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| FORECLOSURE PREVENTION OPTIONS |
Finding a solution to a temporary or ongoing financial
hardship can be confusing. I work to assist my clients in
finding out all options for Foreclosure prevention. This
may or may not involve selling a home, but even if an
individual chooses Foreclosure as an option, I believe it
should be an informed decision. Truly working to help
people, and treating them as I would wish to be treated
not only makes me feel great, but has turned out to also
be good business. You may be able to resolve your
challenges on your own, but I am here to offer no
pressure advice, and provide information that may be
helpful to you. Contact me to schedule a free, no
pressure consultation to find out what options may be
available for your unique situation. I am here to help you.
- Brenda
hardship can be confusing. I work to assist my clients in
finding out all options for Foreclosure prevention. This
may or may not involve selling a home, but even if an
individual chooses Foreclosure as an option, I believe it
should be an informed decision. Truly working to help
people, and treating them as I would wish to be treated
not only makes me feel great, but has turned out to also
be good business. You may be able to resolve your
challenges on your own, but I am here to offer no
pressure advice, and provide information that may be
helpful to you. Contact me to schedule a free, no
pressure consultation to find out what options may be
available for your unique situation. I am here to help you.
- Brenda
Every day people have trouble making the next mortgage payment. Though things may seem hopeless, help is available. However, you need to take the first step! If you ignore the problem you may lose your home to foreclosure, possibly affecting your ability to qualify for credit or to rent another home. There are many options available for foreclosure avoidance; however, more options are available if counseling is sought prior to missing payments. When you are evaluating your options, it will be important that you keep and open all of the mail you receive from your lender. It may contain valuable information about repayment options. Later mail may have important legal notices. Failing to read the mail may cause you to miss opportunities for relief. The following is a brief explanation of some of options available and brief descriptions of their benefits and drawbacks: OPTIONS TO KEEP THE HOME: Rent the Property A homeowner who has a mortgage payment low enough that market rent will allow it to be paid, is able to convert their property to a rental and use the rental income to pay the mortgage. • Benefit: Allows homeowner to keep property indefinitely. • Drawback: The issues that can arise with a rental property are many, and rent often does not cover the full cost of property ownership and maintenance. http://www.KeepYourHomeCalifornia.org Great Link with news updates and information about foreclosure prevention options specific to California homeowners from participating lenders. Programs offered include: • Unemployment Mortgage Assistance Program • Mortgage Reinstatement Assistance Program • Principal Reduction Program • Transition Assistance Program
A reinstatement is the simplest solution for a foreclosure, however it is often the most difficult. The homeowner simply requests the total amount owed to the mortgage company to date and pays it. This solution does not require the lender's approval and will 'reinstate' a mortgage up to the day before the final foreclosure sale. • Benefit: Does not require the mortgage company or lender's approval. • Drawback: Requires that a homeowner be able to pay all back payments, fines and fees. Partial claim If your mortgage is insured by a private mortgage insurance firm, your lender might help you file a claim. Some insurers provide a one- time, interest-free loan to bring your account up to date. The interest-free loan is due when you refinance, pay off your mortgage, or when you sell the property. This is a one-time loan from the FHA insurance fund to bring your mortgage current. The loan is interest free and does not need to be repaid until you pay off your first mortgage or sell your house. This option is only available to borrowers with FHA- insured loans. However, if you have a conventional loan, ask your lender if they offer an “advance claim.” Refinance If a homeowner has sufficient equity in their property and their credit is still in good standing, they may be able to refinance their mortgage. • Benefit: In some cases, this will lower payments. • Drawback: In today's market, a refinance will almost always raise mortgage payments, and is an expensive process. Forbearance or Repayment Plan A forbearance or repayment plan involves the homeowner negotiating with the mortgage company to allow them to repay back payments over a period of time. The homeowner typically makes their current mortgage payment in addition to a portion of the back payments they owe. • Benefit: Allows the homeowner to make back payments over time. • Drawback: Requires that a homeowner be in a financial position to pay not only their current mortgage, but also a portion of the back payments owed. Some mortgage companies will require a homeowner to 'qualify' for forbearance. Mortgage Modification A mortgage modification involves the reduction of one of the following: the interest rate on the loan, the principal balance of the loan, the term of the loan, or any combination of these. These typically result in a lower payment to the homeowner and a more affordable mortgage. A