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What Should a Homeowner Do When They are Behind?

What Should a Homeowner Do When They are Behind?
by John Occhi, Hemet CA REALTOR
Hemet CA Real Estate

In Hemet CA there are many real estate properties on the market that have been foreclosed on by the lender and are now considered REO, or "Real Estate Owned". Unfortunately there are many more on the verge of falling into this category.

So, what can be done?

Today as homeowners find themselves ‘buried' in a loan that they cannot pay the best advice I have is to talk directly with the lender. Be polite, it is not their fault and as my grandmother used to say, you can catch more fly's with honey than vinegar.

Assuming you can now make the current payments and you want to keep your home, as a Hemet California homeowner you should discuss the loan with your lender and not bury your head in the sand.

Ask the lender if they can do an "extension", of the bad debt. This is taking the delinquent payments, their fees and interest and penalties that are due the lender, and asking the lender to add them to the end of the loan. Yes, this will add to your principal and extend the loan by several months, depending on the size of the arrears, but it will return your loan status back into a performing loan and in good status with the lender.

Then there is the "forbearance' alternative. In a forbearance agreement you have to make your regular payments on time. In addition, all of the funds you woe in arrears are bundled together and then divided by 12 - allowing for a years worth of payment on top of the regular monthly payment. Be careful with this type of solution - if you got in trouble with the regular payment, be certain that you can now commit to the extra burden.

The third alternative is to sell your home. Discuss this strategy with your lender. Often times they will allow you the necessary time to market and sell your home. Remember, the lender only makes money when they are being paid and they either want the monthly payment which includes interest or they want their principal back. When a lender is not getting paid they are losing money and they never want to do that.

So please, don't act like an ostrich and bury your head in the sand. The problem is not going away and it is only getting worse. Communication is the key to maintaining whatever dignity you have left in resolving this type of unfortunate situation.

Now Have a Blessed Day,

John Occhi, Hemet CA REALTOR
http://www.johnocchi.com/

Posted by John Occhi Hemet CA Real Estate on 02/24/2007 11:02 PM

Comments (13)

foreclosure, forbearance, extension, hemet, california, real estate

Originally posted at: John Occhi's Blog: What Should a Homeowner Do When They are Behind?

This post has been included in California Information Riverside County, CA Information Hemet, CA Information

13 Comments on What Should a Homeowner Do When They are Behind?

FEB

2007

Great advice John. Communication is key when dealing with creditors whom you are having trouble paying. Well put, good blog!

Thank you Jaso - I just hate to see it happen on so many different levels.

Now Have a Blessed Day,

John Occhi, Hemet CA REALTOR
www.JohnOcchi.Com

MAR

2007

I wish more people would realize that they have options other than foreclosure. I have 2 listings now where the owners could have sold easily, but didn't. one family didn't bother trying. their ARM adjusted, they couldn't make the payments, they rented a place, told the bank they could keep the house, and left. With what was owed on it, it would have sold fast. The other couple put theirs on the market- about $40,000 more than they owed on it, and $20000 more than it's worth. If they had lowered the price to get out from under it, rather than trying to make enough to start building a new home, things would be different for them. Poor choices from both owners has now led to poor credit.

MAR

2007

Same here Amber. Many could have sold the house for much more than they owed on the mortgage but didn't even consider that. It is unfortunate as they are embarrassed and think they have no choices.

so, is there a way we can help inform the public of their options? A way to let financially troubled homeowners know that letting the bank foreclose isn't their only choice? I make my living selling foreclosures, I know, but I would far rather help people keep their homes and save the banks the expense of foreclosure/eviction/trsh-out/rehab...

Any ideas?

Amber,

I believe the way we educate is through channels like ActiveRain and our websites - keep putting education out there and if the right person is looking for a solution, they will find it and us.

If they bury their head in the sand, then there is nothing we can do. For the most part, people made the decision to get into trouble and they need to decide for themselves to get out.

Now Have a Blessed Day,

John Occhi, Hemet CA REALTOR
www.JohnOcchi.com

JUL

2007

John:

I looked high and low for a simple definition of short sale. Your explanation was very clear and to the point. I can tell from reading your blog that you are very knowledgeable and care about your customers.My neighbor(townhouse community) told me he sold his home back to the bank in a short sale. He tried to make it sound like it was no big deal. He claims he bought another townhouse a couple of blocks away where the association was so much better. He wanted to bad mouth our property because he was moving. One question. How can you buy another property when you are in arrears on the current property? I am confused. Thanks for your help.

You have a blessed day also,

Patricia

Patricia - Thank you for your very kind words - you made my day - and it was already a good day!

As far as your disgruntled neighbor - all he is doing is blowing smoke so he can maintain some dignity. Chances are he has friends in your complex and will be back visiting - so he has to remain on top.

