Steps to a Foreclosure



For most homeowners, foreclosure is a terrifying prospect. When it comes to foreclosure the options available are extremely limited and the homeowners need to make decisions extremely quickly, especially in non-judicial states. However, the foreclosure process can be stalled for as long as 5 years in judicial states. All homeowners who face foreclosure have four basic options that are solutions for their dilemma.



The foreclosure process in non-judicial states can be as rapid as 30 - 45 days. Most non-judicial states allow the lender to foreclosure rapidly but may not allow the lender to get a deficiency judgment against the homeowner. The homeowner needs to investigate the process as it differs slightly from state-to-state.



When it comes to foreclosure in judicial states, the lender needs to take the foreclosure through the judicial process. The process was designed to take place in 90 - 120 days after which the courthouse auction would occur. Realistically, because of backups in the judicial system and stalling measures by attorneys, the process can take years.



Thousands of Americans are behind on their mortgages. They are in a situation where they can either pay the money that will never be payed back, or they can take the option known as a strategic default. With the strategic default, the homeowners simply stop making mortgage payments. However, before they do this they should be aware of the four most common alternatives to the foreclosure process.

Loan Modification - Making your home affordable

The method that is most commonly used is a loan modification, however, this is usually the least successful of the alternatives. In this situation, the homeowner requests a reduction in his monthly mortgage payment to meet his budgetary needs. If he has lost his job, a loan modification is almost never granted. If the property is upside down (mortgage greater than the property's value) the lender may grant various changes to the mortgage interest or term to make the payment smaller for the short term.



Seldom do lenders do principal reductions which would result in more homeowners being able to keep their homes. Lenders are hesitant about granting loan modifications as in the majority of the cases, they result in mortgage defaults. It is generally believed they are only giving loan modifications for publicity and good will purposes.

Short Payoff and Short Refi

The next viable option is what is called a short pay. In this instance, the lender can offer the homeowner a principal reduction and in return the homeowner must pay off the reduced mortgage within three weeks in cash. These are becoming more and more common as they save the lender time and money over doing a foreclosure. A 66% principle reduction is what is commonly being granted at this time.

Short Selling your Home

The next option available to the homeowner is a short sale . If this option is chosen, the house is sold and the homeowners vacate the property. The benefit of this option is to stop the imminent foreclosure from destroying the homeowners credit. The homeowner will therefore be able to buy another home in less time than had he been through a foreclosure. Another benefit of the short sale is that the homeowners can stay in the house without making any mortgage payments until the process is complete, this could take anywhere from three to nine months.

Deed in Lieu

The last option available to the homeowner is to give the lender a deed in lieu of foreclosure. Instead of the lender going through the cost and time of the foreclosure process, the homeowner deeds his home to the lender. In this case the homeowner should always ask for money to move out - the so-called "keys for cash" program. This cash can range from $1,500 to $10,000+ depending on the value of the property and what condition the homeowner leaves his home.



Lenders prefer homeowners to sign over their property with a deed in lieu of or to do a short sale. This stops any future court action against the homeowner because he voluntarily gave up his home. When it comes to the lenders, they prefer the short pay option as this saves them the trouble of trying to sell their properties at what could be a larger discount.



To make the best decision for your future, it is always a good idea to review your personal situation with legal aid services. Going broke to keep your mortgage is never more important than your credit. Your credit can always be repaired, your well-being can be much harder to fix and take a lot longer.

Homeowners who find themselves in a situation where their mortgages are higher than the property's value, and who cannot afford to pay their mortgages, can either short sale their homes or let the bank foreclose. It is far more beneficial for them to short sale their homes and with the new H.A.F.A program in place, the benefits became even greater.



In an attempt to reduce foreclosures, the Home Affordable Foreclosure Alternative Program aims to streamline the short sale process. Short sales, transactions in which a lender accepts a payoff less than the balance due on a home loan, have become more common as the housing market soured. According to California-based research firm CoreLogic, about one in four homeowners nationally owe more than their homes are worth.



The extent to which the program catches on remains to be seen. The new program is still finding an audience with homeowners and real estate agents. The impact on community banks may also be mixed. This is a new government program that was implemented to help a certain portion of distressed homeowners avoid foreclosure by allowing a short sale of their home without any negative consequences to the homeowner.



This is a really good option for homeowners who qualify. You get 120 days to short sell, with the option of renewing the listing for one year if needed. The entire time you are in the program the servicer will not foreclose on your home. Another benefit is the fact that the servicer and investor of your mortgage are accepting full satisfaction in the short payoff. Therefore, there can be no deficiency judgment or promissory note asked of the homeowner. This is the true advantage of the Home Affordable Foreclosure Alternatives program.



