hope that with the information in this article you can start to see clearly the choices you have and act in time to save your home from foreclosure.
Copyright © 2008 by Jackson Chan All Rights Reserved.
This article discusses ways that involve your lender or loan servicer and ways that don't have to include them.
I will also mention a couple of things you can do that doesn't stop a foreclose, but will at least minimize your financial exposure. After you finish reading this article, you should feel some relief because you'll have practical and realistic ways of handling your situation.
Negotiate With Your Loan Servicer
When you are having trouble paying you home mortgage, you should immediately talk with your loan servicer. If you do and don't miss more than two or three payments, then they will more likely be cooperative. They can help you in several ways.
They can reinstate the loan, meaning that if you're able, you can pay what was late plus fees.
They can create a repayment plan that includes what you owe into your regular payments.
They can perform a loan modification that would change such things as the interest rate, the term of the loan or adding the missing payments to the loan balance.
If they think you are experiencing a temporary financial hardship, then they can give you a payment forbearance, which allows you to stop making any payments until you are once again able. However, once you are able to resume you must pay your regular payment and everything you owe in a lump sum.
If you are no longer able to afford the mortgage after considering the previous options, then a deed in lieu of foreclosure allows you to transfer title of the property to the loan servicer in exchange for canceling the remaining debt. However, the lender is not obligated to do this, and you still may owe taxes on the debt forgiven.
Things You Can Do Without Your Loan Servicer
Having and honest talk with your lender is the best strategy for saving your home and credit rating. However, there maybe a time during negotiations when you feel you still can't meet their requirements no matter how much you plead with them.
That is when you may consider professional help. You may want to hire a real estate agent to sell your home and use the proceeds to payoff the entire mortgage. This will save your credit rating. However, this strategy will work if you can close a deal before the foreclosure date. If you don't have enough equity, then you would still owe your lender the difference.
Other options include refinancing your loan at lower rates to making use of foreclosure prevention or loss mitigation experts who may charge fees to do much of what you can do on your own, but may only be good if they are legitimate and honest.
Your Last Resort
If your financial world falls apart, your last resort may be to file for bankruptcy. Under Chapter 13, you may be able to keep your mortgaged home. However, the courts will require and approve a repayment plan that uses your future income to satisfy your debts. After making all payments during a three to five year period, you obtain a discharge of some debts.
Bankruptcy isn't free. You'll have it on your credit records for ten years, making it difficult for you to get a loan for another home or financing a car payment.
This article has discussed the ways to handle your foreclosure using your lenders help and the help from third parties. It has also touched upon bankruptcy as a last resort. I hope that with the information in this article you can start to see clearly the choices you have and act in time to save your home from foreclosure.
Copyright © 2008 by Jackson Chan All Rights Reserved.
To Stop House Foreclosure or Not?
It’s an epidemic that hasn’t been seen since the great depression; houses are being foreclosed at three times the normal rate in some counties across America. As a result of this sudden rise in foreclosures a new type of business has sprung up within the real estate market called the “short sell.” If you are considering bankruptcy or foreclosure it is extremely important to understand this practice that helps and hinders many at the same time.
Have you seen the ads that say “stop house foreclosure” online, in your mailbox and on billboards? Chances are these are make-shift investors offering to negotiate a short sell in lieu of foreclosure for you. A short sell is when an uninterested party negotiates with your mortgage company for a lower payoff for your home instead of foreclosure. Most of the times these people are looking to “scoop up” cheap houses or they already have an investor/buyer lined up to buy the home. The end result is that you have to move or rent from the investor.
When banks foreclose it’s rarely a profitable situation for them, very rare in today’s market. Most often the properties are in disrepair, dirty and littered with unwanted household items. The bank has to clean, repair and then discount the home to put it on the market. After the discounts, repairs, appraisers, real estate commissions and other added expenses banks are usually losing around 35% of the amount that was owed by the homeowner. This is why a lot of banks are using the short sell option more often as their foreclosure departments are maxed out to capacity.
Short sell experts simply attempt to handle all of the aforementioned headaches and skip to the discounted price. The person that negotiates the short sell will either make money by having the house pre-sold for a higher price than they negotiate or will be keeping the property as an investment and renting it. Either way they stand to earn a nice profit and while helping their clients circumvent foreclosure. If you are significantly behind on your mortgage and cannot see the light of day this may be a good avenue for you depending on your particular situation.
There are a few things you need to be aware of before executing a short sell to stop house foreclosure. The first thing is to know is if you are considering bankruptcy you definitely want to seek advice from council before executing a short sell. Selling property for a loss can sometimes be considered income by the trustee and complicate the bankruptcy. Also, if your primary goal is to avoid foreclosure to preserve your credit, it may not matter whether the bank forecloses or not. If you fall four months behind (120 days) on your mortgage this is considered to be a foreclosure by all mortgage lenders regardless of the fact.
According FHA loan requirements, borrowers must be out of a foreclosure for three years with little or no negative marks since the foreclosure to be approved for a new mortgage. If after three years you can prove adequate income, that you have established new credit and manage a 3% down payment you will almost certainly be approved for a new home. So if homeowners look at foreclosure from a three year perspective the picture is not quite so gloomy if they plan ahead and manage their finances well. In certain situations it becomes a viable option for many people in today’s housing market.
Your home is an investment; businesses cut their losses on bad investments every day as a cost of doing business. If you bought a home for $200k with little or no money down within the last 5 years chances are that you still owe somewhere around $195k on the home. If you are in an area where property values have dropped significantly you may find yourself upside down in your home. For example, you may still owe $195k on your home and it’s only worth $175k on the market. When this happens you need to look at the reality of the situation much as a business would and consider cutting your losses.
