Foreclosures
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I first want to point out that going into foreclosure DOES NOT make someone a bad person. No matter the condition of the real estate market, property owners encounter unfortunate circumstances and fall behind on their mortgage payments. Foreclosures occur all the time due to these circumstances, which are usually very emotional times, due to loss of job, divorce, or illness. Including the two months the owner must be behind before the notice of default can be filed, the foreclosure time line in the state of California, is nearly 180 days. In most cases, that is enough time to cure the loan default or sell the property.
Aggressive loan origination practices of the past few years has allowed many borrowers to put little or no money down when purchasing. Many also over extended their boundaries of financial ability and are now facing foreclosure. With little or no equity, any disruption in the property owner’s income puts their mortgage at risk. It appears that through 2008, that many owners who have fallen behind on their mortgages may not find it easy, or even possible to cure the default and avoid foreclosure. Home prices in the San Luis Obsipo and Pismo Beach regions have leveled off but in most cases are on a downward trend. The chart below indicates that the number of homes going through the entire foreclosure process is increasing in San Luis Obispo County. I will closely monitor this situation and provide regular updates to keep you informed.
You Have Options
If you have fallen behind on your mortgage you will receive information – not just from the lenders, but also from many people who want to take advantage of your temporary misfortune. They will tell you that time is your enemy and that you must act immediately to save your credit. That will normally be followed by a proposal to solve your problem by selling or deeding your property to them.
Don't Do It!
Don’t do anything until you understand your options.
Here are some of your options:
Contact Your Lender
- Do not ignore the mail that your lender sends you. They are likely to work something out if you contact them immediately. Even better is to contact them first, before this happens. The lenders and federal government are working on plans to help home owners. Contact your lender today to see if you qualify!
Sell Your Property
- Sell the property at fair market value and put your equity in your bank account – where it belongs. I can help here and will be sure you get your equity. Contact me today!
A Short Sale
- If you owe more than your home is worth, you can look at negotiating a discounted payoff with your mortgage company. I can negotiate with your mortgage company on your behalf to get approved for a Short Sale. The best part of a short sale is the lender nearly always pays all the sales costs including title and escrow fees, commissions and most repairs. Call me today!
- The down side is you may be hit with a tax bill for the amount of debt forgiven by the lender. Be sure to seek advice from your attorney and/or tax advisor for more information about how this may affect you.
Refinance
- Refinance the property and pay off existing loans.
If you have not received a Notice of Default (NOD), but know that your loan is going to adjust in the near future, and you will not be able to make the new payment, contact your lender immediately. They will likely work something out with you. The other option is to contact another lender to see if they can help refinance you into a new loan that will better fit your financial ability.
Negotiate a Forbearance Agreement
- Negotiate a Forbearance Agreement with your mortgage company.
For those borrowers who experienced a very temporary event that caused them to fall behind on their mortgage, a Forbearance Agreement with the lender is a good option. In most cases, the mortgage company is going to look for two things when considering a forbearance agreement.
First, why the loan became delinquent in the first place. It helps greatly if the problem was something beyond the control of the borrower – serious illness or injury, temporary disability or a onetime disruption in income.
Second, that the borrower’s financial difficulties have been corrected. The mortgage company wants to know that the borrower is now on a solid footing and can be counted upon to make regular loan payments as agreed. The new payment will probably include some amount to go to the delinquent amount.
Do Nothing
- I DO NOT recommend this option. Many go this route because the situation seems overwhelming and the are emotionally distraught. It is a heavy burden, but the consequences of a foreclosure are serious. Let’s at least consider potential solutions that help you avoid foreclosure.
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