Stop Foreclosure

About 1.3 million homes received foreclosure related warnings last year, 2007. There are over 1 million already in 2008. Honestly, avoid a foreclosure at all cost.

A foreclosure is a legal proceeding that takes away a homeowner’s right of owning or redeeming the home that the mortgage covers. The following are ways to avoid a foreclosure:

1. Don’t ignore your problem.

Hiding your head in the sand will only get you further behind on your debt. It only becomes harder to reinstate your loan and become current. Losing your house will become a reality.

2. Contact your lender as soon as you realize that you have a problem.

Trust me, your lender WANTS to know what is going on. A lender does not want your house. They have far to many homes already. Not only do they have options to help you through this difficult time but they know your options, possible options you do not know.

Forget the embarrassment you feel by calling. Seeing your name in the newspaper stating you are being foreclosed on will be far more embarrassing then a phone call.

Calling early gives you more options. You need options at this point. Do I need to say that the problem will not go away if you ignore it! I guess I just did. Don’t hide your head in the sand.

3. Open ALL mail from your lender and respond to it quickly.

In most cases the first letter you receive will be advising you of your late payment status. It should include information about preventing a foreclosure. In a short time you will receive information regarding pending legal action. Lets talk about this. Ignoring these communications will not help your position. Claiming you never received these letters will also not help your case. If you do not respond your lender will undoubtedly contact you by telephone.

Listen to me; it is extremely important that you respond to all mail and phone calls from your lender. If your lender doesn’t hear from you, they WILL start legal action ultimately leading to foreclosure. Not only will this limit future possible resolutions but these actions will only tend to increase the cost of bringing your loan current.

4. Know the rights granted by the contract you signed.

Read the loan documents you signed. Look for all information with regard to what your lender may do if you fail to make your payments. You must familiarize yourself with the foreclosure laws in your state.

5. Getting help with foreclosure prevention.

The government has put together a lot of valuable information about foreclosure prevention. You can view this information at: http://www.fha.gov/foreclosure/index.cfm.

6. Cut your spending.

Keeping your house should be your first priority. Consider what expenses can be cut in order to make your mortgage payment. Look at “luxury” expenses such as cable TV, gym memberships, eating out, going to the movies, and any other entertainment that can be eliminated. Maximize your other payment in order to stall payments to non-critical debts.

7. Use what you have to produce cash.

What can you sell to help get out of this predicament? Do you have a second car, , motorcycle, boat, or jewelry that you can sell? Do you have life insurance you can borrow on? Can you or a family member get an extra job? Do what it takes to keep from losing your house.

8. Don’t fall for foreclosure prevention deals.

Let me ask, if you could afford $1000 to pay someone to save your home would it not be better to put that $1000 on your past due loan? This is the time when the “Help You” companies come out of the woodwork like cock roaches in the night. Think about it, you’re contacted by a guy that wants to argue your case to your lender and all he wants is $300. I have to believe YOU would be more sincere when talking to your lender then this guy. Do it yourself and do it early and often!

9. Don’t fall for foreclosure scams!

These people also come out at night. They try to convince you that they can save your credit and give you cash in your pocket too. It could happen but more than likely you will lose big. If they want your house for your equity plus $5000 cash I have to believe you could get $20,000 or even more in a sale. Never sign a legal document before getting legal advice. No one reads all the fine print and that’s where you will be hung out to dry. Seriously, people do not chase you down to give you money unless it profits them unbelievably.

Tags: how-to-stop-foreclosure, stop foreclosure

Let’s define Foreclosure

In the simplest terms, a foreclosure will occur when a homeowner is unable to make the principal and/or interest payments on the loan. This will ultimately result in the property being seized and sold.

The foreclosure allows the lender to recover the loan amount owed either selling or re-taking ownership of the property that was securing the loan. This is the process we have come to know and love as the repossession process. It all starts when a homeowner defaults on loan payments. The lender files a public default notice know as a Notice of Default or Lis Pendens.

