Foreclosure Information

Short Sale 

When a borrower is experiencing economic hardship the lender may agree to a short sale. This is basically discounting the loan balance to help the borrower out. When a borrower is interested in a short sale they should talk with the lender’s loss mitigation department to negotiate a deal. Not all borrowers will be eligible The borrower/homeowner will sell the real estate for a price that is less than the loan balance and the money from the sale go to the lender and satisfy the debt in full. In a short sale, the lender determines whether a proposed sale is worthwhile or not.

A loan balance is not always discounted for a short sale and the circumstances surrounding the borrower’s situation play a big role in whether a short sale is approved or not. Generally, the real estate market and the borrower’s personal finances will affect the decision.

Generally, the reason a bank will accept a short sale is to help the borrower avoid a foreclosure on their home. When the bank believes that selling the home in a short sale would save them more money than a foreclosure would then they will agree to a short sale. The homeowner benefits significantly from this arrangement, too, because they have some control over the deficiency as well as avoiding having a foreclosure on their credit report. In most cases, a short sale is faster than a foreclosure and costs less money. This is why banks are willing to accept it. In general, a short sale is simply negotiating the amount of money owed on the loan down to an acceptable amount so the homeowner can sell the home and pay off the debt.

Short sales are good business practices in certain situations and that is why banks will accept them. Talk with your lender about a short sale if you believe this could be a good option for you.

Foreclosure is the last thing homeowners want to consider, however when the mortgage can’t be paid for whatever reason this is certainly what happens in many cases. Luckily, there are some options for homeowners to prevent foreclosure and forbearance is one of them.

Forbearance is simply an agreement to postpone the borrower’s monthly mortgage payment for a period of time. The time frame is determined by the lender and the borrower’s special circumstances. During the period of the forbearance, the loan will continue accruing interest, which may be paid during the forbearance period or afterwards depending on the situation. Homeowners interested in a forbearance must talk with their lender and be approved for this. Generally, a lender will approve a borrower for forbearance if they are able to make one full payment and the rest within 24 months or if they can pay at least 50% of the behind payment amount. Each lender has their own rules regarding forbearance so it is important to talk with your lender regarding your situation.

Of course, when a foreclosure seems like the only option there are still ways to catch up with the back payments and stay in a home. When a home has a great deal of equity then one option is to refinance and pay the balance of the back payments to catch up. This won’t reduce the monthly payment, but it will get you out of foreclosure proceedings. Not all lenders will be up for this, but if you do have plenty of equity and can prove that you have enough income to keep up with your future payments then they are more likely to approve you. The interest rate may be high, but that is worth paying to stay in the home and maintain the equity. Not to mention, in the future you could refinance to a lower rate.

Remember, the law requires lenders to approve you for forbearance if you qualify. That is why it is so important to head to the bank and make sure you talk with the person in charge of forbearances. Make sure you have everything in writing and even when you think your home will be sold because there is a court sale date you can still get two extensions. Because of this, you should do your best to get forbearance on your home.

Find You States Basic Foreclosure Law

For many people, owning a home brings a sense of pride and freedom that cannot be matched by renting.

things to consider before buying a home for yourself :

1. Pay off all credit and auto debts. 

2. You Can afford the home your buying, your total debt-to-income ratio should not exceed 36%.

3. Don’t forget you will have Home insurance, property tax and home repair bills.

4. Save for your downpayment, I highly recommend at least 10% to 20%.

5. Evaluate the real estate market in your area, in todays market (Oct. 2008), I would wait another year or two before getting into your first home (save save and save more). Home prices will continue to dip until next summer 2009 or even 2010.

6. Home prices will not see appreciation for some time, maybe until 2013 or longer. Prices look very attractive right now, very tempting to buy but i see prices going down further (if you can take a hit of $20k to $50k or more downward price if you buy now, then buy dont let me stop you - if you can’t patience is a virtue)

7. Don’t let anyone influence you to buy, reasearch your community, prices, foreclosure rate etc…make an informed decision.

Last thing i want to see are people buying into homes now and getting into foreclosures later, so ugly if you know what i mean

Deed in Lieu of Foreclosure

When a loan is in default and about to enter foreclosure proceedings there are still some options available, one of them being a deed in lieu of foreclosure. This happens when the borrower, also called the mortgagor, gives the lender all the interest in a particular property to satisfy the defaulted loan. Doing this helps avoid further foreclosure proceedings.

Why do this?

Those who are on the verge of foreclosure proceedings obviously want to do whatever possible to save their home. The deed in lieu of foreclosure is a way this can happen. There are quite a few advantages offered to both the lender and the borrower in this situation. The biggest advantage to the borrower is that as soon as the deed in lieu of foreclosure is approved the debt associated with the defaulted loan no longer belongs to the borrower. Additionally, the borrower will not have to deal with the foreclosure proceedings or the shame and embarrassment that frequently accompany these proceedings. The borrower also will receive more favorable terms, in most cases than they might if the foreclosure were formal. The borrower benefits from this arrangement because significant time and money is saved since repossession is not necessary. Additionally, the lender has more advantages should the borrower eventually file for bankruptcy.

The way a deed in lieu of foreclosure transpires is the real estate that is transferred secures the debt. Otherwise, there is no way for this transaction to occur. This transaction must occur on good faith by both parties as well as voluntarily. The settlement agreement must equal at the very least the fair market value of the property that is being transferred. In most cases, borrowers who owe more on their property than the current fair market value of the property will to be considered for a deed in lieu of foreclosure.

Generally, the borrower must act upon this option with the lender because it must be voluntary. The lender will frequently respond to the deed in lieu of foreclosure when the borrower sends a written offer to the lender. The lender waiting for the borrower to make the proposal of a deed in lieu of foreclosure offers some protection that the lender did not pressure the borrower or act in bad faith. It is not necessary for either party to engage in the deed in lieu of foreclosure until both have settled negotiations and come to an agreement.

If receive a Form 1099c from a lender saying it couldn’t recover the difference between what the bank sold your home for and what’s owed, Fill out Form 982 with your tax return to clear your tax obligation. Speak to your tax consultant about more information about form 982 if you qualify.