Category Archives: Links

Too Much Month At The End Of The Money. Who Gets Paid First?

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Posted by on July 3, 2007 – 7:33 pm
Filed under Foreclosure Prevention, Links

There’s an old saying that the squeakiest wheel gets oiled first. In the case of creditors you may want to let some of them go on squeaking.

Who gets money at the end of the month when everyone can’t be paid has to be decided based on your situation. If you own a home then being able to avoid or stop foreclosure is a primary concern, so the top priority will be the first mortgage holder on your home. This obligation typically represents a debtor’s largest payment.

Evidence has shown that we make payments to smaller creditors first when money gets tight. This results in a short sighted solution. Soon your credit becomes blemished anyway, bankruptcy looms, and foreclosure on your home may soon follows. Once the damage is done many find negotiating with first mortgage holders can be more difficult.

 

Stop and think of this: If faced with the options of losing a credit card or losing your home which would you choose?

Here some things to consider when deciding how to allot your monthly income:

  • List of all available fixed income for the month.
  • Do you have teenagers or adult children living at home who can contribute? As a parent we automatically resist calling on our kids for help, but when the other option may be losing the house, it has to be considered.
  • List any extra income available.
  • Are there savings that can be used?
  • Can you borrow money from friends or relatives? Understandably not the preferred choice, but again consider the alternatives.
  • Is there a 401K plan or whole life insurance policy perhaps with some cash value? Widespread belief is if you tap into these you will be penalized heavily in the form of fees and penalties. There may be relief if you can prove a hardship exists. Contact the retire plan administrator or insurance company and ask what your options are.
  • Make a list of all monthly expenses. Be frugal and stick to only those items you must have. For example:
    • Food
    • First mortgage or rent
    • Additional mortgages
    • Utilities
    • Transportation for work

Of course there are many other monthly expenses in the typical household; clothes, household goods, and personal transportation to name a few. If you have money available after taking care of the priority expense then look at spending on these items. Luxury or wasteful expenses such as entertainment, vacation, jewelry, movies, dining out, and playing the lottery must be eliminated for the time being. Remember you are working at saving your home, and nothing should take precedent over this.

  • Obtain your credit report as well as your credit score. You can obtain these online for about $20.
  • Complete a personal financial statement.
  • Prioritize assets. Which do you need to keep, would like to keep, wouldn’t mind keeping, and which would you just as soon get rid of?

Now comes the moment of truth. Does the net monthly income amount match the expense amount? If the numbers balance you are fortunate. If there is surplus money this is better still as it opens all kind of options. I suggest taking any extra money and paying down credit cards balances, especially those with the highest interest rates.

 

If you find, as most do, that expenses still outstrip monthly income then you must honestly evaluate your problem. Is it long term or short term? Can it be solved or is there a date certain when it will be? Is it permanent?

 

So which is the best path from here? Contact a debt professional to help you. Be careful, finding the right kind of help can be very difficult. Attorneys are an option, but surprisingly few attorneys have any expertise in this field.

 

Look for a non-profit organization such as Consumer Credit Counseling Service. Be wary of individuals or for profit agencies offering these services. Some don’t possess the knowledge to complete the task, others are out right crooks. Many just take your money and put you in touch with a lawyer they have selected based on fee arrangements between themselves and the attorney, who not have the qualifications to handle these matters.

 

Regardless of what decision you make it is important to take action. Get help if you feel overwhelmed. Above all else be prepared to tighten your belt if you wish to salvage your finances, your credit, and probably most important, prevent or stop home foreclosure.

Equity Lines of Credit. The Allure Of Easy Money Brings Harsh Financial Lessons.

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Posted by on July 2, 2007 – 7:26 pm
Filed under Foreclosure Prevention, Links

The way Americans have taken on mortgage debt has changed significantly in the past two decades. The 1980s saw second mortgages account for less than 4% of outstanding home mortgage debt. By the mid-1990s second mortgages had increased to 12% of home mortgage debt. The 2000s have shown yet another double-digit increase, and the number is only growing. The primary reason for this increase is the ease in which homeowners can now access the equity in their homes. As a result second mortgage debt has grown faster than all other forms of consumer debt except credit card debt.