Banks don't buy properties back in a short sale. If there was a short sale, the new owner bought the property at a discount from the homeowner, with the banks permission. Otherwise the homeowner would be owing the bank money at the closing. If the bank took it back, the home would have been auctioned at the courthouse and when no one bought it, the bank would have taken possession back - a major ding on your neighbors credit. As it is, he seller will probably receive a 1099 for the debt that was written off, or as the IRS calls it - Forgiven Debt - and it will be reported as taxable income.

I'll bet he owes your HOA some money too - because the only time a bank does a foreclosure is when the borrower is behind on their payments. So, if he quit paying the bank - he probably quit paying you too. You may want to figure out exactly where he did move to so you can be their hero and let the HOA know how to go after him for the loss.

As far as your neighbor "buying another place" it happens all the time. They start the process before the foreclosure goes too far - it is best before the NOD is filed so it does not show up in the public records or credit. Chances are that he has committed some sort of mortgage fraud - probably by lying. It is also possible that the purchase is in someone else's name - anything is possible when people are desperate.

Hope this helps. Your comments are always welcome on any of my blog articles.

Now Have a Blessed Day,

John Occhi, Hemet CA REALTOR
Mission Grove Realty

AUG

2007

John,

I have worked with homeowners that have been in the Foreclosure process and sold their house. However it is always difficult to get the bank to cooperate, mainly because they send you from one department to another and they do not understand how selling RE works. What in your experience is the best way to slow down the process? I know that if they are applying for any type of agreement with the bank that helps, but some banks will not work with the owners if they decide to sell the home.

Carmen Rivero - Thanks you for stopping by and asking your questions.

I don't want to come across as rude Carmen, but if this is what you have been able to accomplish I would strongly suggest you sign up for some serious training / coaching on the topic or just leave it alone altogether.

Your problem will be when the homeowner loses their house and in a year decides that it was your fault and sue you. This is very serious business and should not be taken lightly. Honestly, if you don't know what you are doing - either don't get involved in loss mitigation - of which Short Sales is only a small portion. There will be times when you get involved and you earn nothing as a REALTOR® but gain the satisfaction of helping a family stay in their home or exit gracefully with pride and ego in tact.

Trust me, the lenders know all about how selling RE works - they will do everything they can to wear you down so they are in a stronger negotiating position.

I have NEVER heard of a bank NOT working with a homeowner if the home is listed for sale. This lets the bank know the owner is serious and motivated to do the right thing - even if it means selling the home they cannot afford.

As far as the "best way" ...well lets just say I have written several blog articles on that very topic and there are litterally volumes of information thea cover that - I cannot geti into it all in a blog comment.

Sorry if I appear a little short, it's just this is not a topic to be taken so casually, as I perceive your question to be.

Now have a Blessed Day,

John Occhi, Hemet CA REALTOR
Mission Grove Realty

John,

Thanks for responding and Idid not mean to imply that I did not know what I was doing. I have not done any short sales yet but I have actually sold homes in pre-foreclosure that never got to be short sales thanks to my efforts. John, I recognize that it was a casual question but you did not have to assume that I did not take my work seriously. For your information (I am sure you know but I am not going to assume) Florida is one of the states where the number of Foreclosures are growing every day. Because RE is my career, short sales and foreclosures are topics that I would need to be very involved and knowledgeable in. In regards to banks working with owners when they are selling their home I am talking because of personal experience, I did not mean all banks but it has been my experience. If you look at what I wrote I said "some banks". BTW if you wrote tons of information on it maybe you should have included a link to that in your response, if you wanted to be helpful at all. Thanks again and I hope you don't think I am being rude to you either as that is not my intention, but to clarify where my question came from.

Carmen Rivero - I do not think you are being rude at all. and I wish you nothing but the best. I sounded chaste because you know how easy it is for an inexperienced agent to mess up a perfectly simple transaction. Short sales are very complicated and I have had 2 in the past month fall apart because of the other agent - so I do speak from experience.

As far as my other articles - yes - I have them - just click on the TAGS to the right and pick out short sales - there are about 30 articles there - all with relevant info. sorry, but I don't have time to research every article I have ever written here (almost 250 between 2 blogs) to conveniently provide you with a link. I have answered your question and it can be found with a little research through my blog and some of the great groups we have here on the topic.

Again, not meaning to sound short, but I have to run.

Now have a Blessed Day,

John Occhi, Hemet CA REALTOR
Mission Grove Realty

John,

Thanks I will be doing the research in your blog and checking your posts for more information. I do not do short sales, but with the market the way it is it might change even unwillingly because a listing could start as not being one and end like such after 6 months in the market (I have seen it happen to other agents).

Have a great day!

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