Most people believe that foreclosure laws are designed to hurt rather than help them. Not so. The truth is, foreclosure laws have evolved to protect the borrower -not the lender. The foreclosure process gives you, the borrower, specific periods of time in which to:
• bring your loan current by making up the missed payments (known as “reinstatement”), or
• pay off your loan in its entirety (called “redemption”).
If neither of these options is feasible, you will still have time to prevent your property from being sold at a public auction (the foreclosure sale). You will get the most benefi t out of the foreclosure process if you envision it as a “window of opportunity” to resolve your financial problems. During this period, you have time to learn about the foreclosure process and implement a strategy to stop foreclosure. Another basic misconception about foreclosure is that lenders want to foreclose.
Nothing could be further from the truth! Lenders are in the business of loaning money—not owning real estate. Lenders are also reluctant to incur the costs of a foreclosure. For example, if your lender is forced to foreclose, it will not only lose your back payments, but it will also incur foreclosure expenses, taxes, insurance, wear and tear while you (or your tenant) live in the property, rehabilitation expenses to refurbish the property for sale, and a real estate agent’s commission once the property is sold. As a result, many lenders will go out of their way to work out a resolution– short of actually foreclosing–if given the opportunity to avoid paying these costs.
Communicate With Your Lender
At the heart of stopping your foreclosure is communicating with your lender. Don’t shy away because you’ve missed payments, concerned that you will miss some payments in the future, or that your property has already gone into foreclosure. Whether you communicate by telephone, le_er, email, fax, or in person, you will have a much easier time stopping (or at the very least, delaying) the foreclosure if you talk to your lender rather than adopting a code of silence. The first step is to determine who your lender actually is. (This is no small feat these days with lenders selling their loans to other lenders like hot potatoes.)
If your property has already gone into foreclosure, the fi rst person you will be dealing with either the foreclosing trustee, or the attorney for the lender. The trustee is responsible for handling the foreclosure process if it is nonjudicial If it is a judicial foreclosure, you will most likely be contacted by a process server, sent by the lender’s attorney. But the problem is that you need to communicate with your lender, not the trustee or the attorney.
So you should request from the trustee or the a_orney, the name, telephone number, and address of the foreclosing lender. In the unlikely event that they refuse to disclose the name of your lender, you can look on the Notice of Default, or the summons and complaint, or telephone the customer service department of a local title insurance company. Another situation may occur where you discover the name of your lender, but it turns out to be a servicing agent rather than the party that actually holds the deed of trust or mortgage.
A servicing agent is a company (sometimes it can be a bank, mortgage company, or private corporation) that is hired by the actual lender to “service” the loan, including the collection of payments, issuing of payment coupons and late notices, monitoring the impounding of insurance and tax payments, and handling foreclosures if necessary. Fortunately, most servicing agents will disclose the name of the lender. If they won’t, you may be forced to negotiate with the servicing agent. In either event, follow the guidelines in this book to communicate and negotiate with them.
Do not under any circumstance ignore your lender’s contacts. Your goal should be to respond to every phone call or letter. Diffi cult as it may be to talk about your financial problems, be polite and cooperative. Follow up all telephone calls with a letter to the person you spoke to, confi rming what was said. If you’re not in when a call comes, return it as soon as you can. When you receive a le_ er from your lender (always keep the original), immediately write a letter in response. It is important to establish a paper trail so you can prove to your lender (or a court, if necessary) that you have been cooperative, especially during the initial stages of the foreclosure process. It is also important to send copies of all of your letters to:
• the lender’s CEO
• the branch manager (if applicable)
• the loan offi cer who helped you obtain your loan, and
• any other person you know by name at your lender’s office.
Getting the right tips and info on foreclosures could really help you deal with foreclosure problems or your investment strategies regarding foreclosed properties. Most people think that foreclosures are the outcome of poor personal financial management. While for the most part this is quite true, there could be more telling reasons foreclosures occur. Do not take it too hard on yourself if you are under pressure to foreclose on your mortgage or home. Thinking about foreclosures bank owned? Do more research online and find out.
