Remedies and Solutions
To Foreclosure
This detailed report is informative on the existing solutions to
saving your home and/or your credit,
but by NO means should be considered a
guide.
This is not an
instruction manual and there are no forms in this
report.
This report details
the foreclosure remedies and solutions
methods
in a general overview, so that you have the
ability
to become familiar with each one
and will have the knowledge to choose one for your
plan.
We strongly suggest you have a Foreclosure Prevention
Professional assist you in the preparation of your individual package for your chosen
solutions plan.
IAFPP has shown homeowners
how to avoid the biggest mistakes many others
make.
Many people in situations just like
yours
are hesitant to do anything
because they are having a hard
time
finding out who and what to
believe.
Homeowners are often surprised
at how few people are aware
of how to help them truly find an answer to their
problem.
We hope this report will provide you with valuable
information to help you make the important decisions of how to avoid a potential
foreclosure.
By now you have probably received a lot of junk mail
from
They believe that their solution is the best one for you
without objectively analyzing and comparing all of YOUR options
However IAFPP understands that everyone’s situation is
unique
This report will explain All of the options available to
you
This report shall discuss the multiple
options
for each situation
and we shall lay out the steps you will need to take
to;
No one can make all the right
decisions
without the right knowledge
first.
Once you understand your options,
you can make an educated decision
on whether you want to,
and can,
keep your home,
or if you need to sell
quickly.
Let's get
started
Pick an option and click on it.
Keeping Your Home By:
Sell Your Home By:
Deed In
Lieu:
Reinstate Your Loan
The option of reinstating your loan is available to homeowners who can
demonstrate to a lender that they have available funds to pay back the outstanding balance on
their mortgage in a short time (up to 24 months).
This solution works best for homeowners who can make up their total past due
balance through a combination of lump sum payments and/or “extra” payments (spread out over a
12-24 months) in addition to their regular mortgage payment.
To better understand the steps you may have to take to reinstate your
loan, let’s first look at the different options you have for reinstating your
loan.
Total
Reinstatement
This process involves bringing your loan current in
one payment. You will be required to provide a certified check that will
include all past due payments
late charges
any fees and costs which have been assessed to your
account.
Repayment
Plan
This process involves making up the amount past due
over a period of months by paying a full payment plus a partial payment on the past due balance
each month. You will be required to give your bank a cash contribution, usually equivalent to
30-50% of your total arrears (total of late payments, bank fees and attorney’s fees).
Forbearance Plan
This option involves reduction or suspension of
payments for a period of time followed by a period of time during which the deferred payments
are made up, similar to the repayment plan.
Partial Claim Program
Certain loans qualify for this program, in which the
homeowner is required to give a cash contribution equivalent to 30-50% of total arrears, and the
remainder of the arrears is loaned to the homeowner interest free. The homeowner will have the
remaining term of the mortgage to pay off this loan in full.
The PROs of choosing one of the foreclosure
reinstatement options is that it helps you keep your house and avoid a foreclosure. You also avoid
filing for bankruptcy, and do not have to pay lender fees and try to refinance your home. You get
to keep your original loan, which is especially helpful if you negotiated a good interest rate when
you originally took out the loan.
The CON’s of choosing one of these options
are that you will have to come up with some out of pocket funds to get into a plan. This is usually
a minimum of 30% of the outstanding total past due balance, but could be as high as 50%. Obviously,
if you don’t have the funds, foreclosure reinstatement is not an option for you. Furthermore, after
you send in the funds, the remaining outstanding past due balance is the added onto your loan
amount, and spread out over anywhere between 6 and 24 payments (months).
Make sure before you enter into a foreclosure reinstatement plan,
that you have the funds available to get into the plan, and also to continue making the new, higher
payments.
These options are not for everyone, as there is usually an up front
fee to enter into any of these options. If you choose to move forward with one of these options, it
is something you could do on your own. However, many people have a difficult time getting through
to the loss mitigation department of their bank and they must be prepared to be aggressive,
persistent and to stay on top of the lender. In addition, many people don’t have the bank contacts
or negotiating skills to get the best possible plan. Finally, if you have a job to go to each day;
do you actually have the time, and appropriate levels of privacy at work to work on this each
day?
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questions
Loan Modification
This option includes changing the original terms of the mortgage through one or a
combination of the following methods:
-
Increasing the loan balance to cover the delinquent interest and/or
increasing the number of payments to pay off the entire
loan.
