Loss Mitigation Alternatives (Or When is a Short Sale not Appropriate

With historically high rates of default on home mortgages lenders are facing many more foreclosures than they have in the past. This allows for short sale investors and pre-foreclosure specialists to thrive in the current market. However, not everyone who defaults on a mortgage should be considered a candidate for a short sale.

A short sale is only one of six loss mitigation options, and playing the pre-foreclosure game successfully requires a working understanding of the other five. In this article we will look more closely at all of the options available to a homeowner with a defaulted mortgage so that you will be able to present a balanced picture to your client and help them make the decisions that are in their best interest.

Does working with sellers in pre-foreclosure mean you have to be a loss mitigation expert? No, but it does mean you should be familiar with the options available to your client and be able to refer them to a different specialist whenever appropriate.

The purpose of loss mitigation options is to provide an alternative to foreclosure for homeowners who have had difficulty keeping up with their payments but who may still be willing and able to stay in their homes. Generally speaking, a lender is not likely to offer loss mitigation options to the owner of an investment property. And a short sale is usually the last choice on the lender’s list of options, only slightly better than an actual foreclosure.

The first loss mitigation option, in order of the lender’s preference, is a repayment plan. This is where the homeowner catches up the payments and brings the loan current, perhaps by making higher than normal payments for a set period of time. The lender experiences no loss this way. The second option is a loan modification, where the borrower and the lender agree to new loan terms that are acceptable to both, perhaps with a lower interest rate but larger balance.

Third is a forbearance, which is where the lender allows the borrower to go for a specific amount of time without making payments, perhaps adding the back payment amount onto the balance of the loan. Those three options all apply to a homeowner who is able (eventually) to pay for the house.

For the homeowner who doesn’t have the means to stay in the house, the lender’s preferred option is an assumption, which is where somebody else who qualifies assumes the loan and resumes payments. Next is a deed in lieu of foreclosure, which is where a lender agrees not to foreclose but rather accepts the property by quit claim deed, which will protect the borrower’s credit somewhat. And finally, the last option considered by lenders before foreclosing is a short sale.

Understand that making use of any of these alternatives requires strict qualifying by the lender. All loss mitigation alternatives require there to be a legitimate hardship on the part of the borrower. A repayment plan, loan modification, or forbearance will require demonstration of the borrower’s ability to pay, an assumption will require the assumer to qualify for the loan, and a deed in lieu or a short sale will require documentation of the borrower’s inability to pay.

As a pre-foreclosure investor, only after you have informed your client of and eliminated all other options can you confidently proceed with negotiating a short sale.

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Author: Omar Johnson

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How You Can Use A Mortgage Loan Modification Prevent Foreclosure

Mortgage modifications are become more and more common, with the rising foreclosure rates in the United State, until recently mortgage, companies have been reluctant to provide help to people facing foreclosures by utilizing a mortgage modification program. Lenders are starting to use them more often not with the huge influx in homeowners that are in jeopardy of losing their home to a foreclosure. The lenders have come to realize that by working with the homeowners they have a chance at taking additional loses that are putting many mortgage companies into bankruptcy.

A mortgage modification or often times called a loan modification allow borrowers the opportunity to re-negotiate the terms of their mortgage loans, thereby reducing the required monthly payment. This option gives people facing a financial hardship the chance to save their home from a foreclosure. Establishing a new payment plan trough a successful mortgage modification will help you avoid foreclosure.

Lenders and borrowers have many reasons to work through this hard situation together, and establish a suitable plan that works for all parties involved. Selling you home may not be an option, especially with today’s market conditions and the circumstances that have causes this unfortunate situation to begin with. Therefore, if your home is to be saved from foreclosure, you and your lender will have to work together.

Mortgage modifications are often times a reasonable solution to prevent foreclosure. By negotiating a new payment, structure lenders still get their money and the borrower is able to keep their home. However, negotiating a mortgage modification is not that simple. Successful loan modification will require documentation to prove your current financial position with the lender. This information is also use to verify your ability to pay the new loan if the bank is willing to work with the homeowner.