While you may think that personal problems is the main culprit on your financial woes regarding mortgage payments and bills as whole, the other reasons could be more significant. Your local and national economic conditions can play a very significant role on why you are in such a predicament. Think about of the main industry in your locality or the industry that provides labor in your area. If these companies are affected by both your local and national economy, you will definitely be affected.
When the national economy is going down or is in a crisis, most local industries and businesses are going to be affected. And when local businesses and industry is affected, jobs and commodities start to worry everybody. It will not take long before you will feel the effects. So being prepared for these eventualities could do you a lot of favor if have put aside something for situations like this.
To name a few of the basics but very important reasons foreclosures occur will help you immensely on how you will handle your finances.
The reasons foreclosures occur are, as previously mention, personal problems like death in the family or divorce or illness and with mounting health bills. The effects of deteriorating local and national economy to the detriment of personal finances. Too lenient loan or mortgage terms offered by governmental agencies like the Veteran Administration (VA), HUD, and the Federal Housing Administration (FHA).
The availability of mortgage loans being offered at 80 to 100 percent of the value of the house securing the mortgage loan. Simply put, the homebuyer can buy the house with little or no money down payment. In this case the homebuyer or borrower will bail out at the first sign of trouble because they basically will not lose anything. Foreclosing the property is difficult unless you have so many vested interests in the property.
There is the ego type thing that some buyers try to over extend themselves and buy properties which are not really within their reach. Thus, they will fail to secure a cash reserve for any eventualities. Unexpected repairs and expenses by first time homebuyers can quickly turn into a financial nightmare for some. Then they will eventually start to fall behind their mortgage payments. What this means is foreclosures is just around the corner.
As in every business, there are scammers and the hard and honest working businessmen. The existence of these predatory lenders which I call scammers, can hit your wallet in a heartbeat. They target the very vulnerable who have low credit score, low income and have excessive debt and even bankruptcies. These prospective borrowers cannot get loans from the traditional banks and lenders so they are primed for predatory lenders. These homebuyers will end up with high interest rate mortgages and unheard of late fees.
And do not fall prey to advertise low interest rates.
It is very tempting to go and buy homes that are not supposed to be your fit. For instance a couple would have one of them working two jobs and when that other job was lost to downsizing or hard times, the home owner will not be able to pay their mortgage.
With all these tips and info on foreclosures, you should be able to make the right decision when making that home purchase. Reasons Foreclosures occur are valuable tips and info to guide you and prepare strategies for your financial road map.
An Alternative to Foreclosure – Short Sales
For those of you who now find yourselves upside down in your mortgage, facing foreclosure and sometimes even bankruptcy here are a few facts to know.
A short sale is something that the lending market has recently come to terms with as a alternative solution for foreclosure. With the alarming rate of foreclosures coming into the real estate market this step seems to ward off the inevitable and save the seller’s credit.
Most sellers are now finding themselves in the horrible situation of losing their American Dream. When they first purchased their house it was explained to them that when the adjustable rate mortgage kicked in that they could easily refinance the house to a 30 year fixed note with their equity in place. However, the market has turned and now these homeowners are finding themselves with a mortgage that is far in excess of what their homes are worth and lenders are not readily available to refinance. In most instances their loan has been sold and they are stuck with a mortgage that continues to escalate.
A short sale is a process in which you list your house with a realtor familiar with the process. They garnish an offer and submit it to your lender for review. All fees are paid by your lender and in most cases the loan is reported as satisfied. It’s important to remember a few things about the short sales.
1. Sometimes your second mortgage will require you to sign an unsecured note for the balance of the loan. Be prepared for this. Not all lenders do it and I sometimes suggest that the borrower go back at a later date to renegotiate the note.
2. Do not ignore your HOA fees. Your homeowner’s association can and will put another lien on your home and that lien will have to be cleared before the short sale is accepted. You lender will not be willing to pay these fees and in most instances neither will an interested buyer.
3. Most lenders request a financial worksheet, 2 most recent copies of pay stubs, tax returns, bank statements and a hardship letter.
4. Ensure your realtor is familiar with the process and let them know your home is in distress.
5. Short sales take time. Be patient and ready and willing to show your home on a moments notice. Your showing records are very important.
