All the buzz these days is about the homeowner rescue programs--Making Home Affordable and it's babies Home Affordable Refinance Plan (HARP) and Home Affordable Modification Plan (HAMP). But eligibility for these programs requires that the property be a primary residence. What about investors? Is there any help for them?
Investors seem largely left out of the bailout and handed a large share of the blame for the housing crisis. Yet it could be argued that investor foreclosures take a bigger toll on the economy and well-being of neighborhoods. You don't associate investor foreclosure with families being forced out of their homes, but there are--they just happen to be renters rather than the owners. And while governments are finally taking measures to prevent eleventh hour evictions of tenants who had no idea the property was in default, a litter of foreclosure sale signs in a neighborhood blights it and hurts everyone there--whether the properties are owned by investors or not. And then, there's the property owner--is there any help for you if you own rentals or land and the payments become unaffordable? Maybe, but not from the government.
Even Making Home Affordable help is voluntary. Lenders don't have to give anyone modifications just because the program is there. Its goal is to provide an incentive for lenders to modify loans instead of foreclosing, but if a lender can generate better cash flow for its shareholders by foreclosing than by modifying it will do so.
Lenders can voluntarily help investors, too. Call yours. If you can convince it that giving you some breathing room now will pay off in the future, you may be able to prevent foreclosure on your investment property. Investment property is difficult--first, investors are more likely to walk away than someone in a primary residence because it's just an investment. If it goes bad there isn't the emotional attachment and the need to keep it to live in. Banks are less likely to negotiate on an investment property loan because if the foreclosure sale proceeds don't cover the loan balance, they can go after you for the shortfall in most states--get a judgment, put a lien on your primary residence, attach your wages, and drain your bank accounts. In short, if you have other assets, the lender feels it can get them and not take a loss on your loan--powerful incentive to foreclose.
If you have investment property and there is a threat of foreclosure, you have to show your lender what is needed for you to continue to make your payments successfully. It helps if you have consulted a bankruptcy attorney before dealing with the lender--the threat of you filing for bankruptcy protection to avoid deficiency judgments gives your position a lot more strength. At this point the bank has different options--it can get something if it works with you, or it can foreclose--and incur the costs but be unable to recover the loan balance from you. Or you may discover after speaking to an attorney that you won't be able to pay your mortgages even with a modification. In that case it's better to file, suck up the bad credit, and see what a bankruptcy trustee can do to help you. Filing for bankruptcy will at least stall foreclosure proceedings for a while and give you a chance to evaluate your options.
