Foreclosure!

Nationwide it is a huge problem right now. If you are affected personally you probably do not concern yourself much with what others are or are not going through. Danger is everywhere, or so it may seem to you. Threatening phone calls and letters from the collector, strange post cards and phone calls from "concerned individuals" who want to help you "save your credit and your good name" by purchasing your home. Perhaps your lender has even offered some solutions directly.

Here are some things you must know about the process you are involved in and some pointers on when to assume you are in the process of being victimized. Let's start with the easy part.

Every lender has solutions available to people who are facing foreclosure. They always have - it is not something new just because some politician thought it was a good idea. Since there is no way to know the circumstances that got you into foreclosure it is impossible to pinpoint your exact solution so you will have to do some homework. Let me add the stinging statement at the front so it has a lot of impact: If you are facing foreclosure because you have absolutely no spending control and you are driving an expensive vehicle, eating out too often, over-spending on your credit cards, abusing alcohol or using drugs, then shame on you. On the other hand if you have suffered a setback at work or in life such as a divorce or death of a spouse, or have an adjustable rate mortgage that has gone wild,  I have pity on you and so will your lender.

YOU MUST KNOW - LENDERS DO NOT WANT TO FORECLOSE!!!
ANYONE WHO SAYS DIFFERENTLY IS W-R-O-N-G!!

1. Do not ignore the calls and letters from your lender. Of course you are probably embarrassed or even angry at the situation but ignoring the collection attempts will only make it worse. 

2. If you have suffered a temporary setback ask your lender about a forbearance or repayment plan. If you know when your setback will end, perhaps you were out of work but recently acquired new employment or you had a sickness or family emergency that demanded your full attention. Lenders are prepared and have contingencies for this situation. YOU DO NOT HAVE TO PAY A FORECLOSURE RELIEF COMPANY TO DO THIS FOR YOU - YOUR LENDER WILL HELP.  

3. If your income has gone down or your expenses have gone up because of medical issues or perhaps a new child came into your family as your dependent ask about a loan modification. The lender may be able to change the terms of your original loan to something more affordable. Many lenders are now resetting adjustable rates to a reasonable rate probably a little higher than your initial rate but lower than your fully adjusted and indexed rate. They may even be able to stretch the terms of your loan to as much as 40 years.

4. If none of these are possible or a reality ask the lender about selling the home. If they will allow you to list the property and make as much of the payment as you can while the property is listed you may still be able to get out without a foreclosure. This may include what is known as a short sale which I am going to address in detail.

5. The lender may offer a deed in lieu of foreclosure. There are circumstances under which this may not be acceptable especially if you have liens against your property. The lender *may* require you to list the property for sale for a period of say 90 days prior to accepting the deed in lieu.

7. Believe it or not the lender may allow you to sell your property with a loan assumption even though the original loan may not have been issued as an assumable loan.

Short Sales

To "sell short" means to accept a bid lower than the amount owed on the property. In this case it is the lender who actually accepts the funds but the homeowner must agree to the short sale as well. What happens to the difference between the payoff and the short sale price? One of two things generally. Either there is a deficiency judgment or the lender issues a 1099 to the homeowner equal to the deficient amount. 

NEVER - NEVER - NEVER - NEVER!!!!

NEVER assign your property to an investor or anyone else. This is called a quit claim deed and if someone asks you to do this I don't care if they are promising you the world. DO NOT DO IT!!!!