Do You Know All Of Your Pre Foreclosure Options?

By
Real Estate Agent with Keller Williams VIP Properties

Homeowner Resources get Your FREE report! Learn how Jennifer & Gary Ricco with the Certified Distressed Property Expert® designation are best suited to help Southern California distressed homeowners. We have been Certified Distressed Property Experts, CDPE since November 2008, helping one homeowner at a time.

PRE FORECLOSURE OPTIONS

The current U.S. housing market and national financial crisis has caused untold stress and heartache for many American families. Foreclosure is one of the most devastating financial challenges that a family can face and one that many times can be avoided. The options available to Santa Clarita area residents for foreclosure are many. Following is a brief explanation of these solutions, including their benefits and drawbacks:

Reinstatement
A reinstatement is the simplest solution for a foreclosure, however it is often the most difficult. The homeowner simply requests the total amount owed to the mortgage company to date and pays it. This solution does not require the lender's approval and will 'reinstate' a mortgage up to the day before the final foreclosure sale.

  • Benefit: Does not require the mortgage company or lender's approval.
  • Drawback: Requires that a homeowner be able to pay all back payments, fines and fees.

Forbearance or Repayment Plan
A forbearance or repayment plan involves the homeowner negotiating with the mortgage company to allow them to repay back payments over a period of time. The homeowner typically makes their current mortgage payment in addition to a portion of the back payments they owe.

  • Benefit: Allows the homeowner to make back payments over time.
  • Drawback: Requires that a homeowner be in a financial position to pay not only their current mortgage, but also a portion of the back payments owed. Some mortgage companies will require a homeowner to 'qualify' for forbearance.

Mortgage Modification
A mortgage modification involves the reduction of one of the following: the interest rate on the loan, the principal balance of the loan, the term of the loan, or any combination of these. These typically result in a lower payment to the homeowner and a more affordable mortgage.

  • Benefit: Reduces the payment a homeowner is required to make on a monthly basis and may reduce the principal balance of the loan
  • Drawback: Requires that a homeowner 'qualify' for the new payment and will often require full documentation. Lender has to be actively pursuing modifications.

Rent the Property
A homeowner who has a mortgage payment low enough that market rent will allow it to be paid, is able to convert their property to a rental and use the rental income to pay the mortgage.

  • Benefit: Allows homeowner to keep property indefinitely.
  • Drawback: The issues that can arise with a rental property are many, and rent often does not cover the full cost of property ownership and maintenance.

Deed in Lieu of Foreclosure
Also known as a 'friendly foreclosure', a deed in lieu allows the homeowner to return the property to the lender rather than go through the foreclosure process. Lender approval is required for this option, and the homeowner must also vacate the property.

  • Benefit: Many times in a successful deed in lieu, the lender will forego their right to a deficiency judgment.
  • Drawback: Requires that a homeowner vacate the property, and a deed in lieu may be reported to credit bureaus as a foreclosure.

Bankruptcy
Many have considered and marketed bankruptcy as a 'foreclosure solution,' but this is only true in some states and situations. If the homeowner has non-mortgage debts that cause a shortfall of paying their mortgage payments and a personal bankruptcy will eliminate these debts, this may be a viable solution.

  • Benefit: Does not require lender approval.
  • Drawback: If a homeowner cannot afford their mortgage payment, a bankruptcy will only stall-not stop-the foreclosure process. Bankruptcy can be costly, is damaging to credit scores, and can only be declared once every seven years.

Refinance
If a homeowner is lucky enough to have sufficient equity in their property and their credit is still in good standing, they may be able to refinance their mortgage.

  • Benefit: In some cases, this will lower payments.
  • Drawback: In today's market, a refinance will almost always raise mortgage payments, and is an expensive process.

Service members Civil Relief Act (military personnel only)
If a member of the military is experiencing financial distress due to deployment, and that person can show that their debt was entered into prior to deployment, they may qualify for relief under the Servicemembers Civil Relief Act. The American Bar Association has a network of attorneys that will work with servicemembers in relation to qualifying for this relief.

  • Benefit: If qualified, this will lower payments on all consumer debt in addition to mortgage payments.
  • Drawback: Must be active military to qualify.

Sell the Property
Homeowners with sufficient equity can list their property with a qualified agent that understands the foreclosure process in their area.

  • Benefit: Allows homeowner to avoid foreclosure and harvest some of their equity.
  • Drawback: In many cases today, homeowners do not have sufficient equity to sell their property without negotiating a short sale (see next solution).

Short Sale
If a homeowner owes more on their property than it is currently worth, then they can hire a qualified real estate agent to market and sell their property through the negotiation of a short sale with their lender. This typically requires the property to be on the market and the homeowner must have a financial hardship to qualify. Hardship can be simply defined as a material change in the financial stability of the homeowner between the date of the home purchase and the date of the short sale negotiation. Acceptable hardships include but are not limited to: mortgage payment increase, job loss, divorce, excessive debt, forced or unplanned relocation, and more.

  • Benefit: A short sale allows the homeowner to avoid foreclosure and salvage some of their credit rating. This also keeps foreclosure off the individuals public record, and in many cases will allow the homeowner to avoid a deficiency judgment. Borrower may qualify for another mortgage in as little as 24 months (as opposed to five years for a foreclosure).
  • Drawback: Short sales can be a trying process in which a homeowner is best served by contracting with a qualified real estate agent to guide the way.