 

With a home-equity line of credit the homeowner signs a mortgage securing any money borrowed in the future under a line of credit from the lender. The homeowner may owe nothing the first day of the mortgage but will add to the amount with each charge made against it. Alternatively, the mortgage often finances old unsecured debts, so the mortgage begins by securing the previously unsecured debt load, with more to be added with future charges. In either case, any default on the loan may leave the homeowner suddenly having to avoid or stop foreclosure of the mortgage and possible sale of the home.

 

Homeowners who tap into their home equity may see themselves as clever by tapping into the riches represented by the equity in their homes. Lenders run television ads congratulating borrowers for their astuteness. Bankruptcy files are curiously devoid of borrowers who used this strategy with any success. Bankruptcy files are however filed with homeowners who took the risk and mismanaged their windfall.

By paying off debts with second mortgages, debtors might transfer otherwise dischargeable debts such as medical and credit card bills into debts they now have to pay at the risk of losing the family home to foreclosure.

 

The allure of easy money to be obtained by tapping into a home’s equity, coupled with poor money management is a leading cause in the rise of bankruptcy filings. Homeowners across the country are finding themselves unable to meet their financial obligations, placing themselves in a position where they are unable to prevent foreclosure on their homes. With no immediate answer on the horizon, this financial crisis will have far-reaching, negative effects for years to come.

Credit Cards – Their Silent Seduction Helped Fuel The Current Bankruptcy Crisis.

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Posted by on June 29, 2007 – 12:01 pm
Filed under Foreclosure Prevention, Links

In 1995 a historic event occurred that aroused little interest with popular media, yet the long term effects of this milestone have transformed our society. In 1995, for the first time ever, Americans starting paying for purchases with little plastic cards more then cash. Plastic overtook coins and folding money as the payment of choice.

Consumer credit has been around since the early 19th century. Companies such as Sears, Roebuck and Company were some of the first to lend money to the working man. These early credit cards were called merchant or retail cards, and were issued by the same companies that sold the goods.

During the mid-1960s MasterCard and Visa were established and banks started issuing these all-purpose cards. By the 1990s the all-purpose credit card reigned dominant over traditional store cards, and made it possible for consumers to charge anything from vacations to children’s braces.

 

Credit cards have become so pervasive in our lifestyles it has become extremely difficult in some instances to use cash as a result. Try reserving a room, rent a car, or even order a pair of shoes without one.

Credit cards have become all too easy to obtain. Consumers are inundated with offers through the mail, newspaper flyers, and even in places previously unheard of. Visit some doctor and dentist offices and you’ll likely see credit card applications conveniently placed within arms reach. Simply put society has become saturated with credit card offers.

For middle-class America credit cards are a way of life. Increasingly they no longer pay – they finance. Americans have taken to buying groceries and everyday consumables with debt – and financing those items over months or even years. This disturbing trend is only growing and adds to the already fragile economic situation.

Today more and more households find their monthly credit card balance is out of control. Even those credit card holders holding steady jobs and showing good payment history are in serious trouble as they use credit cards to take on more and more debt. A new practice by consumers is borrowing from one card to pay another until the whole situation has spiraled out of control often leaving the homeowner facing possible bankruptcy. As this slide towards financial oblivion occurs people are also discovering they may have no way of stopping foreclosure on their homes.

Credit cards, like life, come with their own slings and arrows. Their seductive influence has changed our mindset about spending. Runaway spending has become an all too common way of life and all too often leads to financial disaster.

Our predecessors understood that hard times often called for hard decisions. The time is at hand for the consumer to make the hard decision of salvaging their finances by reducing or altogether eliminating credit card use. Consumers making the right spending decisions will likely ride out the looming crisis. Those refusing change stand a very real chance of losing it all and ending up with little more than the clothes on their backs.

Death By Mortgage. Overspending and Under Earning Has Created A Bankruptcy Epidemic.

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Posted by on June 28, 2007 – 8:53 pm
Filed under Foreclosure Prevention, Links

One cause for bankruptcy filings is less obvious than others. Home mortgages are a large and important sort of debt for most, but buying a home is not what causes bankruptcy. The main culprit is change. Since the late 1940′s we have been taught that owning our home is a smart investment, provides long-term financial security, along with the added social acceptance and a nice tax break.

Fast-forward to today and we discover rising interest rates, stagnant incomes, higher property taxes, and other increasing housing costs making home ownership a greater risk for people who can no longer be sure of income stability.

