Stop Foreclosure Option - Sell Your Home!

By The Stop Foreclosure Tutor | May 11, 2008

These five options explore the ways you can avoid losing your home in foreclosure, by selling your property.

If you are facing foreclosure, you may want to think about selling your home if you have negative equity, meaning you owe more than the home is worth, if you have a high debt burden currently, if you are suffering from a long term financial difficulty, or if your household income has dropped significantly.

Deed-in-lieu of foreclosure – Using the “deed in lieu” option works where a homeowner want to move out of the house, and is willing to just sign over the deed to the lender to avoid foreclosure.

The buyer agrees to give possession of the house back to the mortgage holder, both physically and by signing over the deed “in lieu of”, or instead of, proceeding with foreclosure.This agreement can benefit both the lender and the homeowner.

The homeowner is typically relieved of further obligations under the loan, including delinquent payments, and the mortgage lender can avoid the time and legal fees involved in foreclosing. It’s a win-win situation Subject To – This option refers to a situation where a homeowner sells the home o the buyer but does not pay off the existing mortgage.

In effect, the buyer is buying the home “subject to” any existing loan.

Usually, the new buyer will bring the mortgage payments current, and continue to pay the loan according to its terms until it is either paid in full, refinanced, or sold to a third party.

A “subject to” can be an easy way to avoid a foreclosure, and can rescue your credit by selling your home and bringing your note up to date. It can take just a few days to complete the transaction.

But there is always an “other hand”…

On the other hand, a major problem with a “subject to” deal is that even though someone else is living in your home, the mortgage is still listed on your credit record even though technically you do not own the home.

If the new buyer does not make payments, you have to make them to rescue your credit. Another problem is that a sale “subject to” could violate a term of the mortgage known as the “Due-on-Sale” clause. The Due on Sale Clause allows the lender to effectively call the note due in full if the borrower breaches or defaults on any of the terms of the mortgage.

A sale “subject to” technically can violate the mortgage terms.

Even so, while lenders do have this option, they will often look the other way as long as the payments are up to date and continue being made on time. Be sure to consult with both your mortgage lender and/or a competent real estate lawyer before you agree to sell your home in a Subject To transaction.

Short Sale – When a lender agrees to take an amount less than what is owed on the face of the note, that is known as a short sale.

A short sale can allow you to sell when you have negative equity and avoid a foreclosure.

This can also help prevent a foreclosure from appearing on your credit record.Bear in mind however that a short sale can have a large tax consequence for the borrower. An example: The borrower owes $100k but the lender agrees to take less in a short sale, in the amount of $90k.

This difference of $10k may be treated as taxable income to the borrower. A tax accountant who is well-versed in real estate should be consulted before accepting a short sale deal. When negotiating a short sale transaction, be sure to get a written agreement from the lender that they will not pursue deficiency judgment against you for any difference between the original amount owned and the negotiated sale amount.

A deficiency judgment occurs when a borrower is held responsible for any portion of the balance of the mortgage loan that was not paid at the closing table. Keep in mind however that not all states have deficiency judgments.

Sell Your House – You can sell your house through the normal home sale process.

However, you should only retain a real estate broker if you have enough equity in your home to pay both the commissions and the mortgage loan, and you have some time before the foreclosure to proceed with a traditional sale.The time you will need includes preparing your home to be listed, getting it listed on the market, marketing the home properly, locating a buyer, waiting for that person to get financing to pay for the home, and then going to settlement or closing.

Generally, you can expect to spend at least four months, possibly more in a down market, from start to finish. You can ask your lender about a forbearance (discussed previously) if you are listing your home for sale, to give it time to proceed to settlement. If none of these options work, you may consider working with a real estate investor. This option was discussed in the Pre-Foreclosure vs. Foreclosure section and is also discussed further below. By selling your home to a real estate investor, you can sometimes take advantage of some short cuts, like just selling your home as is, without having to ready it for marketing, or do any updates or repairs.

There are many investors who are able to settle quickly too, in as little as 30 days.If you really want to just get out of the home and get on with your life, then you may want to consider these additional options.

A benefit of selling your home with the help of a Real Estate Broker is that you might get more money, however the timing of the process could be a problem if the sale takes too long. Sometimes a real estate investor can help in this case.

Most investors of the kind who advertise “We Buy Houses”, have worked with homeowners in foreclosure. You can find ads for these investors in the local newspaper or by searching the Internet. Use the search term “We Buy Houses” plus your town or city, and you will get a few hits for local companies.

