How do you find solid, practical information that will help you when dealing with stressful property issues? You start by reading this!
A Review of Your Options:
Should you be behind in your mortgage payments, you are certainly not alone. Essentially, none of us are ever fully protected from the possibility of financial duress. Indeed, medical bills, under employment or loss of a job(s), divorce and death are among the many causes of mortgage default. In fact, according to CoreLogic, approximately 10% of all home sales in 2015 were due to a so-called “distressed” property sale.
It is often not the property that is distressed, but rather the mortgage. Accordingly, should you be confronted with the prospect of losing your property due to your present ability to keep current with your mortgage payments, we respectfully suggest that you be aware of the options that you have and subsequently decide the best course of action.
Distressed Property Scams:
Look out for anyone claiming or wanting the following:
Anyone who instructs you to make mortgage payments directly to them.
Anyone who asks for a fee up front. Government agencies do not charge for counsel or advice.
Anyone who claims but cannot prove they are associated with a government program.
Anyone who tells you to stop making mortgage payments if you are able to.
Anyone who asks you to sign over a deed to them, without having an attorney first review it.
Your first step is to become as informed as possible and then reach out to the appropriate parties, including your lender, government agencies, attorney, and real estate professional, rather than succumbing to the influence of anyone without first developing a fundamental understanding of the pre-foreclosure and foreclosure process, including what is involved in preventing a foreclosure when possible.
The government’s Home Affordable Modification Program (HAMP).
This is a process where the terms of a mortgage are modified by agreement between the lender and borrower. Since the government (after 2007) now contributes money to the lender who participates in this process, lenders now often agree to:
A fixed and lower interest rate
A lower loan payment
Reduction in the loan principal
Deed in Lieu of Foreclosure:
This is a deed instrument in which the borrower conveys all rights and interests in their property to the lender in order to satisfy a loan that is in default and to avoid a foreclosure. Lenders are willing to do this when they believe that the cost of re-possessing the property is greater and more inconvenient than simply taking over the property in a far less public and eventful way. There is much more to this, such as circumstances surrounding loan to value ratio, present market, and salability of the property, along with other considerations that are all factored in.
A short sale is a sale of a property in which the funds from the sale are less (fall short) than the balance owed on a loan secured by the sale of the property.
Lenders usually ask for a hardship letter to be included as part of the short sale packet that is presented to the lender.
Ask an accountant what the tax implications are regarding a short sale.
There are three stages of a foreclosure. First is the pre-auction period. This is where the lender has declared you in default and this becomes publicly posted and listed. During this period, many unscrupulous parties will reach out to homeowners offering to negotiate with your bank, or claiming they can stop the foreclosure by helping you file for bankruptcy. These individuals, some of whom are scam artists will attempt to get financial information over the phone, charge you a fee, and even ask you to sign your title over to them.
The second phase of a foreclosure is the public auction. Even when a property sells, there is often a period of time where the homeowner can get their property back by making payments in full for mortgage and all debts.
The third phase is where lenders, if they are not satisfied with the outcome of the auction sale, take on the marketing and sale of the property they now own themselves.
The more that you understand the impact of a foreclosure or bankruptcy on the lender, the more confident and aggressive you should be about your many options (including all those we did not even cover).
For any Real Estate Advice that pertains to financial, legal, or tax related information please contact the professionals in those fields. I hope this list has given you a broader understanding of distressed property options and is a good starting point for you to seek the best option for your situation.
Brianne Sides, REALTOR®
Realty Executives, Fort Leonard Wood LLC
920 Missouri Ave, St. Robert, MO 65584
(573) 336-2206/ (215) 527-8520