Now that remarkable increases in mortgage loan default and foreclosure statistics become media's fodder, loss mitigation becomes a largely repeated, but often misunderstood buzzword. Most experts' talking points suggest the homeowners contact the lender early on to 'workout' their mutual problem implying the homeowner will enjoy continued homeownership. While proactive contact is recommended, this in itself is not a solution. The primary reason to contact the lender early on in the delinquency is as much to exclude unrealistic options as it is to explore feasibility.... In most workout interviews, the sale of the home is the lenders' recommendation of choice.
To many, especially those who have never needed loss mitigation, the term is synonymous with a charitable lender bending over backwards to help the homeowner avoid foreclosure for the asking. It's this belief that causes many homeowners to fail to accept responsibility for a non foreclosure solution to their problem. A request for loss mitigation assistance does not automatically translate into a proffered workout.
Recently, I was invited to appear on a Comcast Newsmakers segment to discuss what I've referred to in an AR Blog as A Perfect Storm A five minute interview might seem like a long time... but it goes by quickly, barely enough time to stammer a few rehearsed talking points.... with no real time to expand upon them. That's one reason why I so appreciate the AR forum...
In response to the question I meekly parroted, "The homeowner should contact the lender early on...." which is what the host wanted to hear. Satisfied, he moved quickly to the next question. I should have taken a page from a politician's press conference. Ever notice how most politicos when asked a question, seem to ignore the question being asked, and instead answer a totally different question? Maybe next time. The producer asked if I would do a 30 minute spot in March. I'll be ready. Anyway....
The mortgagors' objective when seeking lender loss mitigation is to prevent foreclosure, make the cost of continued home ownership more affordable, or permit the pre foreclosure sale of an unaffordable home. The lender wants to maximize its return on an under performing asset. The lender, when considering workout options, is constrained by rigid criteria, and most workout options must adhere to a complex business model which is used to predict the option's likelihood of success or failure.
Loss Mitigation is not an entitlement. Its a convenience established by the mortgage company as a means of avoiding loss [for them]. It just so happens that the effect of a self serving loss mitigation strategy aids the homeowner as well.
When loss mitigation efforts are unsuccessful and result in the rejection of the mortgagors' application for relief, the homeowner is faced with a short list of options. Service oriented options include bankruptcy, refinance, or sale.
As the foreclosure process proceeds, many homeowners waste valuable time seeking foreseeable unrealistic refinance and/or an unaffordable bankruptcy repayment plan. Time which could have been devoted to market exposure. Of primary interest to the real estate community is the pre foreclosure sale or pre foreclosure short sale of the mortgaged property. A real estate agent, inexperienced in preforeclosure matters, when faced with a preforeclosure scenario should get help, and not make statements of fact if not 100% certain. The success of a preforeclosure sale transaction is predicated on the quality of the listing presentation. We've all heard horror stories, or war stories concerning preforeclosure scenarios.... and I'd bet the cause of the problems were rooted in the listing appointment which I like to call the LISTENING appointment.
To assure a successful transaction in situations requiring careful choreography and transactional control, I recommend the sellers consider a waiver of broker cooperation.... but more on that another day.
Pre foreclosure sale transactions can be problematic... But careful attention to details during the listing process can make pre foreclosure sales manageable, and result in a rewarding experience.
For more information, including a free scenario evaluation or preforeclosure sale and preforeclosure short sale transaction support, check out our non profit's website, or email me at: info@spoch.org
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