In most cases the lender will take ownership of the property. The intent is usually to re-sell the property and recover the loan amount and associated cost. The lender can do a short sale foreclosure which is an agreement that is made with the homeowner in a pre-foreclosure process. The lender can also buy back the property at the public auction. When a lender repossesses a property the term used is bank-owned or REO (Real Estate Owned).

Stages of Foreclosure

Pre-Foreclosure

A pre-foreclosure is when a homeowner sells the property before a default and official foreclosure is started. The homeowner could walk away with something instead of losing everything and destroying their credit.

Notice of Default

A Notice of Default (NOD) is when a lender puts the homeowner on official notice that he/she is facing foreclosure. This will usually occur after three to six mortgage payments are missed. The Notice of Default is recorded at the County Recorder’s Office.

Notice of Sale

If the loan is not brought current within three months, an official sale date is determined. A notice called a Notice of Sale will be posted on the property. Neighbor’s love seeing official notices being posted on your house and will patiently wait for you to leave on an errand so they can read the notice. This Notice of Sale will also be recorded at the County Recorder’s Office. To add real insult to injury, this Notice of Sale will also be published in the local newspapers for a three-week period.

Foreclosure Trustee Sale

The Notice of Sale would have stipulated the time and location of the actual sale. The sale will usually be on the steps of the county courthouse. The property is auctioned to the highest bidder. The successful bidder must pay in cash. Now few people carry around hundreds of thousands of dollars in a briefcase. Usually a deposit is placed and the remainder of the money must be paid within 24 hours. Upon complete payment, the winner will receive a trustee’s deed to the property.

Foreclosure Auction

At auction, the foreclosing lender sets an opening bid on the property.

The opening bid is usually equal to the amount owed on the property; interest accrued on the loan, additional fees and any attorney fees incurred. To throw cold water on any potential real estate investors that hope to be the only bidder, the opening bid is considered as an opening only. If there are no bids higher than the opening bid, the property is normally purchased by the lender.

It makes little sense that after calculating all the cost that the lender would not accept THAT amount for the property. I have a thought about this and I believe the lender doesn’t want a bidder to get a really great deal on a property. The lender took all the risk, went to all the trouble getting the home back and selling it and some investor walks in and gets a deal by shaving $100,000.00 of the purchase price. Better to wait for the market to rebound and take the profit.

If the opening bid is not met the sale property is considered a Real Estate Owned property or REO. Consider that if the opening bid is the total amount owed or incurred and the lender sells for less the bank absorbs the losses.

The good news for investors is that with REO properties all liens are wiped out. The only amounts still owed would be any existing property taxes. A clear title is a nice reward.

Tags: Foreclosure, foreclosure definition, stop foreclosure

You and so many Americans are asking these questions:

Why is there a foreclosure problem?
Why are homes being taken over by the banks?
Why are people suddenly not able to afford their mortgage payments?

The problem really goes back a few years when banks had an abundance of money to lend and decided to lend that money at low teaser rates to people who were of questionable financial risk.

These teaser rates were the now famous ARMs (Adjustable Rate Mortgages). This ARM offered a very low interest rate for a few years and then increased to a rate usually above the prevailing rate. The bank lost a little on the front side but made it up as well as a lot more on the backside.

Many homebuyers took the risk because they had seen the home prices steadily increasing and wanted to get their piece of the pie. These homeowners had one of two plans. The first was to ride the teaser rate till it was due to expire and then refinance their loan. This would protect them from the higher rates as well as put money in their pocket from the increased equity in the house. Many homeowners refinanced and cleared $25,000 to $100,000 to use as they wish.

The second plan for many homebuyers was to simply buy the home at any interest rate, fix it up or not, and then sell it at a profit. There was a time when you could buy and immediately resell and clear $60,000 with NO fix up cost. You can see that the ARM meant nothing to these two types of homebuyers.

A gentleman in Orange County California refinanced three times in one year and cleared decent cash each time. The house of cards finally fell apart when the market tumbled and he was faced with the expiration of the teaser interest rate. His house payment increased from $3500 per month to $6000 per month. He lost his house.

