After the recent developments with Countrywide Home Loans I though readers might be interested in an update to my first three posts on "Hanging On To Your Home".

Although in my particular market we have a very small number of foreclosures and short sales (less than 4% of the current listing inventory, assuming that the data inputted is accurate. which may or may not be the case), the ripple effect is significant. 

Disclaimer - the information here may or may not relate specifically to YOUR situation.  Seek competent legal and professional real estate advice if you have concerns regarding your home. 

If you are having trouble making your mortgage payments, your lender will want to know why.  In some cases the "why" is very important.  Leading reasons are illness, loss of employment, or change in family status (marriage, divorce, death of a spouse).   If you become late on a payment, then the process starts.

You can review Part I of my posts for the details on the foreclosure process, so here are some updates.

First, most lenders do not focus on short sales and foreclosures.  They make money by providing loans to consumers and re-selling the packaged loans to investors and wholesale lenders.  As the market has shifted a typical wholesaler, like Deutche Bank or Bank Of New York do not have a large staff of people to handle lots of calls from people who are having problems with their mortgages.  As more mortgage holders call in with problems, the people working in the "Loss Mitigation" department or the "Home Retention Division" have more and more customers to handle.

I was attending a memorial service for a friend's mother and at the lunch met a lady who worked in the home retention division for Countrywide.  She said that the average caseload for each manager was 200 files.  Why is this important to know?  As the market continues to shift, there are people that get behind in their mortgage payment, and what they need to do is either a)sell their home in a short sale, b)  refinance (although once you have a late payment that is probably not an option), c) let the lender foreclose.

In some areas when one home is foreclosed, or sold in a short sale, that becomes the new comparable SOLD listing, so that price drags down the value of YOUR home and your neighbors.  Because the managers are so overwhelmed it takes weeks to get a response, so it is possible that if you had received an answer EARLIER you might have been able to re-fi, but because the getting a response takes so long, by the time you receive it, your home has dropped in value due to the other recent sales.

 So if the mortgage holder will not talk with you until you are late with a payment, it may very well be that due to the slow response time you initially COULD have worked out a short sale, now you are officially in foreclosure.  Remember that the mortgage holder does not want to foreclose.  Their preference is:  a) Help you so you can stay in that loan and that home b) help you sell the home as a short sale, c) and lastly foreclose.

So, what do you do if you see the writing on the wall and you know that you are going to reach a point where you are going to be in trouble financially?

After you have a late or missed payment, call the mortgage holder and see if you can discuss re-structuring your loan.  If they are not receptive then ask for the short sale package.  I recommend discussing your concerns with a Realtor as soon as possible so you can figure out the likely market value of your home.  Then you can compute how "short" the sale might be.  Then the Realtor can work with the lender. The Realtor is not attached to the home the way you might be, so let them do the negotiating

One additional issue is that some lenders will not talk about specifics until they have an offer on the table.  Which means when an offer is made, then submitted to the lender, EVERYTHING is negotiable.  The lender wants EVERYONE to suffer equally (that means the owner, the Realtors, title, etc.).