While not all banks offer this type of solution, it never hurts to talk to them and find out. Who knows, it may be just what you need to prevent losing your home to a foreclosure. Lenders are staring to work more with borrowers facing foreclosure in this difficult time, lenders do not want your home, they are in the business of lending money not property management, and with the close to 2 million homes in foreclosure lenders are running out of options too. Qualifications for this type of solution, may be difficult and time consuming, but keep in mind what your goal is. Protect your most valuable asset, save your home from foreclosure with a mortgage loan modification.

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Author: Thomas Bladecki

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Explaining Foreclosure: Explaining Foreclosure Options To A Homeowner Options To A Homeowner

Understanding the different options a seller may be considering is important when negotiating with sellers. Below are the most common options that sellers may address with you if the sellers are either in default or anticipating being in default.

1. Reinstatement of Loan (Cure): This option is paying the lender everything that is owed in one lump sum to include missed payments, any late fees associated with these payments, foreclosure fees, legal fees and the principal owed during the delinquency.

A cure may involve the seller curing or deeding it to the investor “subject to” the existing loans, who will cure. There is a risk to the homeowner that the lender may accelerate the loan because of the due-on-sale, and the homeowner no longer owns the property and has no recourse of the investor doesn’t pay the loans.

2. Repayment Plan: This is a written agreement between the lender and the seller. These plans require higher payments than the regular monthly mortgage amount for a period of time until the loan is brought up-to-date.

3. Loan Modification: A loan modification involves changing one or more terms of a mortgage. Modifications can be considered to reduce the interest rate of the mortgage, change the mortgage product (from an adjustable rate to a fixed rate, for example), extend the term of the mortgage or capitalize delinquent payments (add delinquent payments to the mortgage balance-only available in extreme hardship situations). Modifications are not easily granted and there must be strong, justifiable reasons for the request.

4. Forbearance Agreement: The lender will allow you a period of time (3-6 months typically) of either low payments or no payments at all. Unless the loan term is extended (which happens rarely), the later payments generally will have to be higher than the original monthly mortgage payments until the loan is up-to-date.

5. Special Forbearance (FHA Loans only): Allows eligible borrowers to postpone monthly mortgage payments for a minimum of four months. While there is no limit on the maximum number of months, at no time may the agreement allow the delinquency to exceed the equivalent of 12 monthly PITI installments.

6. Deed-in-Lieu: A Deed in Lieu is an option in which a borrower voluntarily deeds collateral property in exchange for a release from all obligations under the mortgage.

A DIL may not be accepted from borrowers who can financially make their payments. If a borrower qualifies for a DIL program they may be eligible for cash back from the lender as in the Cash for Keys program.

7. Cash Sale: The borrower sells the property, pays off his loan, and, depending on the equity, may net some cash out of the deal. The challenge, of course, is being able to sell it quickly enough, which most often requires a substantial drop in the price.

8. Short Sale: The borrower makes an agreement with the investor to sell it for less than is actually owed, subject to approval of the lien holders. This generally results in no cash to the homeowner, but will be better for the better for his credit than a completed foreclosure.

9. Refinance: The borrower may be able to refinance and get a new loan, but generally this is difficult because the borrower has little equity and poor credit. The new loan likely will have higher payments than the old loan.

10. Do Nothing: The worst choice for the seller, whose credit will be ruined, but he can stay in the house for several months for nothing, save up some cash, and move when the lender or the high bidder from the auction eventually evicts the homeowner.

Explain each of these choices, and be honest with the homeowner. In many cases, he will trust you for your candid explanations.

You may lose a deal or two by offering the homeowner choices that are actually better than your offer, but that’s ok,always take the high road and you will have a long and properous business in real estate investing.