6. Don’t give up! Short sales typically take 60-90 days while the loss mitigation department reviews your short sale.
For more information on the process you can visit my website www.fortbendland.com or contact me directly at Linda@fortbendland.com.
An actual foreclosure occurs when a buyer defaults on their mortgage and forces the lender to reclaim and sell the property for the remaining balance or the current fair market value. A pre foreclosure, on the other hand, is a process that homeowners often use in order to avoid having their property fall into foreclosure. Many homeowners choose to consider a pre foreclosure sale in order to protect their credit rating, which would suffer greatly if a lender reported a foreclosure.
Under a pre foreclosure sale, the current owner will typically be able to accept less than the actual balance remaining on the property. For this reason, seasoned real estate investors often prefer to negotiate directly with the owner under a pre foreclosure offer. The process is understandably difficult for some sellers, who are forced to relinquish their home due to bad circumstances. Individuals are faced with foreclosures for a number of reasons, including illness, job loss, divorce, excessive debt or other situations that may prevent them from making future mortgage payments.
For investors, purchasing a foreclosed home can often be challenging, but successfully negotiating a pre foreclosure offer may be even more so. It is often recommended that investors considering making a pre foreclosure offer consult an attorney who specializes in the handling of real estate matters. Important considerations to factor in to the offer include the condition of the home, any necessary repairs and the fair market value for other comparable homes in the area. Before making an offer, most investors prefer to have a professional inspection completed in order to confirm any unknown or underlying problems that may be present with the property.
The process of finding a pre foreclosure is difficult, but not impossible. Word of mouth is one way of learning of impending foreclosures, but lenders and even realtors may also be able to shed some light on the subject.
Under the U.S. Department of Housing and Urban Development (HUD) guidelines, a homeowner may be able to qualify for a pre foreclosure sale if they are at least two months delinquent on their mortgage payments, can sell their house within three to five months and the lender obtains an appraisal that confirms the value of the home meets the current HUD program guidelines.
A pre foreclosure sale is often beneficial to the current homeowner for a number of reasons. As mentioned earlier, a homeowner who is forced into foreclosure will suffer significant damage to their credit, which may make it more difficult to obtain a loan in the future. Even if the hardship that lead to the foreclosure was temporary, future lenders may see this as a sign that the borrower is a high credit risk. As such, obtaining another mortgage may be a very tedious task that, if granted, may be accompanied by high interest rates and a larger down payment.
The information contained in this article is designed to be used for reference purposes only. It should not be used as, in place of or in conjunction with professional legal, financial and/or investment advice regarding pre foreclosure investments. For additional information, consult an attorney who specializes in real estate and/or financial matters.
Properties appearing at Miami foreclosure listings are primarily the judicial foreclosed ones and sold through open auction. Florida foreclosure law is applied to foreclose and sale properties defaulting in home equity loan and home tax payment in Miami. Low of redemption is applicable here. But, redemption facility is restricted only till the date of auction. It means, the homeowner can stop the foreclosure and auction between approval of foreclosure notice and auction date. The time gap here is thirty days. To stop auction, the homeowner has to pay the outstanding amount and foreclosure expenses. If the homeowner can not pay this on or before commencement of auction, he/she looses right of redemption forever on the said property.
All mortgages on residential or commercial properties and condominiums for sale are foreclosed in equity. County court of Florida conducts separate trial all parties having interest in the foreclosing property. The county court approves the foreclosure notice. But, publishing it in local dailies is the responsibility of petitioner’s attorney. No foreclosed property is sold without proper advertisement of sale notice. Other people who can advertise regarding this foreclosure sale are the lender (or the petitioner) and court clerk. After the first publication of this notice, the homeowner can request for review of the notice. Hearing of this review plea is immediately commenced in the county court and all the complaints are verified minutely once again. If the court finds substantial default history of the home owner once again, then foreclosure notice is approved.
Before intimating county court regarding residential or commercial properties and condominiums for sale, the lender has to give twenty days interim time period to the land lord for repayment of outstanding amount. This period in legal terms is also known as pre-foreclosure. In this time, many landlords sell their property to avoid unnecessary legal hassles.
