Home >> MCP Help Blog

Archive for the 'Foreclosure' Category

2.5 Million Served - Foreclosure Prevention Is Working

Published
by
Gina Pogol
on October 28, 2008
in Foreclosure
. 0 Comments

HOPE NOW, the private sector coalition of ownership counselors, mortgage lenders and servicers, and investors has focused its efforts on preventing foreclosures and keeping homeowners in their residences. As of today, the organization reported that nearly 2.5 million homeowners have avoided foreclosure and been able to stay in their homes since July 2007. In addition, cooperative mortgage lenders helped 212,000 homeowners sidestep default or foreclosure in September.

In September, mortgage servicers helped homeowners avoid foreclosure by creating 212,000 loan workouts, which involve modification to the terms, lowering the balance, refinancing arrearages, a combination of all three. Barring an unforeseen life event such as a job loss, death, or illness, all workouts are designed to enable a homeowner to remain in his or her home as long as he or she wishes to do so.

Here’s an example of how a loan modification might make it possible to avoid foreclosure. Miss Jones bought her home for $250,000 with a zero down ARM loan starting at 4%. Her payment was $1,195. Next year, her rate increased to 6% and the payment to $1,491. By year three, she was paying 7.75% and the payment had increased to an unaffordable $1,767. While she paid her balance down about $11,000 in three years, home values dropped too. So Miss Jones had’t enough equity to refinance–yet she could’t afford her payments either. She missed two payments, added about $3,000 to her principal–now she owed more than her home was worth!

Miss Jones was capable of making her mortgage payment when it was $1,491. By getting the lender to cut her balance to $200,000, she could get her payment to 1,475 at her current rate. But very few banks or investors are willing to take a $45,000 hit to avert foreclosure. What else can a lender do to help?

  1. Finance arrearages. The loan can be officially brought to current status with a small second mortgage. At five years and 6% the payment is only $58. And the credit damage stops piling up.
  2. Change the interest rate and term. By granting a new loan with a 40 year term and fixing the ARM at 6% for the next 5 years, Miss Jones gets a more manageable payment of $1,348, whoch added to the $58 second lien means that Miss Jones has a guaranteed manageable payment of $1,406 for the next 5 years. In that time it is likely she will have equity and enjoy more solid financial footing.

Suggesting that your lender write off huge loan balances doesn’t go down well with investors, and it’s harder to get that kind of concession. However, there are many things you can tweak to get a manageable payment and keep your home.

1 Star2 Stars3 Stars4 Stars5 Stars (6 votes, average: 5 out of 5)
Loading ... Loading ...

Foreclosures Create Problems for Tenants

Published
by
Gina Pogol
on October 22, 2008
in Foreclosure
. 2 Comments

The San Jose Mercury-News throws light on a problem in many housing markets. The surge in foreclosures not only hurts those trying to sell homes, it affects renters looking for homes too. Tenants may find themselves in a double bind–the landlords continue to collect their rents but do not make the mortgage payments on the properties. The landlords have the tenant’s security deposits as well. And while legally the deposits belong to the tenants, in foreclosure or bankruptcy proceedings the money may not be returned for a long time, if at all.

So the poor tenants find themselves evicted by the new owners, with no security deposits to give a new landlord. In addition, the explosion of foreclosed properties being rehabbed for sale has left a dearth of homes available for rent. So rents are higher and harder to get, adding insult to injury. In other words, it’s a great time to be a landlord and a lousy time to be a tenant.

How can you prevent this? First, check a property’s status before signing a rental agreement. The landlord checks your background, you should check his. Notices of Default are public filings and the county should make records pertaining to the property and the owner available to you. For example, in Washoe County in Nevada you could go to the County Assessor’s Web site, type in an address, and find out who owns the property. Then, you check the County Clerk’s Web site, type in the name of the owner, and any filings involving the company or individual will show up. Even if the property in question isn’t in default, a slew of filings on other properties should alert you that maybe this person isn’t a good risk. Finally, many court systems allow you to check for legal filings too. In Washoe County you can check District Court cases–enter the person’s name and up come any lawsuits in the system.

 Remember: Your landlords will check you out–you owe it to yourself to return the favor.