Many larger cities have real estate investing (REI) clubs where you could find a buyer. However, a word of warning. Always check the references of these buyers. Don’t be afraid to ask how long they have been investors, and where they have done deals. As with anything else, if they are pitching you a solution that sounds too good to be true, it probably is.

Remember too that real estate investment companies who buy pre-foreclosure homes usually do not allow a homeowner to stay in the home once they have bought it. Use common sense when talking to an investor, especially if they are telling you that they will bring your loan current, pay off any taxes and escrow that you owe, as well as let you live in the home, you should be skeptical.

Some investors may be able to offer such a deal, but go in with your eyes open.Try and talk to several companies, at least three. Be sure that you feel you can work with the investor, and that you think you can trust them, because the last thing you want is for the deal to fall through, and you being left with a worse situation than you started with. Don’t take the investors promises on faith – ALWAYS ask to check the source of the cash they will be using to buy your home.

While you may feel self-conscious about asking this, remember that this is for your own protection, to make sure they are the “real deal” and can complete the sale. Almost all buyers have to have a “pre approval” letter to buy a home, and your investor should have some proof of funds too.Bankruptcy - Bankruptcy occurs when someone is either unable or unwilling to pay off their debt, and they file for bankruptcy to seek protection from their creditors under the Federal Bankruptcy Code. To file for bankruptcy, you are best advised to see a bankruptcy attorney for help.

A lawyer can help you decide what type of bankruptcy proceeding would be best for you under Chapter 7 or Chapter 13. Ask the attorney about the consequences of each options, including taxes, damage to your credit, your ability to qualify for future credit, and so on. The final option is always to do nothing at all, and wind up losing your home in a foreclosure proceeding.

Hopefully the ideas and options listed above will give you some alternatives.

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Stopping Foreclosure - A Quick Review Of Your Defensive Options

By The Stop Foreclosure Tutor | May 9, 2008

If you are facing foreclosure it is very important to remember that you are not without defensive options. Being in pre-foreclosure does not mean that you are sure to lose your home. This is a check list of some of your defensive options and strategies that can help you stop the foreclosure process and save your home. Take a deep breath and run through the list step by step, and most importantly - don’t panic…

1. Don’t move out of your home, in order to qualify for assistance.

2. Avoid losing your home if possible to save your credit history.

3. Start by calling the mortgage lender’s loss mitigation department. It may require a few calls. Stay calm and try to hold back your frustration, you can vent all you want AFTER the call!

4. Locate a HUD housing counseling agency in your area.

5. Call at least 3 service companies that help stop foreclosure, and schedule at least one appointment to meet them to discuss
your options. At this stage you do NOT want to contact a company that offers to buy your home.

6. Help the lender or counselor help you by being cooperative.

7. Call at least three Real Estate Agents in your area.

8. Call at least three Real Estate Investors that operate in your area.

9. Review and compare all of the options offered to you by each of the companies or individuals you contact to help.

10. Don’t let all the red tape overwhelm you.

11. Review the Words of Caution in the previous section.

12. Make sure you understand all documents before signing anything. Signing over your deed to another party does not help you
avoid the loan obligation.

13. Keep everything that you have received about your foreclosure in one place. Pick up the phone with a pad and pen to take notes. Pick up the phone and start calling.

14. Read through the Bonus Items prepared by Federal Government Agencies of Fannie Mae, Freddie Mac and The Federal Trade
Commission.

15. Ask all the questions you need. Find out the consequences of each decision.

16. Find out how your credit report and ability to borrow credit in the future will affected. Are you facing any tax implications?
Can you get out from under all of your unpaid debts?

17. Take Action right away!

There are no guarantees that if you follow everything here, you will successfully keep your home.

But it’s 100% certain that by doing NOTHING, you will absolutely lose your home.

Take comfort from each little success you achieve in this whole process - even a phone call or email you accomplish - to help you stay strong and keep going in this fight.

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Avoiding Foreclosure – The Facts

By The Stop Foreclosure Tutor | May 6, 2008

If you’re like many people in the United States, you may be having trouble making your mortgage payments. And as interest rates continue to rise, your payments are going up and up. What can you do to avoid the finality of foreclosure?

It’s important to understand how you got into trouble in the first place. Have you had a loss of a job? Is your interest rate climbing in your adjustable rate mortgage? Have property values declined in your neighborhood making it difficult to sell. Once you put your finger on the problem, you need to face it head on. Ignoring the letters and phone calls from your lender won’t make the problem go away. In fact, it can make it much worse.