All properties appearing at Miami foreclosure listings are sold only through open auctions. Its open to all and all participants have to deposit a security amount (as mentioned in the sale notice advertisement) to bid in the auction. The said property goes to the highest bidder if payment of the remaining amount within a fixed time period by the bidder. Otherwise, the security is confiscated and court orders for a fresh auction.
The question of how people stay in foreclosed properties sometimes for years is one with a simple answer. The foreclosure process is designed to take title away from a homeowner for non-payment of the mortgages on the property.
If a homeowner stops making mortgage payments why wouldn’t the lender take the property back as soon as possible and evict the homeowner immediately. In fact, this is the usual course of action in almost every foreclosure action, however, there are exceptions.
When a homeowner is late making his mortgage payments and the lender starts collection action (harassing calls for example), there becomes an adversarial relationship between the two parties.
The lender views the homeowner as a dead-beat and the homeowner views the lender as a money-grubbing worm. The goal of the lender is to get possession of the property as soon as he gets the deed from the homeowner or through the court and clear out the property and sell it as soon as possible to recover as much of his loss as possible.
So why then would a lender allow a homeowner to stay in the property? There can be a couple of reasons but they are designed to be in the best interest of the lender and not a benevolent action with regard to the homeowner in foreclosure.
The most obvious reason is the lender wants a caretaker in the property to avoid vandalism from neighbors or damage by the homeowner before he leaves. While this sounds simple let’s look carefully at the consequences to the lender of the homeowner staying in the property.
First, the homeowner will be paying the electric and probably sewer and water or these utilities could be turned off. Many states for safety reasons will not allow utilities to be turned off even when a homeowner or tenant is not paying the bills. But the utilities are not the important issue.
The important issue is the liability the lender has with “squatters” living in their property. This liability extends to the former homeowner suffering a physical injury for which the lender will be sued.
The lender can easily get property insurance for uninhabited properties but not for inhabited properties. So the “hearsay” that lenders will allow homeowners to stay in foreclosed properties is nonsense. Have homeowners actually stayed in foreclosed properties? The answer is “Yes”.
There seems a disparity here but the actual reason is that the lenders start the foreclosure proceeding but do not complete the procedure and get the title or deed transferred into the lenders name until such time as they are ready to evict the homeowner. In the interim until the homeowner is evicted or he leaves, the lender puts “forced insurance” in place for an occupied property.
The homeowner will have to pay for this insurance if he works out his foreclosure problem or the lender will take it as additional loss on the property.
So the stories of lenders “forgetting” about properties, especially high priced homes, and leaving the homeowners in these properties for a year or two is generally an “urban legend”.
It may have happened but only when it was in the best interest of the lender. More often, the lender evicts first and would have done better to have the homeowner stay a little longer to help with the transition to a new residence. So don’t take a chance on your lender not evicting you when you go into foreclosure.
Amazing Short Sale Profits Part # 2 of 2
Now, let’s look at a situation where there is $100,000 owed on a mortgage and the property has back taxes of $5,000, a 6% real estate commission of $6,000 and repairs of $10,000. On a good day, the lender(s) may net $79,000. Now if the market value has fallen by 10%, then it is worth maybe $69,000, if…the lender can find a Buyer?
Now a sales price of $69,000 may be a fair deal for some Buyers, but not a great deal to a smart Buyer and certainly a very poor one to a wholesaler. So, if a retail Buyer could get this property for $60,000, that would be a much better value and the wholesaler could get for $50,000, that would work for him.
Soooo… how can we persuade the lender(s) to agree to approve and accept a short sale offer from a bad loan for them into a great deal for us? Make them an offer and substantiate with documentation why they should accept it, and that the Buyer is qualified to buy it now. The lender(s) and borrower(s) both at this point just want to “make it end and go away”.
Each loan(s) and lender(s) has certain criteria and guidelines to follow and must comply with. The lender(s), if they feel that there is a reasonable and responsible offer from a serious qualified Buyer, they will engage an appraiser and or a BPO agent to be the eyes and ears for the area and property and will forward their written opinion (appraisal or BPO) back to the lender(s).
The lender(s) will evaluate and then will decide to accept, counter or reject the offer. Additionally if there are two or more lenders on the subject property, the first lender will basically decide what they will take and typically the second may only get $1000 to maybe $5000, very seldom any more.
