The foreclosure process is a very long process. Today, with so many homes in foreclosure, the court system is being taxed to the limit and cases are languishing even longer than normal. The foreclosure process takes many months and in some places will last over a year.
If you are in foreclosure, then by definition you are having monetary problems (otherwise you would've paid your mortgage). Instead of renting a house right away and spending money in moving, use this opportunity to save some money for your eventual move. Moving out right away is not going to earn you any points with the lender. In fact, it may be to its advantage to have you remain in the house if you are at least maintaining it in good condition.
You should remain in your home as long as you can. Please note, that the length of the foreclosure process varies by state, so in some states your stay will be longer than others and consulting with a lawyer will always be worth your while. Your county courthouse and lender will let you know when it's time to get out. Hopefully, by that time you will have saved enough money to move out.
Tuesday, May 27, 2008
Thursday, May 15, 2008
What's Congress doing to help you avoid foreclosure?
Lately, both the Senate and the House have been working on bills that go much further than the Hope Now project and project Lifeline mentioned in a prior post. They each have separate versions which will have to be reconciled before the President can sign it into law. It's constructive to discuss each plan individually to give you an idea of what to expect in the near future.
Maxine Waters (D-California) has proposed a bill to give $15 billion to the states to be used to purchase foreclosed properties. The idea is that the states will buy and rehabilitate these properties so that they do not become eyesores which blight the whole neighborhoods.
Barney Frank (D-Massachusetts) has proposed a plan which in addition to Waters' plan provides the following: an FHA guarantee for $300 billion in refinance funds. These funds will provide loan guarantees allowing lenders to refinance loans to homeowners facing foreclosure because of high interest payments. It relaxes standards for FHA loans in order to provide fixed rate loans to financially strapped homeowners who can prove that they will be able to pay the new loan. The current lender will have to agree to take a substantial loss on the loan.
In addition to the FHA guarantees, Barney Frank's bill will provide up to a $7500 tax credit to anyone purchasing a foreclosed property.
On the Senate side, the Senate Majority leader, Harry Reid has proposed the Senate version of the bill which among other things provides: a $25 billion tax break for money losing businesses such as homebuilders, a $7000 tax credit for individuals buying foreclosed properties, $4 billion in grants to communities to buy and fix foreclosed properties, $150 billion for pre-foreclosure counseling to individuals in jeopardy of losing their homes and finally $10 billion in tax free revenue bonds to help refinance loans for homeowners in jeopardy of losing their homes.
The Senate version of the bill seems to favor lenders and builders more than the homeowners who really need to be bailed out, so I'm guessing the bill will have to be much closer to the House version in order to avoid a veto by the President. I'll keep tabs on this and let you know what happens.
Maxine Waters (D-California) has proposed a bill to give $15 billion to the states to be used to purchase foreclosed properties. The idea is that the states will buy and rehabilitate these properties so that they do not become eyesores which blight the whole neighborhoods.
Barney Frank (D-Massachusetts) has proposed a plan which in addition to Waters' plan provides the following: an FHA guarantee for $300 billion in refinance funds. These funds will provide loan guarantees allowing lenders to refinance loans to homeowners facing foreclosure because of high interest payments. It relaxes standards for FHA loans in order to provide fixed rate loans to financially strapped homeowners who can prove that they will be able to pay the new loan. The current lender will have to agree to take a substantial loss on the loan.
In addition to the FHA guarantees, Barney Frank's bill will provide up to a $7500 tax credit to anyone purchasing a foreclosed property.
On the Senate side, the Senate Majority leader, Harry Reid has proposed the Senate version of the bill which among other things provides: a $25 billion tax break for money losing businesses such as homebuilders, a $7000 tax credit for individuals buying foreclosed properties, $4 billion in grants to communities to buy and fix foreclosed properties, $150 billion for pre-foreclosure counseling to individuals in jeopardy of losing their homes and finally $10 billion in tax free revenue bonds to help refinance loans for homeowners in jeopardy of losing their homes.
The Senate version of the bill seems to favor lenders and builders more than the homeowners who really need to be bailed out, so I'm guessing the bill will have to be much closer to the House version in order to avoid a veto by the President. I'll keep tabs on this and let you know what happens.
Tuesday, May 6, 2008
Avoiding foreclosure with a short sale.
These days we're hearing the term: "short sale" used a lot in the real estate field. Real estate agents have been mentioning that term often to their anxious sellers and to their bargain hunting buyers. But what is a short sale and how can it be helpful for someone who is in a bind?
Short sale is used to refer to the act of selling your home for less than the amount that is owed on the mortgage. In order for this to work, the lender must agree to take less than what you owe on the mortgage as full payment for the home.