 

Home ownership, combined with the need to follow the jobs, taking out second-mortgages to pay for college tuition, braces, and a stagnant or declining housing market have combined to move owning a home into the liability column in the family balance sheet. Another recent and alarming trend is the rise in using second and third mortgages to pay off credit card debt.

 

Home ownership remains one of our most visible signs of respectability and acceptance into society. Families in bankruptcy often want desperately to keep their homes and stop foreclosure. Their bankruptcy filings are often an attempt to eliminate other debts so they can redirect their shrinking incomes into their mortgage payments. Hanging onto a home may no longer make sense economically. Many struggle to hang on and save this important part of their lives when all the signs are telling them to let it go.

 

Change, as mentioned previously, is also the answer to reversing the growing bankruptcy trend. Unfortunately change is not always easy or readily accepted by some. People become comfortable with homeownership, and their new position in society. Human nature being what it is causes us to resist anything that may disturb our status quo, or literally “the way things are”.

Those who embrace the idea they must make needed alterations to their spending and lifestyle habits will likely manage to weather the current economic uncertainties. Those who ignore the signs may likely lose it all.

Income Interruption – Unless You Have A Safety Net Bankruptcy Becomes A Real Possibility.

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Posted by on June 27, 2007 – 10:52 am
Filed under Foreclosure Prevention, Links

At some time in our past a wise sage stated, “Failing to plan is planning to fail”. These words have never ringed truer than in this and age. A financial crisis is looming, some experts claim it is actually upon us, and Americans are faced with the reality that their ill-conceived spending habits are catching up with them. In today’s precarious balance between debt and income all it may take is a slight push to topple the entire thing. One such “push” is a sudden loss of income.

Anything that causes income to decline puts a family at risk for bankruptcy. Layoffs and firings create a vulnerability which if not addressed may start a domino effect in which the one may end up in financial ruin. Bankruptcy then becomes a very real possibility. If you are unable to meet debt obligations, such as your monthly mortgage, being unable to stop foreclosure becomes a harsh reality, which no one really wants to contend with.

Even finding another job doesn’t always solve the problem. The time period without income may create insurmountable debt, especially if one was carrying substantial debt loads prior to the loss of income.

 

Other income-related setbacks may contribute to the debt versus income mismatch. Unemployment isn’t always the cause of this problem. Losing overtime hours or moving from a salaried position to commission sales for example may be enough to tip the scales.

You may be caught up in a company downsizing, a growing trend these days. If this position provided the majority of a household’s income this has a sudden and drastic effect. People are finding themselves a part of the growing bankruptcy curve because they lost their jobs, often positions held for years and thought secure.

 

How can one prepare for a potential income loss? The knee-jerk reaction is to save money. Given the relative stagnation of income and salaries over the past decade coupled with the rising costs of living this may be more wishful thinking than reality. Consider first taking a look at your spending habits. This is area most discover they can reduce expenditures, in some cases saving hundreds of dollars monthly. Credit cards, department store cards, frequent dining out, frivolous weekend trips, and many other income-draining activities exist that can be cut back on or eliminated entirely.

 

You have to decide just how close to the edge you wish to tread. Consider a lesson from our grandparents and great-grandparents. Those generations were forced to live below their means and most were still able to secure a monetary buffer against income interruption.

Take a good hard look at your financial situation. Take advantage of the many agencies offering consumer credit counseling. There are countless resources available to help you once you have decided to take action. Taking action is the key in preparing for the possibility of income interruption.

Filing Bankruptcy To Stop Foreclosure Brings Long Lasting Consequences-Think Hard Before Deciding.

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Posted by on June 26, 2007 – 3:35 pm
Filed under Foreclosure Prevention, Links

Filing for bankruptcy to stop foreclosure is likely the last resort for most homeowners. They have exhausted all other means to try to solve the matter to no avail. Before taking the plunge into the chaos that is bankruptcy it is best you fully understand what you are committing yourself to and just how difficult the entire process is.

 

Filing for bankruptcy is a matter of collecting a great deal of financial and sometimes personal information. The process demands filling out long schedules and forms about your family’s income, assets, and debts. Debt listings include home mortgages, car loans, revolving credit (credit cards), medical debts, and personal loans just to list a few. There are other types of debts that may be involved as well. You may be questioned about spending habits, which for some people is a personal and highly emotional topic. If there is a lawsuit involved things can get complicated very quickly, but for the most part the bankruptcy process is actually straightforward albeit painful and shameful for some.