The Obama Administration's Home Affordable Foreclosure Alternatives Program, which officially launched on the 1st August seeks to streamline and standardize the short-sale process to help banks and homeowners avoid foreclosure. This program also offers incentives for homeowners who qualify as well as real estate professionals. These incentives include;



The homeowners can receive up to $3,000 in relocation costs. This incentive makes it less likely that owners will damage the house on the way out, this is common in foreclosures.



Any future liability of the homeowner is released after the home is sold or deeded back to the bank. The homeowner can therefore not be held responsible for any loss on the loan experienced by the lender.



Servicers cannot ask real estate agents to discount their commissions.



After completing a short sale or deed-in-lieu-of-foreclosure, the servicer will receive a monetary incentive of $1,500 to $2,200.



A total aggregate of $6,000 will be awarded to all lien holders in order of lien priority, this means that secondary lien holders can get up to 6% of the outstanding principle balance.



This program seems like the perfect solution to the current housing crisis. This program aims at decreasing the number of foreclosures, streamlining the short sale process and bringing in a standardized form that is used by all the participating mortgage services. This program can be seen as the first step in repairing and reversing the many housing issues the United States are experiencing.



If you decide on doing a short sale , you need to hire a Realtor. This is a prerequisite made by the lender. The realtor you choose can determine what type of experience you have so it is always in your best interest to choose a top realtor. When embarking on this process it is also always a good idea to seek out the services of an attorney and a tax professional.



The other benefits of short sale are;



If you are not behind in your mortgage payments, you can buy a new house immediately. However, if you are behind in your mortgage, you may have to wait for 2 years.



On submission of a short sale package, the foreclosure proceeding will be postponed and the homeowner will be given 2 - 4 months to complete the transaction.



You will not have the stigma of a foreclosure on your record.



Your credit score will only decrease by 30-200 points depending if you are behind in your mortgage or not. You can easily build up your credit by supplanting with good payment history, low credit balances and so forth.



You are not legally required to disclose you had a short sale when applying for a loan. If you had a foreclosure on your property you would legally be required to disclose it. Not disclosing a foreclosure when applying for a loan is a federal offense.



You may be able to negotiate with your lender to forgive the equity loan or non-purchase money loan. If the lender will not forgive the debt, you may be able to reduce the balance considerably.

A lot of families are struggling to hang onto their loan in the current economic climate. It is believed that almost half of all homeowners in the United States are in financial difficulty. One good way to afford your mortgage payment is to get your loan modified.



In normal times, when there are just a handful of foreclosures every day, the banks can absorb it. They just write those off and go on their way. However, when the economy is as bad as it is right now the banks are battling to absorb the debt of foreclosures . Banks can no longer afford to keep foreclosing on homes at the rate they are now.



This financial crises is affording the battling homeowners an opportunity to rectify their financial problems. This opportunity comes in the way of a loan modification. Loan modification is a way to modify the terms of your loan so that you wind up with payments you can afford. It is not to be confused with re-financing. In the loan modification process, an individual will negotiate with the bank to either cut down on your interest rates or on the principal leaving you with repayments that are manageable. These cuts are often dramatic, 30%-50% in many cases.



You can represent yourself in the loan modification process, but even seasoned loan modification attorneys get told “no” by the banks more often than not. It is always best to work with an experienced lawyer as they have the tenacity to keep asking until the bank agrees. The bottom line is that when the banks realize they’re dealing with someone who knows the basics of the procedure, and their culpability in it, they tend it sit up a little bit straighter and be more receptive to working out a deal.



There have been some reports that loan modification does not work. They base this assumption on the fact that some people who have gotten loan modifications wound up back in trouble six months later. In these cases, it is normally found that the bank gave a token reduction in payment instead of a real loan modification. However, there are now experienced loan modification specialists dealing with this process and the loan modifications are becoming more successful than ever before.



Choosing a loan modification company is quite tricky and there are a lot of shady loan modification outfits out there right now to choose from. A good example of this is a company that works on a "best effort clause", this means they will make an effort to modify your loan but they offer no guarantee. As long as they have contacted the bank and put out their proposal, they consider their job done. If the company you're looking at doesn't offer a guarantee, then don't go with them. That is the plain and simple truth about choosing a loan modification company.



An advantage of working through a loan modification company is that they understand the terminology used when negotiating with the bank. They are on the same page as your lender and know what needs to be done to get you approved. They also know what a good loan modification is and what a bad one is. A good loan modification company will know when to reject the offer and when to take it. They can save you hours of negotiating by taking care of the entire process on your behalf.