Who has the highest foreclosure filing totals?

Nevada can boast the highest number of foreclosure filing for its population. The number equates to 1 foreclosure for every 75 homes. That’s 3.5 times the national average.

California has the highest number of total filings. In context, California has 10 percent of the nation’s population but has 18 percent of the nations foreclosures.

The nation’s top 10 highest foreclosure rate states are: Nevada, California, Florida, Texas, Colorado, Georgia, Michigan, Arizona, Ohio, and New Jersey.

The honor for the worst foreclosure rate within the country’s 100 largest metropolitan areas goes to Detroit. This “winner” had one foreclosure filing for every 51 households. That gives Detroit a foreclosure rate exceeding five times the national average.

What happens to those homes after foreclosure?

When these homes do go into foreclosure many are sold at action. In the most depressed housing markets as few as 1 in 100 homes up for auction are actually sold. That’s 99 out of the 100 homes up for auction at discounted prices never receive a bid equal to the starting bid set by the lender. Contrary to most myths, you can’t buy a $300,000 home for $100. All lenders reserve the right to bid and that means they will bid the opening bid if no one else does.

In many depressed markets the lenders are NOT offering sweet deals to move houses. Its not unusual for a neighborhood to have 3 of 4 homes foreclosed on and those homes sit empty for 2 or 3 years. They reject offer after offer waiting for the market to move back up.

True, some lenders move houses quickly at discounted prices but these are the few, not the many.

Another reason that many homes go up for auction and receive no bids is the fact that before potential buyers are allowed to bid, they must present a cashier’s check for the full amount they plan to bid. Few people outside of investors can pony up the full purchase price for a home. But, if you have $300,000 sitting in a CD account and feel like buying a house this week, you’ll probably get it.

Tags: Foreclosure, foreclosure facts, stop foreclosure

If you are actively trying to keep your house from going on the auction block but are losing the fight, you need to look at the options that might stop foreclosure. Refinancing is the option that most homeowners attempt first but in todays upside down world that might not be a workable option.

In the good days YOU had to qualify. Now it’s your HOUSE that needs to qualify. If you owe anything near the current appraisal price, you’re toast. In today’s market a homeowner needs to think outside the box to save his or her home and credit.

First things first, the home in danger of foreclosure MUST be listed for sale. Selling to avoid a foreclosure is always better than the foreclosure. Did I say ALWAYS? Now the words of caution.

Almost every real estate agent will tell you that to get the very best price “you need to fix it up a bit!” Well that may be true but if you’re in foreclosure you are probably in other financial trouble too. This is not the time to go further into debt or to borrow from the relatives. If the market is depressed in your area, $10,000 in fix ups will make little difference and there’s a good a chance that it will still not sell.

I know every real estate agent in America will probably disagree with me and I know there is some validity to their thoughts. But here’s the point I will make: since I will make nothing from the sale of your house and they will, who’s impartial?

Another option is to try and work with your lender to arrange a short sale. A short sale is where the property is sold for less than what is owed on the loan. A short sale will pay off the loan and will do more to save your credit than the damage a foreclosure would have done.

Next stop if unsuccessful with the short sale is to ask your lender about giving you a deed in lieu of foreclosure. This is the “Give it Back” plan. The best part of this plan, if accepted, is that you are free of the debt. The mortgage company agrees to accept the deed instead of foreclosing on your home. You still lose the house but that was happening anyway. Time to move on!

It is always suggested that you check the Internet for foreclosure rules for your state. Some states allow a lender to continue collection activities after foreclosure by suing for a deficiency judgment.

The reality is that very few lenders sue for deficiency judgments. They know your financial situation and pursuing you would be more wasted money. Having said that I know of one major bank that seems to pursue everyone for every penny. It is probably to maintain a reputation as being hard on bad debts.

Being diligent and following through with all your options will benefit you in the long run. Do the research and make the calls. It’s your life and your credit. And more times than not, your lender does care about you and your situation.

Tags: foreclosure facts