-
A loan modification requires the prior approval of the
lender/investor.
-
A modification fee will be charged as well as a cash contribution
toward compliance with any additional requirements of the bank and/or
investor.
-
The PROs of a loan modification can
be substantial. The principle amount owed may be reduced, the interest rate may be reduced
and the maturity date of the mortgage may be extended. You may receive one or more of the
above in a loan modification, and that will have a drastic effect on your mortgage
payment.
The CON's of a loan modification are that
they are hard to get, especially today. The lender's are being bombarded with request every single
day (we understand that each mitigation person at the bank receives approximately 300 written
requests every day). In an effort to handle the requests, the lenders have established a specific
format to request the loan modification. If this specific format is not met, the request will more
than likely be discarded.
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REFINANCE
Sometimes the best
option for an individual or family facing foreclosure is to refinance their loan. In today’s
quickly changing mortgage loan environment there is usually a loan to meet your needs.
However, refinancing your loan isn’t always the best solution given your specific
situation.
The obvious PROs to refinancing your loan is that you can stay in your home
and possibly set yourself up for better financial freedom. Additionally, if you have a competent
mortgage broker, he or she should be able to set your closing date so that you get to “skip” a
mortgage payment. This month of “no mortgage payment” is often exactly what someone needs to get
himself or herself back on track financially.
Nevertheless, refinancing can be a long and difficult process especially if you are already one or
two payments behind on your mortgage.
Unfortunately the CONs of refinancing often times outweigh the PROs.
Some of the CONs of refinancing include, up front out of pocket cost for an
appraisal. While you have to pay for an appraisal anytime you refinance your loan, the key in a
foreclosure situation is that the loan to value (LTV) requirements be met. Lenders are very strict about only
refinancing when a LTV
meets their guidelines. If your appraisal does
not fall within the LTV guidelines that the
lender has set then they will not underwrite your loan. So you might pay for an appraisal
($350-500) and not be able to use it. If you try and refinance with another lender, they most
likely will want their own appraisal done, so you can see that appraisal fees can begin to add up
very quickly.
All of the lender and broker fees that get added onto your loan
balance can quickly eat up your equity, if you have any.
Many times in a foreclosure refinance, you are required to pay
points. One point is equal to one percent of the loan amount. So if you are borrowing $250,000, and
the broker is charging you 2 points, that is an extra $5,000 you are paying just in broker
fees.
Then you must also add in all of your possible closing costs:
settlement fee, lender fee, underwriting fee, transfer tax, recordation charges, title insurance
and credit report, just to name a few. Do not be surprised if your closing costs alone add
up to ten, fifteen, maybe even TWENTY THOUSAND
DOLLARS.
Refinancing will more than likely create a new, bigger payment as
your loan balance is going to increase, but you are borrowing enough to pay off the loan, and all
of the late fees, and attorneys’ fee that come along with a foreclosure. Add to the fact that your
credit score is much worse now than when you originally got the loan, and you are going to be
paying an increased interest rate on a larger loan amount.
Let’s be realistic for a minute. If your old payment was difficult to
make, what makes you so confident that you can make a new, bigger payment?
Now that you understand the PROs and CONs of refinancing, the most
important thing you must remember when considering refinancing is to make sure you carefully read
all the paperwork before the closing! Don’t get to the closing table to find out you have a
pre-payment penalty and additional closing costs you did not
anticipate.
If you decide that refinancing is your best option it is important to
make sure you find the right person to help you out.
It is surprising how many homeowners just turn on their computers and
start searching the Internet in search of a new loan. You will want to work with a local broker or
bank that understands your area and you can deal with on a local
basis.
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Back to questions
BANKRUPTCY
The final option available to a homeowner facing foreclosure who wants to keep
their home is to file for bankruptcy. This option should always be
the homeowner’s last resort.
If the homeowner chooses to file for bankruptcy the PRO is that the
homeowner can sometimes stay in his or her house, and some, but certainly not all debts can be
forgiven.
Unfortunately there are bigger CONs to this
option. A bankruptcy will be on the homeowner’s permanent record and the mortgage payments could be
higher than before. If the homeowner couldn’t make the old payment, how can he or she make the new,
bigger payment?