1 Star2 Stars3 Stars4 Stars5 Stars (11 votes, average: 4.91 out of 5)
Loading ... Loading ...

HOPE for Homeowners: Finally, Real Foreclosure Help from HUD

Published
by
Gina Pogol
on October 17, 2008
in Foreclosure
. 4 Comments

List of Lenders Who Are Participating in the HOPE for Homeowners (H4H) Program

HUD officials estimate this program could help about 400,000 homeowners to keep their houses. Today the agency released a still-growing list of lenders voluntarily participating. HUD strongly urges homeowners in trouble to contact the servicing or loss mitigation departments of their lenders as soon as possible.

 If they are unable to reach someone who can help or are uncomfortable dealing with their lenders directly, there is help avaible through approved housing counseling services.

The list will be updated on Fridays. If your lender isn’t on it yet keep checking. And stay in contact with its workout department. If you truly want to keep your home and can afford it (with reasonable modifications) then don’t give up.

 And check out the recent NINJA post for ideas on retrenching and keeping that roof over your head.

1 Star2 Stars3 Stars4 Stars5 Stars (3 votes, average: 5 out of 5)
Loading ... Loading ...

When Bankruptcy Is Better

Published
by
Gina Pogol
on September 8, 2008
in Foreclosure
. 4 Comments

Bankruptcy is referred by so many as a “last resort.” Not necesarily. For those facing foreclosure, bankruptcy may be the best solution available. If you have a lot of debt and you lose your home through foreclosure, you unload your house payment but you still have all your other debts. You can’t pay them with a debt consolidation loan because you will have no home equity. In most states you can be required to pay your lender for the difference between what they are able to sell your foreclosed home for and what you owe on your mortgage (this is called a deficiency)–so you don’t really get out of your mortgage, after all! And then, you have trashed credit and you still have to find (and pay for) a place to live. Not much of a solution.

Bankruptcy, however, can be a way out whether you do a Chapter 7 or 13. Chapter 7 may work best if you:

1. Can pass a Chapter 7 “means test.” Here is a list of median income by state and family size. If yours is less than what’s on here, you pass. Otherwise, the calculations are more complicated but involve subtracting necessary expenses like utilities, housing, and taxes and determining if you have enough “disposable income” to pay some or all of your bills.

2. Have very few non-exempt assets. Because Chapter 7 is a “liquidation” bankruptcy, your assets are taken and used to discharge your debts. So if you have assets, you might want to do a Chapter 13, which involves restructuring your debts to manageable payments  and discharging them over time.

3. Have primarily unsecured debt like credit card obligations. Debts like child support, student loans, and most tax debt can’t be discharged by a bankruptcy so don’t file to get rid of them–it won’t work. Debt secured by things like cars and houses can’t really be discharged unless you want the creditors to take your things. However, a Chapter 7 filing can keep the lender from getting a deficiency judgment (collecting extra money from you if the property is worth less than what you owe on it). Chapter 7 may help you afford your house payment by relieving you of your unsecured payment obligations (like credit card bills). If you can’t afford your house payment even with the discharge of other debts, however, you will probably lose your home.

 Chapter 13 might be a good solution if:

1. You have assets that you don’t want to surrender in a bankruptcy proceding. You don’t get the clean break afforded by a Chapter 7 filing, but paying some or all of your obligations over time may cost you less in the long run. Chapter 13 creates a plan for repaying your creditors, allowing you to retain your home, and if you stick to it your obligations will be discharged in a few years. And you can save your possessions.

2. You fail a Chapter 7 means test. This means the government has determined that you can afford to repay at least some of your obligations. The bankruptcy trustee administers your plan, which may involve debt settlement, interest rate reduction, payment reduction, having arrearages added to the balance and the account brought current, or other options. Chapter 13 can get your expenses to a level that makes it possible to pay your mortgage and keep out of foreclosure.

3. Want to minimize the hit to your credit rating. Lenders view Chapter 13 much more favorably than Chapter 7. for example, FHA will allow those who fiole Chapter 13 to get a mortgage a year before they will approve someone who files a Chapter 7.

Bankruptcy is almost always better than foreclosure. Many lenders consider foreclosure the blackest mark you can have on your credit. And you could end up owing a deficiency. And you may have a very hard time finding a rental or a mortgage for years after your house is taken. Of course, to be certain of choosing the right solution for you, check with a reputable debt counseling service, attorney, or mortgage counselor (you can find them through HUD).