This represents only a summary of some of the solutions available to homeowners facing foreclosure. Please call us today for a free confidential evaluation of your individual situation, property value, and possible options. With our law enforcement backgrounds we pride ourselves on honesty and integrity, your information is kept confidential.

WE CAN SEND YOU THE FOLLOWING FREE REPORTS:

1. Short Sale & Deed-In-Lieu Understand the details and consequences of two dignified solutions to an upside-down mortgage situation.

2. The Truth About Mortgage Modifications The Truth About Mortgage Modifications.

3. 7 Short Sale Myths The 7 most dangerous short sale myths identified and explained.

4. Foreclosure Vs. Short Sale A side-by-side comparison of the consequences of foreclosure and a short sale.

5. Options and Solutions Highlighting 10 alternatives to foreclosure for distressed property homeowners.

To get these Free reports go to: www.SantaClaritaPreForeclosureSpecialists.com simply click on the Resource tab and choose which report you would like e-mailed to you. If you have any questions please feel free to contact these CDPE® Realtors

Jennifer & Gary Ricco CDPE, PSC Keller Williams VIP Properties

25124 Springfield Court Suite 100 Valencia, Ca 91355
(661) 290-3837

We service Los Angeles and Ventura Counties

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Rainer
432,184
Margaret C. Taylor
Century 21 New Millennium MD - Mechanicsville, MD
St Marys/Calvert/Charles MD Real Estate Agent

Excellent complete list.  Thank you it was just what I was looking for.  Margaret C

Feb 16, 2010 12:43 PM #1
Rainmaker
160,184
Ray Wright
Keller Williams Realty - Riverside, CA
SoCal Realtor - A.L.C.

Thanks for placing all this in one concise list.  great for reference

Feb 16, 2010 05:18 PM #2
Rainer
237,362
Jeffrey Smith
Author of 'Realtors Guide To Short Sale Success - Eustis, FL
Short Sale Education

Forbearance and Doing nothing are both other options. Good list!

Feb 16, 2010 11:04 PM #3
Rainer
41,186
Jill Schmidt
Aurora, CO

Jennifer, This is a nice post.  Are the reports you offer to consumers a KW product, or have you developed them?  (I was wondering because if they are KW, I'd like to get some.)  THANKS!

Feb 17, 2010 01:33 AM #4
Rainer
12,348
Jennifer Ricco
Keller Williams VIP Properties - Valencia, CA
CDPE, PSC, e-PRO, Retired LAPD

Margaret & Ray- Gary and I strive to bring our clients the most up-to-date information in this ever changing pre foreclosure market. Education is key for us real estate agents to best serve our communities as well educating homeowners to give them a general understanding of this very complicated pre foreclosure process!

Feb 17, 2010 02:59 AM #5
Rainer
12,348
Jennifer Ricco
Keller Williams VIP Properties - Valencia, CA
CDPE, PSC, e-PRO, Retired LAPD

Jeffrey- Doing nothing means the decison is being made for you, doing something gives you options! A forebearance is nothing more then a uncontested foreclosure.

Feb 17, 2010 03:07 AM #6
Rainer
12,348
Jennifer Ricco
Keller Williams VIP Properties - Valencia, CA
CDPE, PSC, e-PRO, Retired LAPD

Jill- Both my husband and I are Certified Distressed Property Experts, CDPE. This is a great certification that is offered nationwide by Alex Charfen you can go to http://www.cdpe.com/home to read more about CDPE. There are over 17,000 agents from all brokerages who hold this designation. Gary and I have a website where we offer homeowners these monthly reports www.santaclaritapreforeclosurespecialists.com .

Feb 17, 2010 03:14 AM #7
Rainer
12,348
Jennifer Ricco
Keller Williams VIP Properties - Valencia, CA
CDPE, PSC, e-PRO, Retired LAPD

Jeffrey- I just posted another blog http://activerain.com/blogsview/1498779/the-myths-and-misrepresentations-of-strategic-defaults-why-walking-away-is-not-the-answer- for homeowners to get a free report about the very subject of 'doing nothing'.

Feb 17, 2010 03:28 AM #8
Rainer
237,362
Jeffrey Smith
Author of 'Realtors Guide To Short Sale Success - Eustis, FL
Short Sale Education

Thanks for the input Jennifer. In Florida, doing nothing allows you to stay in your home rent free for a considerable length of time -usually a year or more. It beats "doing something" of moving out immediately upon default notice like some 20% do here. Also, I think you are confusing forbearance with deed in lieu. A deed in lieu is an uncontested foreclosure. A forebearance is:

"An agreement made between a mortgage lender and delinquent borrower in which the lender agrees not to exercise its legal right to foreclose on a mortgage and the borrower agrees to a mortgage plan that will, over a certain time period, bring the borrower current on his or her payments. A forbearance agreement is not a long-term solution for delinquent borrowers; it is designed for borrowers who have temporary financial problems caused by unforeseen problems such as temporary unemployment or health problems." -Investopedia by Forbes

     

Feb 17, 2010 11:59 PM #9
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Rainer
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Jennifer Ricco

CDPE, PSC, e-PRO, Retired LAPD
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