Now, why would a lender allow this? Keep in mind that if the lender were to foreclose on your home, it would have all kinds of expenses that would need to be paid. It would have attorney's fees in order to do the foreclosure. It would then become owner of the home and incur all the costs of homeownership such as: maintenance, insurance and taxes, protection and possible vandalism. Then, in order to sell it, it would incur the costs of sales, such as commissions and required repairs. It may take up to a year to foreclose on the home and another year to sell it. On top of that it might only sell at a reduced price. All told, the lender may incur costs of up to 50,000 and then have to dramatically cut the sales price in order to sell in a down market.
For this reason, it would be to the lender's advantage, when all else has failed, to allow you to sell the home in a short sale. Carrying out a short sale is just like any other sale except that it has the added twist, that any purchase offer will have to be approved by the lender. Depending on the lender, selling your home in this manner will be much slower than a straight sale, because the lender will usually be slow to answer but it can be done and will be a win-win for you and the lender. Most real estate agents have become somewhat familiar with this sales method, but you may do well to pick one who is experienced in short sales just to avoid any more headaches.
Short sale is used to refer to the act of selling your home for less than the amount that is owed on the mortgage. In order for this to work, the lender must agree to take less than what you owe on the mortgage as full payment for the home.
Now, why would a lender allow this? Keep in mind that if the lender were to foreclose on your home, it would have all kinds of expenses that would need to be paid. It would have attorney's fees in order to do the foreclosure. It would then become owner of the home and incur all the costs of homeownership such as: maintenance, insurance and taxes, protection and possible vandalism. Then, in order to sell it, it would incur the costs of sales, such as commissions and required repairs. It may take up to a year to foreclose on the home and another year to sell it. On top of that it might only sell at a reduced price. All told, the lender may incur costs of up to 50,000 and then have to dramatically cut the sales price in order to sell in a down market.
For this reason, it would be to the lender's advantage, when all else has failed, to allow you to sell the home in a short sale. Carrying out a short sale is just like any other sale except that it has the added twist, that any purchase offer will have to be approved by the lender. Depending on the lender, selling your home in this manner will be much slower than a straight sale, because the lender will usually be slow to answer but it can be done and will be a win-win for you and the lender. Most real estate agents have become somewhat familiar with this sales method, but you may do well to pick one who is experienced in short sales just to avoid any more headaches.
Sunday, May 4, 2008
The most important thing you can do to save your home from foreclosure.
When people ask me if there's one bit of advice that I can give them that will help them save their home from foreclosure. I always answer the same way: "Talk to your lender." That's it that's the most important thing you can do.
I don't mean just talk to the customer service representative who calls to harass you on a daily basis and who demands that you make your payment. I mean call the loan loss mitigation department. Loan loss mitigation is a term that the lenders use to refer to the department in charge and with authority to negotiate with you and help you stay in your home.
It is to the lender's advantage to keep you in your home. The last thing the lender wants is to become a homeowner or a landlord. It knows that the expenses of the foreclosure process are only the beginning. If it takes the house back, it will have to deal with maintaining the home, insuring it, protecting it from vandals, possibly renting it out, possibly holding it for a long time, preparing it for sale and if it's lucky enough to sell it in this market, paying all the inherent closing costs. Taking all these costs and headaches into account, the lender prefers to negotiate with you.
For that reason, it is to your advantage to call the lender's loan loss mitigation department as soon as you realize that you may be in trouble. Customer service should be able to give you that number. If you have already fallen behind, the mail that you get from the lender will usually list the number for their loan loss mitigation department.
Don't pass up this opportunity to prevent foreclosure.
I don't mean just talk to the customer service representative who calls to harass you on a daily basis and who demands that you make your payment. I mean call the loan loss mitigation department. Loan loss mitigation is a term that the lenders use to refer to the department in charge and with authority to negotiate with you and help you stay in your home.
It is to the lender's advantage to keep you in your home. The last thing the lender wants is to become a homeowner or a landlord. It knows that the expenses of the foreclosure process are only the beginning. If it takes the house back, it will have to deal with maintaining the home, insuring it, protecting it from vandals, possibly renting it out, possibly holding it for a long time, preparing it for sale and if it's lucky enough to sell it in this market, paying all the inherent closing costs. Taking all these costs and headaches into account, the lender prefers to negotiate with you.
For that reason, it is to your advantage to call the lender's loan loss mitigation department as soon as you realize that you may be in trouble. Customer service should be able to give you that number. If you have already fallen behind, the mail that you get from the lender will usually list the number for their loan loss mitigation department.
Don't pass up this opportunity to prevent foreclosure.
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