1 Star2 Stars3 Stars4 Stars5 Stars (11 votes, average: 4.73 out of 5)
Loading ... Loading ...

Prime Foreclosures Now Higher than Subprime: What We Can Learn

Published
by
Gina Pogol
on September 5, 2008
in Foreclosure
. 4 Comments

Information released by the HOPE NOW coalition, a voluntary effort by major lenders to reduce mortgage foreclosures, shows that for the first time since its inception in July 07 prime mortgage foreclosures exceeded those for subprime loans.

According to housingwire.com, the reason for this trend is that servicers prefer to rely on repayment plans when dealing with prime borrowers who fall behind, rather than modifying the terms of the loans as they do with most subprime borrowers. HOPE NOW reports that 57,822 troubled prime borrowers got a repayment plan in July, which is 72.3 percent of all workouts effected that month. While only 48 percent of subprime borrowers were stuck with similar repayment plans–servicers were more likely to offer loan modifications instead.

Housingwire.com’s opinion is that this is because lenders still believe they have a shot at recouping prime borrowers’ arrearages, so they push repayment plans. In addition, repayment plans allow the lenders to classify seriously delinquent loans as “current,” which makes their numbers look better. But many feel the practice just sweeps the problem under the rug. Even prime borrowers end up in foreclosure when the repayment plan isn’t feasible.

Kevin Kanouff, the president of  Clayton Holdings Inc. theorized that servicers are using repayment plans as “one way to reduce default rolls.” Repayment plans represent “a temporary fix for the servicers if they do not fit the borrowers’ capabilities to repay. Eventually the real numbers will come out on bad plans.”  Cheryl Lang, the president of Integrated Mortgage Solutions, clains repayment plans “are used to minimize or mask the 90-day-plus category of delinquencies.”

So, what can we learn from this? First, if you have a problem with your mortgage you are likely to be offered a better solution if you are a sub-prime borrower. Don’t allow your lender to shove an unrealistic plan down your throat. Second, you are more likely to be successful at keeping your home out of foreclosure and saving your credit rating if you get a loan modification rather than a repayment plan. A loan modification involves changing the terms of your mortgage to something manageable. A repayment plan just means moving the past due amounts to a different loan, classifying the (still unpayable) mortgage as ”current,” and expecting you to pay both your mortgage and the repayment plan. How logical–let’s see, the borrower is behind on the loan because he can’t make the payment, so we’ll help him out by giving him 2 payments to make!

If your lender suggests a plan that you know won’t work, don’t let their stupidity become your stupidity. Housing / mortgage counselors abound, and qualified attorneys can also help with mortgage negotiations. If your goal is to keep your home, working with your lender to create a realistic plan is your best chance at a win-win.

1 Star2 Stars3 Stars4 Stars5 Stars (26 votes, average: 4.92 out of 5)
Loading ... Loading ...

Sellers: Speeding Up Your Short Sale

Published
by
Gina Pogol
on August 28, 2008
in Foreclosure
. 2 Comments

Most lenders won’t even consider a short sale until you are at least 60 days in arrears and dealing with the loss mitigation/remediation department (not customer service). And while not making your payments is a sure way to get their attention, it’s a risky strategy that will destroy your credit and may not get you out of your mortgage jam.

And few lenders will even speak with you about a short sale unless you approach them with a contract. So it’s kind of a chicken and egg thing–you can’t guarantee the buyer that your lender will allow a short sale, and you can’t discover the lender’s position unless you have an offer….

Which bring me to the real purpose of a short sale from the lender’s point of view. It’s not to relieve the owner of the burden of a bad investment decision. It’s to minimize the loss to the lender. Period. So if you want to get a short sale approved, you have to show your lender that a short sale will produce the best outcome. This means proving that foreclosure is probably inevitable and that a short sale will save the lender the costs of maintaining and disposing of the property. Here are the factors that make a short sale more attractive to a lender:

• The borrower has insufficient income to make the mortgage payment (job loss, health issues, or other catastrophe is a good reason–too much credit card debt or an expensive Ferrari habit isn’t).
• There isn’t enough equity in the property, due to reduced values, negative amortization, or high loan-to-value ratios to be able to pay off mortgages by selling the property.
• The homeowner lacks the assets to pay the lender in full if the property sells for less than the balance of the loan(s) against it.