If the property goes to a public sale, typically anyone behind the first mortgage will lose out. Assuming the lender(s) accept the offer, then a detailed letter of the short sale agreement will be forwarded to the closing office and the purchase and sale will be completed in a typical fashion, with all parties getting what was agreed to.
In the forms section is all the paperwork that is needed to complete a short sale. The borrower(s) cannot negotiate a short sale for themselves and also CANNOT receive back any money proceeds from the closing
To learn more about the amazing profits of short sales, please visit our website or contact us for more in depth information. Questions…please contact me.
Q: Who can participate in a foreclosure auction?
A: Unless otherwise specified by the seller, anyone can participate in a foreclosure auction. Some organizations, such as HUD, give priority to owner-occupant bidders before allowing investors to participate. For additional information on an upcoming foreclosure auction, check with the lender who currently owns the property or the auction house conducting the sale.
Q: When should I have an inspection completed?
A: The answer to this question will differ depending on who you ask, but the one consistent statement is that inspections are important. If you are permitted to have a professional inspection completed prior to the foreclosure auction, this will give you a good idea as to a fair bid amount when considering the cost of any necessary repairs. On the other hand, a professional inspection isn’t cheap and some investors may choose to complete the task after their offer is accepted. If in doubt, speak with a real estate attorney regarding your responsibilities when participating in a foreclosure auction.
Q: Are there any warranties offered in a foreclosure auction?
A: Most, if not all, foreclosures are sold ‘as is’ and with no warranty of any kind. This means that you, the buyer, will be responsible for any necessary repairs or improvements on the property. If possible, it’s recommended to have a professional inspection conducted.
Q: What type of financing options are available for a foreclosure auction purchase?
A: As is the case with any type of home purchase, including that of a foreclosure auction, you will be responsible for making sure that the funds are in place before you agree to purchase. Whether your ability to participate in a foreclosure auction comes from cash assets or a mortgage loan, it’s important to research your options before making an offer.
Q: What can I expect from a foreclosure auction?
A: Because some homeowners are forced out of their home due to unsettling circumstances, such as a divorce, job loss, illness or other hardship, the foreclosure process is understandably difficult. A foreclosed property may or may not be in good condition and could require extensive repairs. No two homes are alike in this respect as the condition of the home will greatly depend on its former residents.
Q: Will I be required to pay in full on the day of the foreclosure auction?
A: Policies vary from one auction foreclosure to another, but most will require that you at least place a good-faith deposit if your bid is accepted. In some cases, you may be required to pay for the property in full on the day of the foreclosure auction. If you have questions, contact the lender who currently owns the property or the auction house conducting the sale.
The information contained in this article is designed to be used for reference purposes only. It should not be used as, in place of or in conjunction with professional legal, financial and/or investment advice regarding the foreclosure auction process. For additional information, consult an attorney who specializes in real estate and/or financial matters.
As of July 5, 2009, homeowners with mortgages finally have some rights in Michigan. In the past, if the home went into foreclosure, the lender could just advertise for four weeks in a legal newspaper that only went to attorneys, and the house could be sold at a sheriff’s sale. While the lender was required to post the notice of sale on the property (e.g., nailing it to a door), homeowners often had no actual notice that they were about to lose their homes.
Meanwhile, if a homeowner had problems paying the mortgage and wanted to discuss a loan modification, that was like arranging an appointment to talk to the real Santa Claus in person. Calls went unanswered or homeowners were transferred from phone number to phone number with little success. Some spent hours listening to phone menus that led them to nowhere. Since mortgages are often assigned from one lender to another, or are placed with companies whose duty was to “service” them, it was often impossible to find your way to anyone with information about the loan or the authority to deal with you and your loan.
All that changed when the Michigan Legislature enacted new provisions to the foreclosure law in Michigan. Under the new provisions (contained at MCLA 600.3404 through 600.3205e), before foreclosure proceedings can be commenced on a primary residence, the lender must actually give you the name, address, and telephone number of someone you can contact with authority to discuss a loan modification with you.
