How To Stop Foreclosure

How To Stop Foreclosure

Homeowners and real estate owners who are in foreclosure, or who have received a letter from their mortgage lender's attorney stating that the foreclosure process will begin, or have received a notice of default frequently ask me how they can stop the foreclosure. Therefore, I listed the best ways to stop a foreclosure action below depending on whether you want to keep your home or investment property.

Options if you want to keep your home or investment property:

• Mortgage Refinance - If you have not missed a payment yet you still may be able to refinance into a more affordable loan. You should investigate this option as soon as you know that there may be financial trouble as this option will only remain viable for a short period of time. If your home is worth substantially less than the mortgage(s) you need to refinance this option will not work.
• Loan Modification - Contact your mortgage lender as soon as you miss a mortgage payment and ask about their loan modification options. Don't expect much help, though, as most loan modification requests are not approved.
• Loan Forbearance - If you are denied for a loan modification due to your financial issue being temporary you may be able to get a loan forbearance agreement with your lender. Basically, forbearance is a temporary reduction in your mortgage payment (usually 3-6 months) where the part of the payments that you did not make (i.e. the difference between the normal payments and the reduced payments) is added to the final forbearance payment. Due to the large final payment, this option most likely only a temporary way to stop foreclosure. However, getting the foreclosure stopped is absolutely necessary so that you can review other options (see below).

Options if you do not want to (or or not able to) keep your home or investment property:

• Short Sale - A short sale is a sale of real estate where the sale proceeds are not sufficient to pay off the liens on the real estate (usually the mortgage(s), tax liens and unpaid HOA and condo fees). This is the best way to proceed in that you can frequently, but not always, get the mortgage debt(s) fully satisfied and get released from any future obligations. A short sale is also less damaging to your credit than the other options. If you decide that a short sale is your best option I highly recommend that you chose a REALTOR who specializes in short sales (i.e. not a traditional REALTOR, or neighborhood expert), or a short sale investor. In either case, you need someone who knows how to close short sales since they are very different than regular real estate sales.
• Bankruptcy - If you have a lot of unsecured debt (i.e. personal loans, credit cards, unpaid bills, collection accounts, etc.) and just need to buy time to evaluate other options a bankruptcy could work for you. Please know that bankruptcy will not save your home. It will only delay the foreclosure unless the lender wants to work with you. Due to the complex laws which regulate personal bankruptcy, you will need to contact a bankruptcy attorney.
• Deed in Lieu of Foreclosure - Basically, a Deed in Lieu of Foreclosure is where you deed your home directly to your mortgage lender in exchange for them stopping the foreclosure. While this option is better than foreclosure, at least from a credit score standpoint, it will usually not get you released from the debt and probably will not work if you have other mortgages on the property.

Please note that all the options above will be slightly more difficult for real estate investors than they are for homeowners.

Short Sale and Foreclosure Help and Assistance for Homeowners and Property Owners in Nashville TN and Middle TN. If you are a Nashville Tennessee, Franklin Tennessee, Brentwood Tennessee, Nolensville Tennessee, Spring Hill Tennessee, Murfreesboro Tennessee, Smyrna Tennessee, La Vergne Tennessee, or Middle Tennessee homeowner, property owner, condo owner, real estate investor, home builder or real estate developer who cannot pay your mortgage payments (due to losing your job, having your income reduced, illness, health problems, adverse business conditions, slow sales, loss of investment property tenants, vacancy issues, lack of funds to complete the project, feuding business partners, etc.), know that you will not be able to pay your mortgage, have defaulted on your mortgage, are already in foreclosure, or owe more than your home is worth, please contact me to discuss your options including a loan modification and a short sale (a real estate short sale occurs when the sale proceeds are not sufficient to pay off all the mortgages and liens on the property/home). I am a Middle Tennessee distressed real estate, short sale, pre-foreclosure (preforeclosure) and foreclosure REALTOR and Expert. I primarily help sellers (homeowners, property owners, condo owners, owners of high end homes and properties (estate homes, luxury homes and executive homes), real estate investors, home builders and real estate developers) of distressed real estate, short sales, pre-foreclosures, foreclosures, investment properties, failed new construction projects and struggling commercial real estate developments located in Middle Tennessee (Rutherford County TN, Williamson County TN, Davidson County TN, Robertson County TN, Maury County TN, Murfreesboro TN, Smyrna TN, La Vergne TN, Eagleville TN, Lascassas TN, Rockvale TN, Christiana TN, Brentwood TN, Franklin TN, Nashville TN, Belle Meade TN, Nolensville TN, Spring Hill TN, Gallatin TN, Springfield TN and Mt. Juliet TN). If you do need to short sell your home or property, or you need a quick sale due to being in foreclosure, you can request short sale and foreclosure help and assistance on my website at Get Short Sale and Foreclosure Help and Assistance from a Nashville Tennessee and Middle Tennessee Short Sale and Foreclosure REALTOR and Real Estate Expert.

