23 IMPORTANT TIPS FOR FORECLOSURES VICTIMS
Presented by The Law Offices of Richard D. Seward, PC.
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1) What is foreclosure? If you are a homeowner currently in default on a loan secured by your home, your lender might choose to foreclose against your home, which is a remedy available to them. It means that they start the process of providing notice to the public that your home will be sold at auction to the highest bidder. The proceeds from this sale would go to pay off the indebtedness secured by your home. The difficult truth is that if you do not pay your home loan, or any other loans secured by your home, then you could lose your home and bankruptcy will only delay the inevitable.
2) Who usually is the highest bidder? It is usually the Lender unless there is significant equity in the Property. They just bid their loan amount, plus default interest and other costs of the sale.
3) What happens then? The Lender then has the trustee deed the property to them. With all of the foreclosure documentation in place, the Lender has a local title company insure the title in the Lender. The Lender then can sell the Property to pay-off the loan and pursue other legal remedies against you for any amounts still owed after applying the sale proceeds.
4) Does foreclosure damage my credit? Yes.
5) What can I do as a foreclosure victim? There are several options available to you – See Tips 6 through 12.
6) Stay for Free. One benefit is that you can live in the home without making loan payments for up to 9 months or even 18 months. Foreclosure usually does not start until you have missed 3 monthly payments and it takes 6 months to complete the foreclosure process in Washington. That time can double if you file for personal bankruptcy. The bankruptcy damages your credit for up to 10 years, but you can keep non-defaulted credit cards and other leveraged assets if you chose to keep the loan current on these assets.
7) Negotiate a Short Sale. You can go to your Lender and negotiate a “short sale.” If the fair market value of your home is less than the loan amount, you can ask your Lender to take less. They will take the property immediately and the loan is deemed to be “satisfied.” This does, however harm your credit rating.
8) Apply for an FHA loan. This can give you from 3 to 12 months of a break on your payments, with the payments tacked onto the end of the FHA loan.
9) Ask for a Break. You can go to your Lender and ask for reduced monthly payments. Ask for either a downward adjustment in the note rate or an increase in the amortization term. If you have been a good paying customer for some time, they may be willing to do this to keep you as a good paying customer.
10) Offer a Deed in Lieu of Foreclosure. This is a quick swap with your Lender. Your Lender forgives your Loan in exchange for title to your home. This also harms your credit rating.
11) Rent out your home. Use the rent to make the loan payments. You then can move to a smaller, more economical place.
12) Consider Contacting Homeownership Preservation Foundation - a group partnered with NeighborWorks America, a national nonprofit created by Congress by calling (888) 995-HOPE (or visiting HPF's Web site). For the quickest service, call rather than e-mail or visit an office. A counselor will review your financial situation, make recommendations for a course of action that best fits your needs and help communicate with your mortgage lender to work out a plan. When you call, ask about a forbearance to temporarily modify or eliminate payments to be made up at the end of the forbearance period.
OTHER SUGGESTIONS AND ADVICE:
13) KNOW AND MANAGE THE TIMELINE - 30 days: Your troubles actually start as soon as you miss a single payment. Lenders may not contact you until you've skipped a second payment, but most will report the first late payment and every subsequent delinquency to the credit bureaus. Even a single late payment can devastate your credit score, the three-digit number that lenders use to help gauge your creditworthiness. Each subsequent "late" further decreases your score, making it more difficult and expensive to get a loan or a refinance that might help your situation. In addition, lenders typically tack on late fees of 5% or so for each missed payment.
90 days to one year: Eventually, if the payments aren't made, the lender will file a "notice of default" with a local recording office for real estate notices and serve you with a letter saying that the foreclosure process will start unless you make good on the missing payments. This notice also means that the amount you owe has shot up as well, since the lender typically adds substantial fees to cover its legal costs. The notice of default is a big threshold and your options are fewer. The notice of default is generally picked up by the credit bureaus, further depressing your credit score and making refinancing the loan extremely difficult. BE WARY OF SCAMS - In addition, the notice will be seen by scam artists that you're in trouble and you can expect to be shown various "equity skimming" schemes. One common ploy to expect is where the scam artist promises to take over your payments, but instead rents out your house and keeps the rent payments as pure profit. The home goes into foreclosure, your credit is trashed and you've lost any equity you had in the home.