In addition, the lender must give you the names of housing counselors who can help you navigate your way to a loan modification. If you request a meeting with the person in authority, then no foreclosure proceeding can be commenced for 90 days. If you reach an agreement and comply with it, the foreclosure cannot go forward. If the lender will not agree to a loan modification, you have a right to go before a judge.
The lender even has to advise you of your right to an attorney and give you the number of a lawyer referral service of legal aid. All of these notices must be mailed to you by first class mail and certified mail. In addition, the lender has to publish a notice in the newspaper that the homeowner has the right to contact an attorney, and/or the lender, and/or a housing counselor. The homeowner has a right to go to court. That notice must also provide contact information for the lender and advise the homeowner that if an agreement is reached to modify the loan and the homeowner complies with the agreement, there will be no foreclosure. The notice must advise the homeowner that if he/she requests a meeting with the lender, foreclosure proceedings cannot be commenced until 90 days after the date that notice was mailed to the borrower.
Under MCLA 600.3205b, if a homeowner wants to discuss a loan modification, he must contact a housing counselor from the list provided within 14 days after the list of counselors is mailed to him by the lender. Then the counselor has 10 days to contact the lender. After that, financial information regarding the homeowner is provided to the lender and an in person meeting between the homeowner and the lender is arranged. The counselor may attend if the homeowner requests that. If a loan modification agreement is not reached, then the lender must work with the homeowner to determine if he is “eligible” for a loan modification. To be eligible, the total housing costs (including the house payment, property taxes, insurance, and any homeowner fees) must not exceed 38% of the homeowners’ gross income. This ratio could be reached if, for example, the lender reduced the interest rate or extended the length of time for repaying the loan or stalled payment of part of the loan until the end of the loan. The lender has to provide any calculations that it did to the homeowner.
If the homeowner is “eligible” for the modification under the guidelines above and in good faith and the lender has offered a loan modification to the homeowner (but the homeowner does not agree to it), or if the homeowner is not eligible for loan modification, then the lender can proceed with a typical out-of-court sheriff’s sale.
Unfortunately, this law has a “sunset” provision. It will expire on July 5, 2011 if it is not extended by the Legislature. Meanwhile, this law is certainly good news for homeowners in Michigan, especially those whose houses are “under water” or those who have become unable to pay their housing costs in full each month.
“Foreclosure can be defined as a process of recovering the amount of default from a defaulter on a loan either by selling or taking ownership of the property pledged as the security for the loan amount”.
Because of the recession period the economy is going through now, unemployment, huge debts and lack of accessibility to credits, are making it very difficult for many families to pay their mortgage payments, and they have no other go than to hand over the keys of their homes to lenders and walk out.
There are different kinds of foreclosures.
Home foreclosure: When a person borrows money from a money lender, he is liable to pay the interest and the principal amount. When he defaults the payment, the lender then takes possession of the house and this process is known as home closure. The lender then files a notice in the court called Notice of Default, when the borrower defaults for more than 30 to 60 days, to reclaim the property, to recover the amount owed.
If a person owns a property, he is liable to pay property tax. If the owner does not pay tax, the Government places a lien on the property, whereby the owner has to pay tax amount, the interest and the penalty charge for defaulting payment. This process is known as tax lien foreclosure.
When a person takes loan for business by mortgaging commercial property and the business defaults the payment, the property is sold for recovery of dues.
There are four steps of foreclosure:
The procedure of foreclosure varies from state to state, but the process is almost the same.
When the owner defaults payments, a Notice of Default is send to him. This is officially recorded by the bank. Usually it is not send when there is a default of one payment, but several payments.
The owner can reinstate the loan. Just because the foreclosure process has started, he does not loose the house now itself. He can stay in it and he can arrange for the money and repay the missed payments along with the late fees five days before auction of the house.
The date for foreclosure is set by the bank, and it is usually around three months. Till then the owners can live in that house.
Though the owner can stay till the house is sold, once the house is auctioned then the new owner will evict the present owner, sometimes within 24 hours.
Foreclosed property is on the increase in America. Real estate has stumbled down and many Americans are not able to sell their houses and tend to loose their homes. Between July 2007 and July 2008 foreclosure activity has increased by 55 percent.