To increase your chances of being approved for a short sale, you need to prove the above-mentioned points. Do this by furnishing the following:
• Documentation of income (or lack of). Provide your tax returns, current pay stubs, unemployment compensation, etc. Include a medical diagnosis if applicable. If income reduction is permanent, obtain necessary documentation to prove your claim.
• Document the property value. Get a market analysis (CMA) from a real estate agent, your property tax assessment from your county, even a new appraisal if you think it’s needed to show a drop in your property’s value. If you can get a settlement statement (form HUD-1) prepared to show the estimated expenses and proceeds from the sale it can speed up the process. Include a copy of an offer if you have one. Also, if working with a real estate agent or attorney, put a letter together authorizing them to work on your behalf and allowing the release of personal information between the lender and your representative.
• Document assets. Provide copies of statements (all pages) for every account you have–checking, savings, investments, and business. Don’t leave anything out; your lender will likely notice the omission (remember, you listed your assets when applying for a loan, so it’s not like they can’t check). If your assets are insufficient to offset your deficiency you have an excellent chance of having a short sale approved.

And finally, any request for short sale should include a “hardship letter” which explains why you need to do a short sale. Don’t make it a sob story, but explain what happened and why you are unable to fulfill your obligation as a borrower. Spell out what selling price you are asking the lender to approve and what closing costs and real estate commissions will be involved. Ask the lender to forgive the difference between what is owed and the proceeds of the sale. If the lender doesn’t forgive the balance you could be sued for it in most states. In other cases, the lender may approve the sale but only if you agree to repay part or all of the deficiency over time.

Short sales can work but they take time, effort, and more than a little luck.

1 Star2 Stars3 Stars4 Stars5 Stars (5 votes, average: 5 out of 5)
Loading ... Loading ...

Trying to Unload your Home with a Short Sale? Don’t Hold Your Breath

Published
by
Gina Pogol
on August 27, 2008
in Foreclosure
. 2 Comments

Frustration mounts on all sides. The desperate homeowner wants to sell a home and dump a mortgage he can’t afford. The lender wants out with its skin on. The buyer and her agent want to proceed as soon as possible (and they want a good deal to compensate them for the hassle of entering the transaction). And yet the deal doesn’t get done, the home goes into foreclosure, and everyone is disappointed (and a little poorer). Why can’t short sales work even when they are clearly in everyone’s best interest?

One problem is the number of parties involved. To unload your home in a short sale, you have of course the primary lender to placate. But you can also involve a second mortgage holder, a mortgage insurance company, a title company, a secondary investor (like Fannie Mae or Freddie Mac), or a government agency like HUD. And every one of these parties is likely to be swamped with inquiries and understaffed to deal with them.

So first everyone needs a chance to look at and approve the deal. And there are conflicts of interest to deal with–for example, a first lienholder who will be repaid in full will be more enthusiastic about a short sale than the second lienholder or mortgage insurer who will end up writing off the deficiency.

Then, there is the amount of information needed, and the scrutiny required. Lenders won’t consider a short sale for borrowers who are making their payments successfully; those 90-120 days in arrears are likely to get their attention first. Ditto for homeowners with assets who could bring in the difference when their home is sold. Much of the initial approval process is devoted to making sure that a short sale is the lender’s best chance for minimizing loss. The advantage for the lender is in reduced costs–no attorney fees, no having to put the property on its books, maintain it, and arrange for its sale. But short sales aren’t the first resort when there is a chance of collecting the full amount from the borrower.

Then, there is the issue of mortgage insurance. In some cases, the mortgage insurer has to approve the short sale–one more group to check out the offer, verify the homeowner’s hardship, and negotiate a better deal for itself. And sometimes, the obstacle is the primary lender–if it can get more by foreclosing and collecting mortgage insurance proceeds than by allowing a short sale, you won’t get your short sale. And if you are a borrower relying on a short sale to save you from foreclosure, and the deal doesn’t close, you could be really stuck–trashed credit, evicted, and perhaps a deficiency judgment against you.

So a short sale isn’t the great solution it’s cracked up to be. Even the ones that fly through smoothly take at least 120 days. So how can you, as a borrower / seller or as a potential buyer move the proceses along more quickly? That’s the topic for the rest of the week. Feel free to add your questions any time.

1 Star2 Stars3 Stars4 Stars5 Stars (9 votes, average: 4.78 out of 5)
Loading ... Loading ...

Is Foreclosure Necessary?

Published
by
Gina Pogol
on July 7, 2008
in Foreclosure
. 3 Comments

Foreclosure is a nasty process. The stress on families has been well-documented. So has the turmoil it visits on neighborhoods. And it’s expensive for the lender. So who in the world does foreclosure benefit? All of us.