If you do choose to file for bankruptcy you need to educate yourself
of all your options and the impact of what this will do to your long-term financial status. It is
important to work with someone who is a licensed bankruptcy attorney.
It is important to understand that bankruptcy attorney’s are not
allowed to pay a commission for referrals. We refer our clients out to qualified bankruptcy
attorneys who can help you thru this very important financial decision.
Note:
You should consult a
bankruptcy lawyer regarding how a bankruptcy will affect your financial situation and
future.
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Back to questions
LIST WITH A REALTOR
Listing with a realtor can some times be a good option for people who have
time on their side and a house in a desirable market in good condition.
The obvious PRO of listing with a realtor is that you might get
“market value” for your home, assuming you want to
move.
The obvious CON of listing with a realtor is that you will have to
pay the realtor’s commission. Remember that the seller usually pays BOTH the listing and buyer’s
agents’ commissions. This frequently can cost 5% or more.
Imagine if you sell a $300,000 property - that is $18,000 in commissions
alone! Furthermore, as the seller, the homeowner must first make the house look presentable,
deal with buyers and be willing to show their home at all times with no guarantee anyone will
buy the home in time to stop the foreclosure.
If you are lucky enough to get an offer, remember that buyers are
picky people, and will make an offer subject to a home inspection. The inspector will spend 3-4
hours going through your home with a fine-toothed comb. If they find anything “wrong” with your
property, be prepared to fix it, and to have the funds available to do the repairs (or hire a
professional to do them for you). If you are already behind on your payments you may not
have the time to list your home with a realtor.
If you have the time and ability to list your home with a realtor,
you want to work with a realtor who knows your market area and can help you get top dollar for your
home.
The CONs of choosing the option of selling to an investor is that you
will have to move to a new home and you will not receive retail price with all cash offers. Some
investors may be able to provide you with full retail value if they can find equity in the house
upon rehabbing the property or purchasing your home subject to your existing mortgage.
Selling to an investor is usually the quickest and easiest option to
avoid a foreclosure while retaining some equity in the home, if any exists. If you consider selling
to an investor you should work with someone who invests in your community who knows your market and
can facilitate a quick and smooth transaction.
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SELL TO AN INVESTOR
Oftentimes homeowners have reasons why they want to get out of their home
quickly and avoid a foreclosure with the least amount of work and risk. For these people selling
to an investor may be their best option.
The obvious PROs to selling to an investor is that the homeowner can
close quickly, sell their house in “as-is” condition with no contingencies (retail buyers are going
to want things fixed, and will require a home inspection, etc); oftentimes be paid in all cash and
immediately halt the foreclosure as soon as the title is transferred and sometimes the homeowner
will find flexibility on their move out
dates.
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questions
SHORT
SALE
Individuals who may want to consider a “Short Sale” are those who have little
or no equity in their home. The current mortgage balance along with all fees are negotiated to a
reduced payoff of the property.
Read more on
short sales
The PROs of the “Short Sale” is that the homeowner can sell his or
her property rather than go through foreclosure.
The CONs are that the homeowner must go through the process with no
guarantees. A “Short Sale” takes time with no cash for the homeowner and then you still must move
out of your home.
However, in some cases, this is a good option for individuals facing
foreclosure. If you decide that a “Short Sale” may be the right choice for you, you need to make
sure you have a professional working with you who understands “Short Sales” and can help you
negotiate with your bank.
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Last Resort Option - DEED IN LIEU
As a last resort, you may be able to voluntarily give back
your property to the lender. This won't save your house, but it is not as damaging to your
credit rating as a foreclosure.
You may qualify if:
you are in default and don't qualify for any of the other
options;
your attempts at selling the house before foreclosure were
unsuccessful; and you don't have another FHA mortgage in default.
If you're sure that you can't afford to keep your
house, you may be able to reach an agreement with the mortgage holder whereby you simply give it
back and stop the foreclosure. The mortgage holder would agree to accept the deed as full
settlement and cancel the remainder of your debt.
Whether or not this is a good option to stop foreclosure for you
depends upon your equity in the house, the amount of outstanding debt, and what other options are
available to you. Of course, the mortgage holder won't always be willing to enter into such an
agreement, but if there is little likelihood that you'll be able to pay a deficiency judgment, the
lender may decide that it's better to avoid the costs of a foreclosure proceeding, stop foreclosure
and accept the deed as full settlement
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