Foreclosures, what's the best way to prevent or handle them?

Foreclosures, what's the best way to prevent or handle them? 

It certainly all depends on who's giving the advice -- the majority of the time your attorney will advise that you file for Bankruptcy to protect your home, if at all possible, AND/OR will recommend allowing your property to go into Foreclosure.

For starters, a Foreclosure is going to stay on your credit for 7 to 10 years.  Do you have a Security Clearance?  Is your job dependent on that Clearance?  If so, you may have just lost your job.  Have you seen how a Foreclosed Property impacts an entire community?  It drives all the neighbor's properties down.  The stigma and broken hearts which result from going through all the indignities of a Foreclosure are deep and long-lasting. 

The Mortgage Forgiveness Debt Relief Act and Debt Cancellation should now become your most trusted resource. 

Let's talk about what you can do to avoid going down this road -- how about doing a Loan Modification.  Try to understand that the negative impact on your credit is based upon the number of months you're delinquent in making your payments.  That's the bottom line.  You can certainly talk with your Lender(s) in an attempt to get a Loan Modification wherein you may be able to negotiate for a reduction in the payment for a specific time period; perhaps make partial payments, with the difference due and payable at a date specific, or have it added to the end of the loan.  Okay, maybe that would work -- if you have a Lender Representative who fully understands and embraces the process and is authorized to make decisions and work quickly.

For my "money", I'd explore doing a Short Sale.  A Short Sale is exactly what it's name says.  You agree to sell your house for less money than is owed.  In turn, the Lender(s) can seek and file a Deficiency Judgment against you for the difference.  In many cases the Subordinate Lien Holder (Second Trust Holder) is left out in the cold, screams "foul play", refuses to negotiate and/or to release their Trust, thereby deep-sixing the entire "Transaction of Hope".

Okay, First things first:  You'll need to contact your Lender(s) and have the conversation, request a list of their required documents and write your "Hardship Letter".  This Hardship Letter details the reasons you are unable to meet the monthly payments in a timely fashion.  You work very diligently with your Lender(s) to get your Short Sale terms pre-approved BEFORE listing your property, if at all possible.  There are Short Sale Specialists who can assist you with this process in the event you are unable to navigate these rough waters.  After all, this is very stressful and extremely time consuming.  It's okay to bring in a third party who has a vested interest in helping you get the job done -- find a real estate agent who specializes in Short Sales.

Many lending institutions have Loan Negotiators in place to work with the consumers in getting this accomplished.  Unfortunately, so many of these Negotiators are simply paper pushers and are not empowered or authorized to make even the slightest decision.  When this happens, precious time and money are lost by all.  Our industry would be well-served by having highly-trained and empowered Negotiators.  Communication is the key here, and having a highly trained, empowered Negotiator assigned to a specific property, full-time, would streamline the process.  Having a direct line to that person and being able to speak with the person assigned and who has full possession, responsibility and accountability could streamline and shorten the process significantly.  One person assigned to "The File" from beginning to end; someone who answers the phone and responds.  A direct Fax Line to the ONE PERSON assigned to that case.                                                                                                           
There's no need to state the obvious:  more money in everyone's pockets: Lenders, Consumers, all those ancillary Service Providers,  and bad loans off the books . . .

If a Borrower is HAMP (Home Affordable Modification Program) eligible, but just can't qualify to keep their home, the HAFA Program provides an excellent alternative.  By taking advantage of this program, the Borrowers are FULLY RELEASED from liability on their First Deed of Trust.  Under HAFA (Home Affordable Foreclosure Alternatives) the subordinate trust holders (2nd, 3rd) are paid an incentive (generally about 3%) in return for Forgiving the Debt in FULL and not seeking a Default Judgment.  Again, the Lending Instutions need to have full-time, empowered representatives who can be reached quickly and easily.

Remember where I said your credit would be impacted by the number of months you were delinquent in making those mortgage payments?  Well, you take that "Hardship Letter" you had to write to your Lender(s) and you make certain a copy of that is filed with the credit reporting agencies.  While it won't erase the rough patch you experienced, it will certainly explain what happened.  Oh, and those monthly payments you didn't make while you were trying to negotiate a Loan Modification or Short Sale -- they'll help you get moved and into a good interim property.  Now, you're in control and showing that you are a responsible citizen -- you just hit a rough spot.  It will all start to heal and life will return to normal.  You'll be back on your feet soon . . .

So, before you use the "F" word, take a deep breath; consider your alternatives and call upon a Professional Real Estate Agent to help guide you through this temporary setback.

        

                        

 

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   Copyright © 2010 - 2011 All Rights Reserved

Tish Lloyd, REALTOR®

Broker

NC Real Estate Lic. 269076

Prudential Laney Real Estate

527 Causeway Drive

Wrightsville Beach, NC  28480

910.547.1446

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