Commercial Real Estate Problems

Commercial Real Estate Problems

According to this Philly.com article, Commercial real estate facing worse days, the worst for commercial real estate is yet to come. The article cites the contracting economy and worsening financing markets as the main causes of the commercial real estate decline. My opinion is that the real problem is that all real estate prices (residential and commercial) just reached a point where they made no sense whatsoever. According to the article, "It's just a hint of the harrowing state of affairs in commercial real estate, where vacancies are on the rise across virtually all sectors, rents and property values are dropping, building owners are low on funds, and financing options are drying up. And bad as things are, they're expected to get worse - the next slide in the snowballing economic crisis that began with the collapse of the housing market and continues to claim casualties." The article quotes Sid Smith, managing partner of the regional office of Newmark Knight Frank Smith Mack, a global real estate services firm, as saying "There's a tremendous amount of pain coming." I definitely agree. I predict that we will see more and more commercial real estate foreclosures, bankruptcies and short sales.

If you are a Middle TN real estate investor, home builder or real estate developer who cannot pay the property/project mortgage payments (due to the poor economy, adverse financing conditions, slow sales, loss of investment property tenants, vacancy issues, lack of funds to complete the project, feuding business partners, etc.), have already defaulted on the mortgage, or are already in foreclosure, or owe more than the property/project is worth, please contact me to discuss your options including a short sale (a real estate short sale occurs when the sale proceeds are not sufficient to pay off all the mortgages and liens on the property/project). I am a Middle Tennessee distressed real estate, short sale, pre-foreclosure (preforeclosure) and foreclosure REALTOR and Expert. I primarily help sellers (property owners, real estate investors, home builders and real estate developers) of distressed real estate, short sales, pre-foreclosures, foreclosures, investment properties, failed new construction projects and struggling commercial real estate developments located in and around Middle Tennessee (Rutherford County TN, Williamson County TN, Davidson County TN, Murfreesboro TN, Smyrna TN, La Vergne TN, Eagleville TN, Lascassas TN, Rockvale TN, Christiana TN, Brentwood TN, Franklin TN, Nashville TN and Belle Meade TN).  If you do need to short sell your home or property, or you need a quick sale due to being in foreclosure, you can request short sale and foreclosure help and assistance on my website at Get Short Sale and Foreclosure Help and Assistance from a Middle Tennessee Short Sale and Foreclosure REALTOR and Real Estate Expert.

Effects of a Loan Modification, Short Sale, Foreclosure, Bankruptcy and Walking Away/Doing Nothing on Credit Scores

Effects of a Loan Modification, Short Sale, Foreclosure, Bankruptcy and Walking Away/Doing Nothing on Your Credit Score

There seems to be a lot of conflicting information out there regarding the negative effects of a Loan Modification, Short Sale, Foreclosure, Bankruptcy and Walking Away/Doing Nothing on a person's credit score. I would like to try to clear some of that confusion up.

According to this Los Angeles Times article, Mortgage problems are walloping Americans' credit scores, loan modifications, short sales, foreclosures, bankruptcies and walking away/doing nothing effect your credit score differently. Below is a brief summary of the different options.