 

The majority hires a lawyer to steer them through the bankruptcy process. Costs range from a few hundred to few thousand dollars depending on the case.

 

Federal laws govern bankruptcy. There are federal courts throughout the country that hear these cases. The most important decision a debtor has to make is what type of bankruptcy they will file. Will it be a Chapter 7 liquidation or Chapter 13 payout plan?

 

A Chapter 7 requires the debtor to give up all non-exempt property for the benefit of their creditors. In exchange for this they will be discharge from most of their old debts. Some debts survive the bankruptcy. Home mortgages, car loans, child support, and taxes still have to be paid in full. Even afterwards you could still lose your home and any equity built up if you fail to make your mortgage payments. In essence all the bankruptcy did was give you a fresh start in a relative sense. You got rid of the credit card, medical debt, and any unsecured debt but you may still have substantial debts to pay.

 

Chapter 13 is an alternative to Chapter 7 in that the debtor tries to repay all or part of their debts over time under the supervision of a court appointed trustee. If the payment plan is approved and the promised payments are paid, they may keep all their property and receive a discharge from the portion of the debts they did not pay. Chapter 13 plans typically involve a 3 – 5 year timeframe.

 

Regardless on which bankruptcy plan you choose to pursue to avoid foreclosure it is important to understand that this solution is not as easy to achieve as it was several years ago. Tough new laws are in place now making it harder for people to even file, much less get a discharge from their debts. So before you decide on this course of action understand the ramifications and the long-term effects it will have on your credit for years to come.

Using A Short Sale To Stop Foreclosure – Buyer and Seller Advantages

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Posted by on June 25, 2007 – 8:10 pm
Filed under Foreclosure Prevention, Links

Acceptance is finally settling in as homeowners are realizing the real estate market has truly shifted. The competition to sell their home is fierce as other homeowners are realizing they also owe too much to list their home competitively.  Those attractive low payments that lured you to an Option A.R.M. loan earlier are coming to an end.

 

For many homeowners the new mortgage payment is simply too high for them to afford. Some homeowners are considering refinancing. Unfortunately they are discovering their home isn’t worth what it was last year. At this point they have to explore other alternatives.  

Some homeowners think selling their home is the best solution and immediately turn to a realtor for help only to be told the unfortunate news their home won’t sell for enough to pay all of the fees, real estate commissions, and pay off the balance of the mortgage loan. Some intrepid souls may even try to sell their home on their own.  Eventually, after months of effort and waiting, many are faced with inevitable foreclosure. 

All is not lost even in this 11th hour as there is a viable alternative. Banks, not wanting to be saddled with an inventory of unsold property, are willing to settle debts owed by homeowners through a process known as a “Short Sale.� 

 

A “Short Sale” occurs when a homeowner is upside down on their home and ends up selling their property for less than what is owed on the mortgage.  The lender agrees to accept the lesser payment as satisfying the loan amount.  The seller receives no money from the sale of the home and the lender does not report as a foreclosure to the credit bureau.

 

To qualify for a “Short Sale”, homeowners must demonstrate a hardship and be financially insolvent. The homeowner should be able to demonstrate inability to make the loan payment. Most importantly, homeowners must prove a willingness to cooperate with the process.

Some homeowners who have exercised a successful short sale have voiced concerns over receiving an IRS Form 1099 from the lender for the amount of the loan that was forgiven. The lender may not send a 1099 and instead grant a total release. Even if you do receive a 1099 consider the alternatives: a foreclosure on your credit report that stays there for 7-10 years, lowering your credit score an average of 100 points. A short sale stays on your credit for a much shorter period and may lower your score by an average of 45 points.

 

For the potential real estate buyer a short sale offers a great opportunity to purchase what may earlier have been an unaffordable property.  Typically but the short sale listings are lower than similar properties the buyer needs to be aware the process can take much longer than usual. Lenders may take weeks to review their offer so the buyer has to be patient. For the patient buyer however, the reward may be a great home at a great price. 

You’ve Realized the American Dream of Owning a Home but Find Yourself in Default.

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Posted by on June 21, 2007 – 3:38 pm
Filed under Foreclosure Prevention, Links

No homeowner ever intends to miss mortgage payments. Life, as most have learned, has the tendency to throw us a curve when we least expect it. Job loss, death or divorce can quickly throw our life and finances into chaos. Homeowners can’t always prevent defaulting on their payments. What’s important is how a homeowner reacts to their predicament.

