Let's Talk Chicago Foreclosures - PART I

TODAY, THERE IS NO PHOTO but a serious discussion on Chicago Foreclosures. 

One goes into the Foreclosure Process because the owner fell behind in their mortgage payments.  The process doesn't happen overnight and most banks will work with you on trying to get a Loan Modification for your home, if you still have income coming in.  That being said, one needs to ask themselves this question:

DO I WANT TO SAVE MY HOUSE?

If you want to save your house, then you need to know that certain documents are required for the bank to look and and review.  It's kind of like a reverse Loan Application to compare with your original application when you bought your home or refinanced it.

That being said, KNOW THIS:  That you will be on the phone and will memorize the music that your bank has on their system. 

KNOW:  That the people who are taking your call are Loan Servicers and they are not the Bank.  The Loan Servicers are the ones that have been collecting the money from you on behalf of the Bank.

KNOW:  That they may not give you all the documents that you need to do a loan modification because they may feel you might freak out with the list and hence, they string you along for a couple of weeks, and even months. 

KNOW:  That even while this may happen, that they are collecting data to give to someone else who will review your file before it is sent to someone else in the system.

KNOW:  That it is best to do all communication via email and if you can get their email then in the Title put the following:  Loan #, Your Name, Property Address re Loan Modification

KNOW:  Ask them only two things that pertain to the file and don't get emotional or wordy or they "deep six" ya!

KNOW:  That it is in your best interest to pursue a loan modification even if you are days from the Sheriff Sale here in Illinois. 

Now, if the Bank says that you do not qualify for a Loan Modification, it could be one of two reasons: 

A.  You didn't give them everything they needed; or

B.  You don't have income coming in

If you do not have income coming in, then the bank can't do a loan modification.  So, your next step would be to do a Short Sale.  A short sale is selling the property for less then the mortgage amount and most likely, your home is worth less then what your mortgage is. 

Reach out to your Bank and let them know, in the interim, you are proceeding with a short sale but want to keep the option open should you get a steady income, even if it is lower then what you were receiving before, the Bank will consider a loan modification based upon your new income.

NEXT STEP:  Don't be embarrassed.  About 10 people within a 3 block radius of your home is in default of their mortgage.  Your not the only one in the boat of financial trouble.

Next:  Find a Good Reliable Realtor who has the experience and can show you the addresses of the properties that they listed and sold as short sales successfully.  You are not looking for a Realtor who has taken the classes and gotten ceritifed but has not track record of short sales done successfully.  That is the critical part, successfully.

NEXT STEP:  Make sure that you pay your house insurance and your real estate taxes because that is a sure fire way for the bank to send you immediately into Foreclosure.  So, protect yourself.

NEXT STEP:  When in doubt, ask questions.

NEXT STEP:  Let your Realtor know that should you get a job during the short sale period, that you still want to do a loan modication with the Bank, as that is in your best interest ... to keep your home.

WHAT IF:  The Bank wants you to pay the interest up front?  Well, there are several different Loan Modification Programs and one of them is called Step Rate Loan Modification.  This Loan Modification Program may or may not be one that your lender participates in and you should find out if they do.  However, if they do, they attach the outstanding interest and escrow payments to your new loan amount and take your 30 year mortgage and make it into somewhere between a 38 to 40 year mortgage.  For every year that you are in the property, this program reduces your interest rate 1% but no lower than an new adjusted interest rate of 2% which is set at a new term somewhere between 2 - 5 years, then it increases 1% each year thereafter until you reach a current rate of 5.125%.  This rate may change, depending upon when you get the Loan modification into place, but, and hear me, in Illinois I am seeing this program at 2% for 3 years and in Michigan at 2% for 5 years.  From what I can assess, it appears that Illinois seems to be bouncing back faster then Michigan and hence, the longer time frame for Michigan. 

What happens if you still can't get a job?  Continue on in the Short Sale with an Experienced and it doesn't have to be a designated Short Sale Certified Agent, but again, one who has done short sale LISTINGS successfully. 

Where do I price my property?  Gosh, I have heard people say "take half of your mortgage amount and that's where we'll price it".  WRONG! 

Under the new program that came into place, the Bank may require and interior BPO right from the start and the Bank may tell you where to begin the pricing.  If there isn't an interior BPO or exterior BPO required by the bank, then I would suggest that you do an analysis of the area, based upon your condition, size, bedrooms and don't just look at the listings that the Realtor gives you for comparables but make sure that you or your agent talks to the listing agent on each of those comparable properties so you how to compare yourself to their selling price and their PLA and that is where you will arrive at an initial asking price. 

What is PLA?  PLA is "Price Living Area" and that is based upon the true square footage of the home and divided into the final selling price of the subject coimparable property.  If the seller paid for points on the subject comparables or closing cost credits, then that figure has to be deducted from the final selling price before you divide the square footage because you only want to reflect the selling price with no incentives included in the final selling price when looking for a true PLA.

NEXT:  Take your square footage and multiply it by the PLA from the comparables that you have selected that are the most similar to your property that have closed.  That will give you a good idea of the true market value of your home. 

Get your home on the market.  Let the Bank Know You Are on the Market.