As soon as you realize you have a problem you need to contact your lender. If you’re in the position right now of being in trouble, contact your lender immediately. Most banks aren’t excited about having to resell your home. They’d rather work with you in most cases to keep your home.

Determine if there’s a way for you to increase your income in order to put more money toward your mortgage payments. Can someone work a second job? Can you search for a job that’s higher paying?

It’s also important to see if you can refinance your mortgage at a fixed interest rate. This will keep your payments the same over the entire life of your mortgage. If you can refinance, you may be able to set up reasonable payments.

Another option may be to rent your home if you can get enough rent to cover the cost of the mortgage. You may also want to consider allowing someone to rent a room to bring in extra income for your home.

If you can’t bring in more money and refinancing isn’t an option, you need to try to sell your home. As difficult as it may be to let go of it, it’s better to sell it than have a foreclosure. If you owe more than your property is worth, you should contact your bank.

Many lenders will allow you to perform a “short sale” that will allow you to sell the house for somewhat less than its value and have the difference forgiven. Many banks allow this because in the long run it’s still less costly for them than trying to sell your home.

Finally, if you’ve exhausted all of the possibilities and you can’t find a way to pay your mortgage payments and get out of trouble, you may have to walk away from your home. A foreclosure will be a dark mark on your credit for many years; however you should remember that you’re not alone. You simply have to take with you the lessons you’ve learned about home financing.

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Avoid Foreclosure By Finding The Right Mortgage Loan

By The Stop Foreclosure Tutor | May 5, 2008

In the past decades, it was believed that a mortgage loan is a mortgage loan no matter whichever is chosen. But this theory is not workable anymore because of the many mortgage loan products available in the market. So, before choosing a mortgage loan, it is very important to decide which one is right for you. Finding the right mortgage loan means balancing your mortgage options with your housing requirements and financial picture, now and in the future. Also the right mortgage is not just having the lowest interest rate but much more than that. And this “much more” will be determined by your personal situation. Your personal situation and your limits to pay for monthly mortgage payments can be evaluated by answering the following questions:

The answers to these questions will give you the idea of your financial position. Now the next step is to decide two key options:

The length of mortgage loan can be minimum 15 years; can be 20, or at maximum 30 years. While selecting a fixed or adjustable interest rate you should be aware of the facts that the adjustable interest rate mortgage is more risky because the interest rate will change, while a fixed-rate loan offers more stability because of the locked-in rate. You will be able to pay off a shorter-term loan more quickly, but your monthly payments will be substantially higher. Long-term fixed-rate loans are popular because they offer certainty, and many people find that they are easier to fit into their budget. Although, in long run they will cost you more, but you will have more available capital when you need it, and you will be less likely to default on the loan should an emergency arise.

In the light of above mentioned aspects, it is clear that the key to select the right mortgage loan for your needs should fit comfortably into your entire financial picture, that is having payments within your budget and comfortable level of risk connected to it.

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Avoiding Foreclosure: How to Find the Honest Debt Consolidation Programs

By The Stop Foreclosure Tutor | May 5, 2008

Debt consolidation programs claim to help families and individuals avoid bankruptcy and foreclosure by consolidating debts into one monthly installment. Some programs offer first-time free counseling, which includes debt information and information on how to reduce or eliminate interest rates on credit cards. These programs will assess your needs carefully, claiming to search for the best plan for you.

After your information is analyzed thoroughly by a qualified representative, they will then begin to develop a strategy to help you budget your income so that you can payoff your bills and increase your income. These organizations will help you keep records of your spending, learn how to prepare for emergencies, and at the same time, help you to manage your debts.

Furthermore, the companies that help you organize may see a need to refer you to qualifying debt management programs that offer counseling. These counselors will contact creditors on your behalf, including business creditors, legal creditors to negotiate, and arrange lower monthly fees, including rates of interest.

The programs may even ask for waiver on fees for late charges, and will ask for elimination of accounts past the seven-year guideline. Once the plans are set in motion, they may require you to send one monthly installment to the debt consolidation agency, which then will then be broken down into payments and sent in the arranged amounts to each creditor.

As you can see the plans seem amicable; however this is not always the case: some programs will charge up to $70 per month, plus interest for helping you get out of debt. This means if your plan is to repay $500 per month, then only $430 of that amount will apply to your debts after and/if the programs charge interest rates and also after the rates of interest are deducted. In this event, maybe only $400 is giving to the creditors, which means you are paying out $100 each month simply for debt servicing.

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