 

Inaction is the choice some homeowners make. They may choose to deny the fact their home could be lost and respond by doing nothing. Some will agree the default is a problem, but they don’t act to resolve the issue. If they do finally decide to act, it may be too late to avoid losing the property.

 

<!–adsense–>Overreaction is another choice some homeowners make. They assume missed mortgage payments revoke their rights to own a home and look for a quick way out of the situation. These homeowners, because they didn’t look at their options, are the ideal prey for scam artists ready to take advantage of their response to the mortgage default.

Human beings are hard-wired to their emotions and both of these responses are examples of natural human reactions to a looming foreclosure. Understandably neither of these responses is ideal or helpful to homeowners in default. Ideally, homeowners should adopt a measured response taking into consideration all the options available and act decisively to prevent home foreclosure.

Here are a few sensible guidelines for stopping foreclosure. 

Pick up the phone and contact your lender.

Once the due date for your mortgage payment has come and gone, it’s only a matter of time before your lender knows you’re in default. Act preemptively and call them right away. Leaving it up to them may leave you waiting for several months at which time it becomes much harder to resolve the situation.

When you contact the lender, be honest and to the point about your situation. Ask what suggestions they have. Lenders can usually provide solid advice as they deal with defaulted customers every day. Not wanting to take the house back, most lenders aren’t eager to spend their money and time to foreclose on a defaulted loan, so they’re open to other alternatives.

If you do manage to reach an agreement with the lender ask that they provide it in writing so that you’re protected if they don’t live up to their end of the agreement. Before you sign anything, have it reviewed by a real estate attorney or local HUD approved housing counseling agency.

Be cognizant of deadlines.

The lender will take the necessary steps to schedule a public foreclosure auction of your property if you haven’t worked out a plan of resolution. Depending on your state of residence the countdown to auction could occur in less than a month to over twelve months in other states. It is crucial in either case that you understand exactly how much time you have before you lose your home.

Consider your alternatives.

Although the options are limited, homeowners in default have several viable options to stop the foreclosure process. Not all of these options will work for every homeowner, but all homeowners should consider the advantages and disadvantages of each option and determine which is best for them.

  • Restructure the loan payments
  • Refinance your home loan
  • Sell your home
  • Deed in lieu of foreclosure
  • Bankruptcy

You can be creative when working out options with the lender. Again, keep in mind they really want you to keep the home and save themselves all the trouble of taking it back and reselling it. Stopping foreclosure on your home does not have to be an overwhelming experience. Act fast, act smart, and with a little bit of luck you may come out ahead in the end.

Practical And Impractical Options To Stop Foreclosure

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Posted by on June 20, 2007 – 4:50 pm
Filed under Foreclosure Prevention, Links

For the homeowner who has missed a few mortgage payments the foreclosure process can start very quickly. During this stressful time it is critical you promptly take action to stop the foreclosure process and try to save or sell your home. Keep in mind that no one will help unless you ask. So, if you want to stop a foreclosure, you need to take responsibility and get the process moving as soon as possible.

 

Do Nothing

Exercise this option and eventually the sheriff shows up and escorts you to the sidewalk along with all your personal belongings.

 

Leave In The Middle Of The Night

You can run but you cannot hide. Decades before the “Information Age” a person may have been able to move across country and start over. Today more than ever before the practicality of heading for parts unknown is simply impractical. Aside from the difficulty in disappearing you may be breaking several laws as well.

 

Ask Family and/or Friends For Help

A small percentage of homeowners may be able to find help this way, yet their pride and embarrassment for getting into this situation in the first place prevents them from reaching out. Another consideration is the people you ask may not have the extra financial resources to help.

 

Negotiating With The Bank or Lender Yourself

Your lender is willing to stop the foreclosure process. That is a fact.  All lenders hate foreclosing. Mortgage lenders typically lose money when they foreclose, since most foreclosed homes are worth less than the value of the mortgage. Plus, the foreclosure process is expensive to manage and is stressful for everyone. The problems facing most homeowners in handling the negotiation themselves is a lack of understanding regarding their rights and responsibilities, effective negotiating skills, and the amount of time involved. You are likely already consumed with scraping together funds wherever you can in the hopes of bringing your mortgage payments up to date. Where will you find the time to work with the bank or lender? This option is doable, but it is like swimming against the current. Eventually the pressure is going wear you down and just make the situation worse.