Before you CLICK to get away from this obviously psycho blogger, pull out your credit card statements. Look at the APR of each of those accounts. Now imagine making a mortgage payment with an interest rate like that. Mortgage rates are among the cheapest kind of financing available because they are secured by property. By taking the threat of foreclosure out of the equation you end up with an unsecured loan–just like a credit card. And with that level of risk comes that kind of interest rate.

So, how SHOULD banks lend? How can we balance the needs of homeowners and buyers with investors’ requirements for safe transactions? How do we keep mortgage financing affordable and accessible? Your ideas are gladly welcomed HERE.

1 Star2 Stars3 Stars4 Stars5 Stars (21 votes, average: 3.43 out of 5)
Loading ... Loading ...

Avoid “Walk Away” Companies. It’s a “Credit Repair” Scam All Over Again.

Published
by
Gina Pogol
on June 27, 2008
in Foreclosure
. 4 Comments

Outfits have sprung up all over offering desparate homeowners a way out — making promises like the following, which were copied from one firm’s Web site:

Your lender WILL NOT be able to call you in attempt to collect!
Your lender WILL NOT be able to collect any deficiency or loss they may receive by you walking away!
You WILL be able to stay in your home for up to 8 months or more without having to pay anything to your lender!
You CAN have the foreclosure REMOVED from your credit!

The catch for these extravagant claims is, “IF you qualify….” Qualifying to be able to avoid deficiency, for example, means living in one of the only 2 states in the country in which it is illegal to collect deficiency judgments — or having no money, in which case the last thing you want to do is give $1,000 to a company who does nothing you can’t do yourself for free. Time Magazine ran a story in June which stated that by and large these outfits, which charge cash-strapped homeowners about $1,000, perform services that homeowners can get for free elsewhere–and the worst ones may do nothing but “handholding” after taking your money.

And removing the foreclosure from your credit? If it sounds too good to be true….remember all those scams a few years ago involving companies promising to make bad credit histories “disappear?” Too good to be true, but a lot of people lost money, and some even found themselves in hot water for committing fraud.

So ignore the extravagant claims and avoid these sleazy companies. Your best (and cheapest) sources of help don’t cost a thousand dollars. Time suggests you first contact your lender, write a letter documenting your circumstances and asking for help, and turn to non-profit housing counselors for assistance if you need it. And if you are solicited by these companies? Remember the “weasel words” typically found in advertisements for questionable products. “Actually results will vary,” “Results not typical,” or in this case, “If you qualify….”

1 Star2 Stars3 Stars4 Stars5 Stars (19 votes, average: 4.95 out of 5)
Loading ... Loading ...

Bankruptcy: Sometimes the Best Option

Published
by
Gina Pogol
on June 12, 2008
in Foreclosure
. 4 Comments

While bankruptcy doesn’t carry the same stigma that it used to, the idea of filing for Chapter 7 or 13 protection from creditors fills many with fear and even shame. It needn’t. In fact, in may be the best way to keep your home if you own one and inflict the least amount of damage to your credit score. The key is to act quickly when you get that pink slip or those divorce papers. Months of waiting, avoiding the mailbox and screening your calls will only make things far worse — a clean break may be the best route. For example:

Working as a loan officer, I had a recently-divorced client come in who had always had good credit. When she realized that a creditor of her ex-husband’s was coming after her for a six-figure debt, she promptly got a lawyer and filed for bankruptcy relief. She reinstated all of her own debts and continued to pay them as agreed. The bankruptcy discharged the ex-husband’s obligation and she was approved for a mortgage within months. What my client did that was so smart was that she didn’t wait until she had missed a bunch of payments on this debt — she halted it right away and her credit score remained in the 700s.

Denial results in all kinds of evils — foreclosures when you don’t want to talk to your loan servicer, late or missing payments, and credit scores that can even make it harder to get a new job after losing the old one. By facing the problem and asking for help — from your creditors, a credit counseling service, or an attorney — you can solve the problem quickly and limit the damage.

1 Star2 Stars3 Stars4 Stars5 Stars (23 votes, average: 4.52 out of 5)
Loading ... Loading ...

Get a Free Mortgage Quote

Loading.....
© 1999 - 2008 MortgageCreditProblems.Com. All rights reserved.