90 days more: Borrowers typically have 90 days from the notice of default to make up the deficit before the lender sends out a "notice of sale," which sets a sale date for the house (typically within the next 15 to 30 days). Some lenders will allow you to keep your original loan if you can make up the missing payments plus any late fees and legal charges. Others will insist you refinance with another lender. You can also halt the foreclosure, at least temporarily, by filing a lawsuit or filing for bankruptcy. For either legal option to work, you'll have to be able to come up with a payment plan to fix the deficit.
14) Know Who To Contact To Get Help - If you can work out a solution with the lender quickly enough, you can contain or even avoid serious damage to your credit. That's among the reasons housing experts typically urge you to call your lender as soon as you know you'll have trouble making a payment. But,
15) Understand that Lenders can make it tough to get to the right people. The folks you want to talk to are in the "loss mitigation" department. But many lenders don't routinely route borrowers to that department until they've missed several payments. Until then, you might be dealing with the lender's collections department, which typically offers one option: Pay up now. If you're serious about keeping your home, you may have to really push to get to right people.
16) For certain options to work you have to be able to make the payments. If you agree to a lender's "workout" or "loan modification" solution and then fail to make the agreed-upon payments, you'll have a lot fewer options the second time around and the lender will simply accelerate the foreclosure process. This can be a big problem if the financial crisis that caused you to fall behind isn't over. If you don't know where you're going to get the money to make the payments, trying to work out a solution with your lender will be tough. That's no reason to hide from your lender or ignore its letters. Even if you can't work out an agreement, keeping in contact is usually the right choice: At least you know where you stand.
17) Filing a lawsuit or bankruptcy carries similar risk: If you don't have the money to make the payments, the foreclosure can proceed, and you may have further damaged your credit score.
18) Make a budget. Sketch out a spending plan for the next several months, including expected income and expenses. See what costs you can trim to free up as much money as possible for home payments. You may need to pay the minimums, or even less, on other debts. In certain very limited circumstances -- such as when you are absolutely sure your financial hardship will be short-lived -- it may make sense to skip payments on some bills so you can pay your mortgage.
19) Consider counseling. Legitimate credit counseling services, those associated with the National Foundation for Credit Counseling or the Association of Independent Consumer Credit Counseling Agencies, typically have housing counselors that can help you evaluate your options. Or you can find a housing counseling agency approved by the Housing and Urban Development Department by calling (800) 569-4287. If you have a Veterans Administration loan, you can call (800) 827-1000 to get a referral to a financial counselor.
Continue to Check your refinance options. If you have equity in your home, your credit rating is relatively intact and your lender hasn't yet filed a notice of default, you may be able to get another loan with more affordable payments. An experienced mortgage broker, preferably one affiliated with the National Association of Mortgage Brokers, can let you know your options. Be cautious about jumping into another risky loan, though: adjustable, interest-only or "option" mortgages might just put off the day of reckoning and you could find yourself facing even higher payments down the road.
20) Be realistic. Many times people struggle to hang on to a house that they simply can't afford when they'd be far better off without it. That may seem difficult and harsh, but it's far better to sell a home while you still have equity and some semblance of a credit score than to have it taken away in foreclosure.
21) Get organized. If you are going to try for a loan modification, you'll need to prepare a small mound of documentation. The lender will specify what it wants, but typically you'll need to supply the details of your financial situation, a budget, documentation of your hardship (a letter from your doctor explaining an income-reducing illness, for example, or your layoff notice from your employer) and a "hardship letter" that outlines, in heart-rending detail, the circumstances that led you to fall behind and the improved prospects that will allow you to get your financial life back on track. You may also want a market analysis of your house to document how much equity you have in your home. A real estate agent can typically prepare this for free in exchange for the chance of winning your business should you decide to sell.
22) Review and Manage Your Credit Rating - Credit ratings are much more important in today’s world as they affect other aspects of your life such as car insurance and other expenses. You may also be facing a hike in your credit card interest rates under universal default rules. Review the default provisions of the credit cards on which you carry a balance and consider closing those accounts that have universal default provisions before they raise your rates. Work on a program to repair your credit immediately.
23) If you have additional questions, visit the “contact” page at http://www.richardseward.com/.
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Law Offices of Richard D. Seward, PC
Monday, September 15, 2008
23 IMPORTANT TIPS FOR FORECLOSURES VICTIMS