Another indication that a loan modification company is good is their ability to get "instant" loan modifications with the major lenders. If this is achieved, the process can be completed in less than a week. Some of the major lenders include the Bank of America, Countrywide, EMC and Wells Fargo. If your lender is one of the above mentioned you should definitely contact them regarding a loan modification. The loan modification company will get all the details they need as well as authorization from you to speak to the lender on your behalf.



They will know right away if you are approved, what your interest rate will be and what your payment will be. They will then ask you if you want to go ahead with the loan modification based on the information they give you. If you are not happy with the terms of the loan modification you can look at other alternatives such as a short sale . With the loan modification process there is no risk involved and the loan modification companies do not charge any up-front fees.



If you don't have one of these lenders, there are other programs available as well. There are companies that have experts on the HAFA program (the Obama mortgage plan) and know how to get you qualified if you are within the "window" or close to it. In this process, your monthly payments are reduced to 31% of your net monthly income, including taxes. This process is carried out by either reducing your interest rate, extending the terms of the sale and sometimes by reducing the principal amount. The process is carried out in the above mentioned order until the cap is reached, this means that your interest rate will be cut and your terms will be extended before they even consider reducing the balance, this is only done in rare cases. The whole point is to lower your payments so you can afford to stay in your home.

The prevailing economic environment is placing a lot of families in a financial meltdown. Foreclosure levels are consistently increasing yearly. Not very many areas have actually been slammed as hard by the property catastrophe than California. In California on it's own, house foreclosures have grown roughly 14% in the last quarter.



While these figures are shocking, it usually is hard to believe that loan providers themselves tend not to want to deal with the foreclosure approach. It isn't always an excellent resolution for lenders when a San Diego foreclosure takes place. There are a couple of high fees that comes by way of a foreclosure and having to take back the property.



The foreclosure process can cost nearly $77,000 and sometimes even a lot more. The homeowners may well fork out close to $8,000 for services relating to the foreclosure. Nonetheless, the greater monetary responsibility is with the lending group or individual. The lender needs to settle the legal and recording expenses, advertising and marketing, likely property or home restoration, as well as the time and money it takes to find a new home buyer.



This is definitely why more and more people are looking to sell short than to contend with the San Diego foreclosure laws and regulations. The short sale is additionally a less humiliating exit from the dilemma when compared to a large, foreclosure sign in the front garden. Short Sales arise whenever a lender allows a property to be sold for less than what is owed on the mortgage. On most occasions, the lender will lose less money in a short sale financial transaction than if he lets the property go into foreclosure.



If a homeowner owes more than what the property is really worth, then this option is a lot better than going through a foreclosure. The sale will eliminate his debt for less than what he owes. An additional advantage is that the process will prevent a serious stain on his credit history simply because a foreclosure has a bigger negative effect on your credit compared to a short sale.



A short sale is definitely much simpler than a foreclosure. Nonetheless, it involves a legal procedure. Working with experienced experts, or even a company with a decent team of legal representatives and tax experts, will help you run through the intricate particulars. There are plenty of agencies that provide these sorts of real estate solutions.



A California short sale is regarded as a win-win option for all individuals. The lender gets a payoff amount in a significantly quicker time than he would going through the foreclosure process. The lender also eliminates the risk of not being able to sell the property



Even so, a California short sale is generally a long, slow and elaborate process. There are 5 simple steps that a homeowner ought to take to create a effective short sale. The first is to obtain equivalent sales rates as well as an approximation of the expected high closing costs. This will help authenticate the prevailing marketplace worth of the home.



He needs to then tally up all of the financial loans obtained against the property and subtract this from the forecasted earnings of the sale. The homeowner then must contact the lender. He should insist on dealing with someone in authority in connection with short sale. The homeowner should keep in mind that he is expecting the lender to settle for less than the full amount owed so he should be firm but accommodating.



The homeowner should also be ready to present the necessary documentation which includes a letter of consent giving the lender authorization to talk with specific interested parties about your loan. The homeowner must also include things like his name, home address, the mortgage amount and the agent’s contact information.



Also , it is usually a good idea for the homeowner to present a hardship letter outlining the way you got into a monetary crises, and to give evidence of his assets and income. He might also choose to include recent bank statements with an explanation of any out of the ordinary deposits or withdrawals. He must also make sure he submits his broker’s competitive market evaluation.



The homeowner should feel at ease when working with an property agent that has knowledge about short sales. Many of the brokers have comprehensive short sale education and are for that reason awarded troubled real estate designations. In San Diego, the short sale option is far better than the foreclosure procedure so homeowners should not be embarrassed when enquiring about this specific procedure.

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