 

Hiring a Foreclosure Prevention Service

If you do decide to hire a firm, since negotiating with the lender to find the best solution is complicated and time consuming, practice due diligence and shop around. Depending on your situation and who your mortgage lender is, the subtleties of negotiations are critical to a successful outcome. You need someone who is experienced at foreclosure negotiation. The company that will help you stop foreclosure should present you in a way that convinces your lender that you are a responsible person and that you are capable of developing a plan and getting back on track.

 

The company you hire typically negotiates with the lender to repackage the loan so that the borrower can become current again. It will help save your credit, keep you in your home or sell your home, and appease your lender. This process has to happen pretty quickly, and could involve one or more of the following:

 

Loan modification – If you can currently make your regular payment, but you can’t catch up with the past-due amount, the lender folds any past-due amounts, including interest and escrow, into the unpaid principal balance. This new amount will be re-amortized over a new period of time.

 

Payment forbearance – Here you are allowed to pay the overdue amount, plus penalties and interest, over a specified period of time.

 

Deed in lieu of foreclosure – This is where you are unable to pay for the house and you voluntarily give the house back to the lender. Be warned that you still have to pay back any difference between what you owe and what the house resold for. Not every lender will always accept this arrangement.

 

Sell your house – Some people exercise this option if they do not want to keep the home. Most homeowners want to keep their home and often choose this option if all else fails and they want to save their credit.

 

File for bankruptcy – This should only be used as a last resort because of the negative impact on your credit (up to ten years in some states). Keep in mind also filing for bankruptcy is much more difficult these days due to new laws recently passed.

 

In the end, there are a variety of considerations when you try to avoid foreclosure, so educate yourself and plan for the best resolution to the foreclosure process.

Don’t Let Foreclosure Prevention Scam Artists Make A Bad Situation Worse

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Posted by on June 19, 2007 – 5:13 pm
Filed under Foreclosure Prevention, Links, Uncategorized

There is a saying that good news travels fast but bad news travels at the speed of light. If you happen to be embroiled in a foreclosure you probably understand what I mean. Aside from the bill collectors hounding you daily there now appears another group of people bent on being the one and only ray of hope left if you want to stop foreclosure.

I am not saying all these individuals or companies are simply out to make a quick buck off your dilemma. There are many reputable outfits ready, willing, and able to provide you with legitimate foreclosure prevention service. You must perform your due diligence before making your choice.

These scam artists often charge high fees and take the money and run, and the homeowner finds him or herself in a worse financial predicament. They target people already in a distressed and highly vulnerable state, and who have the least amount of excess funds to take away from preventing foreclosure. These entities collect fees ranging from a few hundred up to thousands of dollars and simply do not deliver on their promise. Consumers have complained they never received help, or when they complained, no refund was forthcoming.

 

What advice should a homeowner follow to prevent becoming a victim of this ruse? If you are facing foreclosure, be very wary of an individual or company that:

 

  • Cannot tell you exactly how they can help you.
  • Before providing any service asks for a fee up front.
  • Makes the claim that for the service to work you must send your home mortgage payments directly to them.
  • Tries to convince you to sign over the deed to them right then and there. 
  • If you are going to sign over the deed, make sure you understand the ramifications of doing this, and that you have had a chance to review ALL of the documents.

As stated before there are numerous companies that do deliver on their promise. How can you identify these?

 

  • Are willing to offer a free initial consultation and go over your unique situation.
  • Make it clear you have no obligation to them.
  • Are willing to explain what your foreclosure prevention options are.
  • Are honest about their foreclosure prevention success rates, and make no guarantees of being 100% successful.
  • Registered with the Better Business Bureau and have a proven track record of consumer satisfaction.

Understandably it is tough to make rational decisions under stress. You must keep your wits about you when choosing a foreclosure prevention service. Your credit rating and finances will be affected by this decision for years to come.

 

Do you know if the voice on the other end of the phone has your best interests in mind regarding helping you avoid home foreclosure? These are a few important things to know to prevent making an already stressful situation worse.

 

A Few Fallacies and Facts About Foreclosure

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Posted by on June 18, 2007 – 10:07 am
Filed under Foreclosure Prevention, Links

There are many misunderstandings concerning the issue of foreclosure. Unfortunately these misconceptions have lead many homeowners to take all the wrong actions in trying to stop the foreclosure process which ultimately causes them to lose their homes. Below are a few of the myths that seem to persist regarding bank foreclosures.