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Author: Richard Reichmann

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How To Stop Foreclosure Before It Happens

Your home is your castle and nobody wants to lose his or her home. Have you seen all the foreclosures in the news lately? If you are facing this dire situation as well, there may be a few things you can do to help yourself. Learn how you can stop foreclosure before it is too late.

The first thing you need to do is swallow your pride, quit ignoring the situation, and talk to your lender at the first sign of trouble. Before it gets too out of hand is the best time to try to work out a solution. There are many reasons that people fall behind in their house payments and you are no exception.

The most common causes of foreclosure generally fall under one of four categories. These include: 1) Loss of income from the main breadwinner in the family, 2) Illness, 3) Death in the family or 4) Expensive and unexpected repairs.

If the reason you are behind in a payment is the loss of income, go to your lender and tell them the situation. They more than likely will work out a plan to stop foreclosure that will allow you to have a specific amount of time to catch up your payment.

Even by adding a little extra to your regular payments until the amount is caught up is better than not paying anything at all. Should this happen a repayment plan can help you to stop foreclosure.

An illness may cause lost time from work, which can put you in a financial bind. If this is the case, another solution to stop foreclosure is called forbearance. What this entails is the situation looking good for a repayment if a temporary delay of the payments is needed to give you some breathing room. Once you get back on your feet or if you are expecting a tax refund, you can catch the payment up and everything goes back to normal. This is called reinstatement.

If a spouse dies and an income suddenly stops, you can get behind in your mortgage payment very easily. This definitely is a time you should go talk to your lender and see what solution they come up with to stop foreclosure. Since they are more experienced with these types of situations that you are, they have a good idea of what can be done for different situations.

Sometimes unexpected expenses crop up and are quite costly. If your car breaks down for example, maybe it can be fixed or maybe not. If not, you are looking at having to purchase another one. If it can be fixed but the repair is going to be expensive, this is money that you were not planning to have to spend.

Ideally, everyone should have a savings account that they try to add to on a regular basis. However, that is not always possible when struggling to make ends meet today.

Another solution to help you stop foreclosure is loan modification. This can be done by the interest rate you are paying being lowered to reduce monthly payments so that you can afford them. Ideally, this would be the best method to stop foreclosure.

These are only a few of the many solutions to help you stop foreclosure. As serious as the problem is, there are numerous resolutions if you start early enough by either talking to your lender or to a credit counselor.

About the Author: Alan Largo

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Professional Help to Modify your Loan

But before we proceed any further with the discussion, let’s clarify the term home loan modification. Loan modification basically refers to some subtle changes affected in one or more of the original clause(s) of the home loan, thus providing the borrower the liberty of having the loan reinstated and resulting in a payment the distressed homeowner can meet off finally, relieving the house owner crunch from the foreclosure bubble.

Speaking on a frank note, the entire process of loan modification is truly exhaustive, and sans the perfect professional guidance, at times if turns out to be exasperating as well. And this is exactly where the role of comes into play; if you are seeking some expert opinion and loan modification assistance take the pleasure to help you in saving your dream house, and live a hassle-free life. Furthermore, considering the current economic scenario, loan modification services offered by the website turns out to be a genuine lifesaver for many of the flustered homeowners and their families. An exceptionally comprehensive website, provides all kinds of professional assistance whenever it comes to modifying your loan amount. Comprised of a team of highly qualified and trained loan modification negotiators, compliance officers and lawyers, processors and real estate attorneys and paralegals, the website is surely a cut above the rest.

It’s quite common to come across loads of baffling and erroneous data, courtesy the internet, wherein the so-called “facts” and “news” are pyramids of cant, penned down either by blog writers or our journalist friends, who in reality are absolutely clueless about the on-goings in the loss mitigation arena.

Even if you are not a computer geek, and are being apprehensive about the website navigation, I suggest don’t be so. So what are you waiting for? Go ahead and take your first step; help yourself to regain your peace of mind. A tour across the site, you’ll come across several business endorsements the witnesses to the site being a verified and trusted professional platform.

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Author: Gerald Greene

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