Consider this, if you are $20k upside down in the market and behind on payments, how long will it take you to catch up on your payments and at what cost? More than that, how long will it take for your house value to catch up with what you owe on it? Will you have to refinance to get out of a bad mortgage and what costs will be associated with this? By all estimations today it may take 3 years to 5 years for the housing market to catch up with today’s losses and regain momentum. In Japan’s case it took ten years when they went through a similar crisis.
A very likely scenario is that in three years you will owe exactly what your house is worth and still not have any equity in your home. In housing markets like we are in rental houses are cheap and plentiful. In fact, in Atlanta $300k homes are renting for roughly half of the cost of what that mortgage would be. If you were to accept a foreclosure and move to a rental home of equal value you could likely cut your home expenditure in half. If you were to save the difference between the payments for three years you would have a nice down payment for a new home. According to FHA loan requirements, as of today, you would be able to buy a home.
In closing, the point of this article is not to encourage foreclosure but to demystify it. Foreclosure is bad for you, the lender, and the economy. However, treading water on a bad investment for the sake of good credit or avoiding the stigma of foreclosure doesn’t make sense. In three years time you will most likely be able to buy the same home you are in now and have a lower note with more equity. Banks and businesses cut their losses on bad investments everyday while planning for their next venture, you can as well.
Aubrey Clark is a syndicated writer on financial matters and the editor for Lendfast.com. He writes extensively on lending topics like finding the best Atlanta mortgage rates and how investors obtain Georgia low mortgage rates.
Have you seen the ads that say “stop house foreclosure” online, in your mailbox and on billboards? Chances are these are make-shift investors offering to negotiate a short sell in lieu of foreclosure for you. A short sell is when an uninterested party negotiates with your mortgage company for a lower payoff for your home instead of foreclosure. Most of the times these people are looking to “scoop up” cheap houses or they already have an investor/buyer lined up to buy the home. The end result is that you have to move or rent from the investor.
When banks foreclose it’s rarely a profitable situation for them, very rare in today’s market. Most often the properties are in disrepair, dirty and littered with unwanted household items. The bank has to clean, repair and then discount the home to put it on the market. After the discounts, repairs, appraisers, real estate commissions and other added expenses banks are usually losing around 35% of the amount that was owed by the homeowner. This is why a lot of banks are using the short sell option more often as their foreclosure departments are maxed out to capacity.
Short sell experts simply attempt to handle all of the aforementioned headaches and skip to the discounted price. The person that negotiates the short sell will either make money by having the house pre-sold for a higher price than they negotiate or will be keeping the property as an investment and renting it. Either way they stand to earn a nice profit and while helping their clients circumvent foreclosure. If you are significantly behind on your mortgage and cannot see the light of day this may be a good avenue for you depending on your particular situation.
There are a few things you need to be aware of before executing a short sell to stop house foreclosure. The first thing is to know is if you are considering bankruptcy you definitely want to seek advice from council before executing a short sell. Selling property for a loss can sometimes be considered income by the trustee and complicate the bankruptcy. Also, if your primary goal is to avoid foreclosure to preserve your credit, it may not matter whether the bank forecloses or not. If you fall four months behind (120 days) on your mortgage this is considered to be a foreclosure by all mortgage lenders regardless of the fact.
According FHA loan requirements, borrowers must be out of a foreclosure for three years with little or no negative marks since the foreclosure to be approved for a new mortgage. If after three years you can prove adequate income, that you have established new credit and manage a 3% down payment you will almost certainly be approved for a new home. So if homeowners look at foreclosure from a three year perspective the picture is not quite so gloomy if they plan ahead and manage their finances well. In certain situations it becomes a viable option for many people in today’s housing market.
Your home is an investment; businesses cut their losses on bad investments every day as a cost of doing business. If you bought a home for $200k with little or no money down within the last 5 years chances are that you still owe somewhere around $195k on the home. If you are in an area where property values have dropped significantly you may find yourself upside down in your home. For example, you may still owe $195k on your home and it’s only worth $175k on the market. When this happens you need to look at the reality of the situation much as a business would and consider cutting your losses.
Consider this, if you are $20k upside down in the market and behind on payments, how long will it take you to catch up on your payments and at what cost? More than that, how long will it take for your house value to catch up with what you owe on it? Will you have to refinance to get out of a bad mortgage and what costs will be associated with this? By all estimations today it may take 3 years to 5 years for the housing market to catch up with today’s losses and regain momentum. In Japan’s case it took ten years when they went through a similar crisis.
A very likely scenario is that in three years you will owe exactly what your house is worth and still not have any equity in your home. In housing markets like we are in rental houses are cheap and plentiful. In fact, in Atlanta $300k homes are renting for roughly half of the cost of what that mortgage would be. If you were to accept a foreclosure and move to a rental home of equal value you could likely cut your home expenditure in half. If you were to save the difference between the payments for three years you would have a nice down payment for a new home. According to FHA loan requirements, as of today, you would be able to buy a home.
In closing, the point of this article is not to encourage foreclosure but to demystify it. Foreclosure is bad for you, the lender, and the economy. However, treading water on a bad investment for the sake of good credit or avoiding the stigma of foreclosure doesn’t make sense. In three years time you will most likely be able to buy the same home you are in now and have a lower note with more equity. Banks and businesses cut their losses on bad investments everyday while planning for their next venture, you can as well.
Aubrey Clark is a syndicated writer on financial matters and the editor for Lendfast.com. He writes extensively on lending topics like finding the best Atlanta mortgage rates and how investors obtain Georgia low mortgage rates.
Subscribe to:
Posts (Atom)