• Loan Modification Type 1 - This Loan Modification type rolls late payments and penalties into the principal debt owed. According to the LA Times article, this type of loan modification may modestly increase your credit score.
• Loan Modification Type 2 - This Loan Modification type is a refinancing of underwater (i.e. negative equity) mortgage(s). This is what is offered under the Obama administration's Making Home Affordable Program through government controlled Fannie and Freddie Mac. According to the LA Times article, this type of Loan Modification "may have little or no negative effect on scores, even though the homeowners might have been tottering on the edge of serious delinquency before refinancing."
• Short Sale - A short sale is a sale of a property where the net sale proceeds are not sufficient to pay off the mortgage balance(s) and there is no party willing or able to make up the shortage. According to the LA Times article, a short sale may lower your credit score by 120-130 points. I have heard from other people that a short sale lowers a person's credit score by 80-100 points. For sake of simplicity, let's say that a short sale will drop your credit score by about 100 points on average (This does not include the negative effects of any missed mortgage payments. You do not need to miss any mortgage payments in order to successfully complete a short sale). While this seems bad (it certainly is not good), it is much better than foreclosure, or doing nothing. In fact, according Question 7, "If a borrower has completed a short sale and was never delinquent on that mortgage and is now attempting to purchase a new primary residence, will Fannie Mae purchase the loan?", in this this Fannie Mae publication, Announcement 08-16: Bankruptcy, Foreclosure, and Conversion of Principal Residence Policy Changes; and Revised Property Value Representation and Warranty Requirements, "If the borrower is purchasing a new property and the previous mortgage history complies with our excessive prior mortgage delinquency policy and does not have one or more 60-, 90-, 120-, or 150-day delinquencies reported within the 12 months prior to the credit report date, the loan is eligible for delivery to Fannie Mae, provided the lender or servicer who completed the short sale has not entered into any agreement that obligates the borrower to repay any amounts associated with the short sale, including a deficiency judgment." In other words, you can short sell your existing home and immediately buy another home as long you did not have a 60 day or more delinquency and your short sale lender did not require you to pay the shortage (normal loan underwriting criteria applies). This publication clarifies the previous Fannie Mae publication, Announcement 08-16.
• Foreclosure - Homeowners that allow their home to go to full foreclosure (i.e. be auctioned off by the lender and/or become a bank owned property) should expect their credit scores to decline by 140 to 150 points plus negative marks on their credit bureau files for as long as seven years. Having a foreclosure on your credit report will also make it much more difficult to buy a home. Fannie Mae requires foreclosed home buyers to wait at least 5 years before buying another home and even then Fannie Mae will require larger down payments. Freddie Mac generally requires a waiting period of 7 years. The FHA currently has a waiting period of 3 years, but is expected to increase that waiting requirement.
• Bankruptcy - The LA Times article states "People who file for bankruptcy protection covering all their debts (mortgage, credit cards, auto loans, etc.) will get hit with an average 355- to 365-point drop in their scores. Bankruptcies remain on borrowers' credit bureau files for 10 years." Having a bankruptcy on your credit report will make it very difficult to buy another home. Fannie Mae requires that people who file a non-Chapter 13 bankruptcy wait a minimum of 4 years from dismissal or discharge before obtaining a new home loan. For Chapter 13 bankruptcy, the waiting requirement is 2 years from discharge and 4 years from dismissal.
• Walking Away/Doing Nothing - according to the LA Times article the "strategic default" has become common in large foreclosure laden markets such as California (and Florida, Nevada and Arizona). Homeowners who choose this option should expect the same consequences as a Foreclosure (described above).

The LA Times article goes on to state that Americans overall credit scores have declined significantly over the last couple of years. The article refers to the Vantage credit score, the main competitor to the well known FICO credit score, which "rates borrowers on a scale range of 501 (subprime, the highest risk) to 990 (super-prime, the lowest risk). Unlike Fair Isaac Corp.'s FICO scoring system, whose scores can vary by 50 to 100 points based on which bureau supplied the underlying credit data, Vantage scores are about the same for each consumer."

Regarding the negative effects of this financial mess on people's credit scores, the article states "For example, roughly 36.6 million of the 213 million consumers tracked by the three national credit bureaus in the first quarter of 2008 had Vantage scores above 900 -- the super-prime credit rung. That select group represented 17.2% of the country's consumers.But by the end of the second quarter of this year, just 15.4% -- 33.3 million out of 216.9 million individuals' files -- were left among the elite. By credit industry standards, that's huge. More Americans' scores are slipping into the worst credit category as well. In the third quarter of 2006, 34.4 million consumers were in the lowest segment -- 16.6% of 206.9 million individuals. But by the second quarter of this year, 18.3% of all files were in that category -- 39.8 million consumers out of 216.9 million. Most of these changes -- fewer people with excellent credit, more people in the lowest brackets -- have been caused by late payments on home mortgages, serious delinquencies, short sales and foreclosures, according to VantageScore researchers."

The article does offer a glimmer of good news - the same information I have been saying for months. That is "the bottom-line good news about scores is that homeowners facing financial stress can experience minimal dings to their credit if they contact their loan servicer or lender early in the game -- when they first discover that they may have trouble making their monthly payments -- and take the first steps toward a loan modification or refinancing." In other words, doing nothing is the worst thing you can do. The article cautions financially distressed homeowners not to "wait and fall several payments behind before seeking a modification". The article quotes Barrett Burns, a former lender and now chief executive of VantageScore, as saying "Start that conversation early. You can lose 240 points on your score" and damage your ability to obtain credit for years.

Based on the above, if you are a home owner who is experiencing difficult financial times and cannot afford to pay your mortgage, you should try to get a loan modification first. If a loan modification is not approved, or you cannot pay your mortgage even after a loan modification, then a short sale is your next best option.

Due to the declines in people's credit scores as described above, the large number of homeowners in financial distress (due to a loss of income, unemployment, etc.), the large number of homeowners underwater (see my previous blog post, SCARY STUFF: About half of U.S. mortgages seen underwater by 2011), the relative attractiveness of short sales and the large numbers of homeowners who do nothing/walk away (this is a terrible decision) there will be a lot of short sales and foreclosures over the next several years.