  • The bank wants your house so they can resell it.
    • Nothing could be further from the truth. The bank almost never wants your house; they want the money you owe along with interest. Typically banks usually hate going through the foreclosure process and will bend over backwards to work with homeowners in avoiding a foreclosure.

  • The bank won’t take my payments. I’m all out of options.
    • The bank wants you to bring your payments current. Period. Remember they are in the money business. The interest on your loan is their life blood. All is not lost however. If this isn’t practical for you then a mortgage negotiation professional can set up a plan for you to pay just a portion of the arrears, set a plan to pay future current payments and catch up on the remaining arrears over time.
  • The foreclosure notice was delivered today; I have to start packing
    • Depending on your state of residence you may have a very long foreclosure process. This may give you several months, if not longer to move. Remember that you have to find a new place to live because eventually you will be physically removed.
  • I’m in foreclosure, no bank will refinance me out of this mess
    • This depends on the amount of equity in the home and its Loan To Value ratio. If that ratio is right there are specialty lenders who will pay off your current lender and hold the note

  • I’ll just file bankruptcy and save the house
    • For starters this isn’t as easy as it once was. Bankruptcy laws are getting tighter and deliberately more difficult. A chapter 7 bankruptcy will stop the home foreclosure on a temporarily. The caveat is you need to do something else to keep the house in the long run if you are facing foreclosure.
  • The bank has our house so we can wash our hands of the whole affair.
    • This assumption has come back to haunt many people. If there is a deficiency you may still owe the difference plus any interest even though you no longer own the home.
  • I pulled off a minor miracle and got all the money I owe the bank to bring me current, but I’m afraid it’s too late to stop the foreclosure process.
    • Wrong. In most states if you have all of the money you owe the bank they have to take it and stop the foreclosure. It is the law, and besides the bank doesn’t really want the house back in the first place.
  • My house is gone and I can never buy it back.
    • There may be hope. Some states have “redemption�? rights where they can keep the house if they can pay the bank off in full, principal and arrears, within a limited time period.
  • They get to keep all my stuff once they take the house.
    • The rule of thumb here is if you can carry it away it’s yours. You keep your personal property, but permanent attachments to the house should stay. Don’t turn it into an issue by taking everything from floor to ceiling. That will just insure trouble.
  • The bank started this process. They can’t expect me to pay legal fees.
    • They do and you will if you want to keep the house. The amount will vary depending on what is contained in your mortgage agreement.
  • There’s nobody to help me stop my home foreclosure
    • In this you have more help at your fingertips than you might imagine. Many methods and many professionals can help you avoid foreclosure.

These are a few of the rumors out there involving foreclosure. The best advice is to contact a foreclosure prevention specialist and allow them to handle the process.

What are the tax implications if I do a Short Sale?

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Posted by on June 14, 2007 – 11:57 am
Filed under Foreclosure Prevention, Links, Short Sales

I am frequently asked this question when I meet homeowners who are facing foreclosure.  Often times, after we have determined that the seller can’t keep their home to avoid foreclosure (either because their monthly income is too low, or their monthly expenses are too high), they are left with the sobering reality that they must sell their home to avoid foreclosure.

In today’s real estate market, many times homeowners are upside down on their homes: in other words, they owe MORE than what the property is worth.  With softening real estate markets across the country, this situation is becoming more and more common.

I came across a great article in Kiplinger’s recently, which addresses this issue.

Many times, sellers ask me about the tax consequences of doing of a short sale.  As it states in the article, the lender very well could issue the homeowner a 1099-C.  However, it doesn’t mean that they WILL issue you a 1099-C.

Here’s a great analogy I use when I talk to homeowners who are short sale candidates and they bring up the issue of potentially getting a big tax bill from their lender.  Let’s go with the example of the $300k debt and $260k Short Sale acceptance, just like in the article.

The bank basically “gave” them $40k.

If I could give you a winning lottery ticket for $40k, would you turn it down because you would have to pay taxes on it?

Of course you wouldn’t. 

Which is exactly why, if you’re a homeowner facing foreclosure, you shouldn’t worry about the possibility of getting a 1099-C.  It might not even happen (we work directly with each lender to negotiate that our client gets a total release).  If it does, it’s a heck of a lot better than the alternative: a foreclosure on your credit report.