Foreclosure Guidelines. Do s and Don ts for fending off foreclosure. Compliments of

Transcription

1 Foreclosure Guidelines Do s and Don ts for fending off foreclosure. Compliments of

2 2 Foreclosure Guidelines CONTENTS: Introduction. 3 Foreclosure. What is it? What happens next? Possible Do s when foreclosure looms DON TS when foreclosure looms Conclusion 8

3 Foreclosure Guidelines 3 Introduction: When you first purchased your home, I am sure that you never imagined that you would be in this situation today. Unfortunately things happen to good people and I assure you that you are not alone. The choices you make now will have a great impact on whether or not you will be able to keep your home but also the possibility of homeownership in the future. In the following pages I have given a brief explanation of the foreclosure procedure, options available to you, as well as some Do s and Don ts in the foreclosure process. Foreclosure. What is it? What happens next? The foreclosure process varies by state, local county/parish government and customs. This process costs lenders in the range from several thousands to $30,000 or more to complete. You have probably already received your copy of Notice of Lis Pendens. This is a Latin term meaning notice of foreclosure that is notifying all parties of record that they are about to lose (or give up) all of their rights, title and interest in a certain parcel of real estate via a judicial process (locally known as a Master Commissioner s Sale). This is typically done, but not always, monthly on Saturday mornings at the Justice Center. The property will be auctioned off to the highest bidder. Once you have received your Notice of Lis Pendens, it usually is too late to work out payment arrangements with your lender. They will take payment in full, including foreclosure fees, attorneys fees, principal and interest due. You do have some options. Some options are better than others but none of them are a magic cure-all. First, I am sure you have probably already thought of, and may or may not have, tried to sell your home and keep the equity. This option may sound simple. However, you are dealing with a property you most probably will need to discount drastically in order to sell it quickly and close before

4 4 Foreclosure Guidelines the foreclosure sale deadline. Considering the marketing time needed and fees and expenses involved, along with the pay-off owed, most people are finding that they do not have sufficient time to market the home and/or they owe too much to make this option work for them. Refinancing or obtaining a second mortgage is another option. This, again, is difficult to accomplish because once you are in foreclosure, almost all lenders will turn you down and the ones that will consider making a loan will limit you to 70% or less of equity in the home and charge rates up to 18.00% interest. Most folks do not have sufficient equity or simply cannot afford to make any more payments. The next best option is a Short Sale. This is when your lender agrees to release the mortgage on the property so you can sell it to someone else for less than what is actually owed. This option may relieve you from the debt entirely or you may agree to work out payments to the lender for the difference owed. Why consider this option? It does not show on your credit file as a completed foreclosure/repossession but rather just paid off prior to completion. This is more favorable for you in the future when it is a better time to become a homeowner again. You will need to work with your lender to accomplish this and most lenders are willing to take this option over completing a foreclosure. You should hire a realtor who has experience in this situation as he or she will know how to work with your lender as well as locating a qualified buyer before the foreclosure process is completed. Bankruptcy, Chapter 7 or 13, may stall the foreclosure process for a short period of time but it does not completely stop the foreclosure and you will still need to pay the mortgage loan, along with all past due amounts, court costs, attorneys fees, and accrued interest. If you had the ability to do this, it should have been done prior to allowing the property to go into a foreclosure status. Lastly, you could walk away. This is the option of last resort because everyone loses, especially the property owner(s). Credit will be severely damaged for many years and there is the likelihood of a deficiency judgment for any difference between the auction sale amount and the balance owed. This judgment is good for (20) twenty

5 Foreclosure Guidelines 5 years and can be renewed for another (20) twenty years. Wage garnishment is sometimes utilized, among other collection processes This is being provided for informational purposes only and is not intended to be given as legal advice of any kind. Please consult an attorney for legal advice.

6 6 Foreclosure Guidelines 7 possible Do s when foreclosure looms: 1. Work out a deal. Contact, work with, and stay in touch with your lender. Your lender may be willing to work with you, rather than lose money at a foreclosure sale. A repayment plan is typically considered to catch up on past-due payments, along with the regularly scheduled payments. However, if you DO NOT pay as agreed, the lender will foreclose and no more consideration will be given, with the possible exception of a short sale. 2. Refinance with a subprime lender. Your credit is poor right now because of the mortgage delinquencies. This means most or all of the traditional banks will not work with you. However, if there is equity in the property, you may be able to find a lender who will refinance you at a higher-than-normal rate. These are called subprime loans, and they are increasingly common: About 10 percent of mortgages today are subprime. You must have loanable equity for this option. Typically, the maximum a lender will go is 70% of the equity and interest rates can be as high as 18.00%. 3. Sell the property. If you can find a buyer before the house is auctioned, you can sell it and keep whatever equity still exists. 4. Short sale/deed in lieu of foreclosure. A short sale takes place when the bank allows you to sell your property even though their mortgage won t be paid in full. Be careful the bank may allow the sale to go through, but only on the condition that you repay the deficiency. They may even allow you to make monthly payments on the difference, to pay off the unpaid balance. In a deed in lieu of foreclosure, the property is signed over to the bank in exchange for the bank giving up its rights against you. When might a bank agree to either of these? Lenders spend close to or more than $30,000 to foreclose on a

7 Foreclosure Guidelines 7 property. Most lenders will consider these options to avoid foreclosure costs. However, if there are other liens or judgments that attach to the property, then foreclosure may be the lender s only option. 5. File Chapter 13 bankruptcy. If you can afford to make the future mortgage payments and the delinquent payments, too, file for a Chapter 13 bankruptcy. This is different than Chapter 7, in which assets are liquidated but debts are wiped clean. With Chapter 13, you keep your assets and, under court supervision, you repay your debts under a three-to-five year plan. Note that currently a bankruptcy will show on your credit file for a minimum of ten (10) years. 6. File Chapter 7 bankruptcy. If you cannot get caught up in time, you will not be able to keep the house but you will generally be able to delay the foreclosure sale a month or even several months. However, if you want to keep the home, you will need to catch up all delinquencies including foreclosure costs and continue to make regularly scheduled payments. 7. Walk away from the house. Pack your things and leave. The only issue remaining is whether your lender can sue you for any deficiency still owed after the sale, and that depends on the state you live in and the type of mortgage you have. You d be wise to speak to an attorney before taking this step. This should be your last option. Any sale or transfer of property has tax consequences, including a foreclosure sale or a deed in lieu of foreclosure. Seeing an accountant is probably a good idea, as well.

8 8 Foreclosure Guidelines Here are two options NOT to consider. In other words, they re scams. 2 Don ts when foreclosure looms: 1. Signing over your property title to another company or person. Some companies say that after the mortgage is current they will re-sign the property back over to you. This rarely happens. Instead, the company is likely to pull out equity, not make any mortgage payments, and allow the property to be foreclosed. You will not be able to save the property from future foreclosures because the property is no longer in your name. 2. Don t pay any company for foreclosure Bail out. These companies are springing up everywhere giving false promises of a guarantee to stop foreclosure. This simply is nothing but a scam and all they do is take your money leaving you in a worse position than you were to begin with. The bottom line is this: You do have options but you need to act quickly, and avoid the scams, if you want to have the best outcome. Delaying your options only makes foreclosure inevitable. Conclusion: In conclusion, now that you have read all the options available, I would like to help by providing you with experienced, professional guidance. Please give me a call Doug Kelly (270) to schedule a personal, no obligation consultation. Thank you.