If you are a homeowner who cannot pay your mortgage (due to losing your job, having your income reduced, illness, health problems, etc.), or your home is already in foreclosure, or you owe more than your home is worth you should contact a real estate and/or bankruptcy attorney to discuss your legal options. You should also contact your mortgage company to inquire about a loan modification. If you a homeowner in Middle Tennessee and would like help and assistance with a loan modification please contact me for free no obligation assistance. If a loan modification will not work for you, or is not granted by your mortgage company, I can help you with a short sale of your property. I am a Middle Tennessee distressed real estate, short sale, pre-foreclosure (preforeclosure) and foreclosure REALTOR and Expert. I serve real estate owners, homeowners and investment property owners in Rutherford County TN, Williamson County TN, Davidson County TN, Murfreesboro TN, Smyrna TN, La Vergne TN, Eagleville TN, Lascassas TN, Rockvale TN, Christiana TN, Brentwood TN, Franklin TN, Nashville TN and Belle Meade TN. If you do need to short sell your home (a real estate short sale occurs when the sale proceeds are not sufficient to pay off all the mortgages and liens on the property/home), or you need a quick sale due to being in foreclosure, you can request short sale and foreclosure help and assistance on my website at Get Short Sale and Foreclosure Help and Assistance from a Middle Tennessee Short Sale and Foreclosure REALTOR and Real Estate Expert.

Top 10 Things to Do When You are or Will be Behind on Your Mortgage Payments or are already in Foreclosure

The purpose of this blog is to help people who are or will be behind on their mortgage payments, or are already in foreclosure.  I know that being in that situation is very stressful.  I have seen it first hand as I have helped many clients through those difficult times.  I welcome questions and comments from people needing assistance.

 

As a first attempt at providing some assistance, I came up with the following list of the “Top 10 Things to Do When You are or Will be Behind on Your Mortgage Payments or are already in Foreclosure”.

 

1. Take a step back to reflect - Take a deep breath and regain your composure.  Getting behind on your mortgage payments or being in foreclosure is a difficult problem.  You cannot solve any problem if you panic and are not capable of reasoned thought.
2. Relax - What is the worst that can happen?  You will lose your home and possibly have to move in with relatives, or into an apartment at least for some time.  It might be embarrassing and even humbling, but it is not the end of the world.  No one is going to throw you in jail.  Your life is not over.  You can and will rebuild your life after you get through this.
3. Gather information - Put together a monthly budget of all your income and expenses.  Use your net take home pay (i.e. after taxes).  Be sure to include all your living expenses (i.e. food, health insurance, housing payment, vehicle payments, gas and vehicle repairs, meals, grooming, pet expenses, entertainment, child support, alimony, etc.  You need to know exactly where your income is going and how much you are really short each month.
4. Be honest with yourself - Ask yourself some difficult questions and be honest with yourself.  How did you get here?  Did you buy more home than you could reasonably afford?  Do you buy too many things on credit?  Are you a shopaholic?  Can you do without things?
5. Analyze - Put together your monthly budget (income and expenses).  Analyze your budget to see if you can eliminate things from your budget.  After cutting your budget see if there will be enough money left each month to pay your mortgage/housing payment?
6. Make your plans - If you cannot afford your home with your current mortgage even after you have trimmed your budget, you have 2 basic options: (1) contact your mortgage company to see if they will modify your loan terms.  (2) Sell your home.
7. Decide - If you prefer to try and stay in your home then a loan modification is your first option.  Call your mortgage company and tell them that you cannot afford your housing payment and that you need a loan modification.  They will likely send you to their loss mitigation department who will then fax or mail you their loss mitigation package, which you will need to fill out.  Your mortgage company will then review the information to see if a loan modification is desirable for them.
8. React promptly - If the mortgage company does not offer you a loan modification (or offers one that still will not help enough) then you need to sell your home.
9. Decide - You will need to make a decision to agree to the loan modification, or accept the sale of your home.  If you need to sell your home price it lower than any other home to get it sold fast.  Buyers will not pay retail prices for homes in foreclosure, or homes where the mortgage balance is greater than the market value (a short sale) due to the “as is” risk or to the lengthy time involved for a response in the case of a short sale.  In either case, you will need to price your home with this in mind.
10. Act – Regardless of what you decide to do you need to act quickly and decisively.  Letting the bank foreclose on your home will severely harm your credit for several years and in many states the bank can still come after you for their net loss after liquidating your home as an REO (this is called a deficiency judgment).  If you opt for the short sale you should be able to lessen the impact to your credit and eliminate the threat of a deficiency judgment.