good resource is • Benefit: Reduces the payment a homeowner is required to make on a monthly basis and may reduce the principal balance of the loan • Drawback: Requires that a homeowner 'qualify' for the new payment and will often require full documentation. Lender has to be actively pursuing modifications. A borrower can be denied if current finances to do show a hardship, or if income is too low to qualify for new terms. Short Refinance Offers certain 'underwater' non-FHA borrowers who are current on their existing mortgage on a principle residence and whose lien holders agree to write off at least ten percent of the unpaid principal balance of the first mortgage, the opportunity to qualify for a new FHA-insured mortgage. The refinanced FHA-insured first mortgage must have a loan-to-value ratio of no more than 97.75 percent and a combined loan- to-value ratio no greater than 115 percent. (see http://www.car.org/legal/real-estate-law/archive/reg-news-fha-short-refinance-option ) for more information
If a member of the military is experiencing financial distress due to deployment, and that person can show that their debt was entered into prior to deployment, they may qualify for relief under the Service Members Civil Relief Act. The American Bar Association has a network of attorneys that will work with service members in relation to qualifying for this relief. • Benefit: If qualified, this will lower payments on all consumer debt in addition to mortgage payments. • Drawback: Must be active military to qualify. OPTIONS IF I CANNOT KEEP THE HOME: Sell the Property Homeowners with sufficient equity can list their property with a qualified agent that understands the foreclosure process in their area. • Benefit: Allows homeowner to avoid foreclosure and harvest some of their equity. • Drawback: In many cases today, homeowners do not have sufficient equity to sell their property without negotiating a short sale (see next solution).
Also known as a 'friendly foreclosure', a deed in lieu allows the homeowner to return the property to the lender rather than go through the foreclosure process. Lender approval is required for this option, and the homeowner must also vacate the property. • Benefit: Many times in a successful deed in lieu, the lender will forego their right to a deficiency judgment. Relocation expenses may be granted. • Drawback: Requires that a homeowner vacate the property, and a deed in lieu may be reported to credit bureaus as a foreclosure. Bankruptcy Many have considered and marketed bankruptcy as a 'foreclosure solution,' but this is only true in some states and situations. If the homeowner has non-mortgage debts that cause a shortfall of paying their mortgage payments and a personal bankruptcy will eliminate these debts, this may be a viable solution. • Benefit: Does not require lender approval. • Drawback: If a homeowner cannot afford their mortgage payment, a bankruptcy will only stall—not stop—the foreclosure process. Credit can be adversely affected for as many as 7 years. Short Sale If a homeowner owes more on their property than it is currently worth, then they can hire a qualified real estate agent to market and sell their property through the negotiation of a short sale with their lender. In a Short Sale, a lender agrees to release the lien on the home for an amount that is "Short" of the amount owed on the property, so that the home can be sold. This typically requires the property to be on the market and the homeowner must have a financial hardship to qualify. Hardship can be simply defined as a material change in the financial stability of the homeowner between the date of the home purchase and the date of the short sale negotiation. Acceptable hardships include but are not limited to: mortgage payment increase, job loss, divorce, excessive debt, forced or unplanned relocation, and more. • Benefit: A short sale allows the homeowner to avoid foreclosure and salvage some of their credit rating. This also keeps foreclosure off the individual's public record, and in many cases (not all) will allow the homeowner to avoid a deficiency judgment. Borrower may qualify for another mortgage in as little as 24 months (as opposed to 5-7 years for a foreclosure). • Drawback: Short sales can be a trying process in which a homeowner is best served by contracting with a qualified real estate agent to guide the way. Unless laws are in place prohibiting a deficiency, these options may still result in deficiencies unless the lender provides specific documentation stating that the debt is forgiven. This represents only a summary of some of the solutions available to homeowners facing foreclosure. Please contact me today for a free confidential evaluation of your individual situation, property value, and possible options. RECENT LAWS AFFECTING SHORT SALES AND FORECLOSURES: Mortgage Forgiveness Debt Relief Act of 2007 - Currently extended to include applicable forgiven debt in 2007 through 2012. Typically forgiven debt may be treated as taxable income. Act removes taxes from mortgage cancellation/forgiveness. Applies to the amount if the original purchase price, plus personal improvements of a primary residence and does not cover any amount over the original purchase price if a loan has been refinanced with a "cash out" option. The relief only apples to first mortgages, not second mortgages or home equity lines of credit. SB 401 (eff. April 8th, 2010) This law changes California's specified date of conformity to federal income tax law from January 1, 2005 to January 1, 2009, and generally conforms to numerous changes made to federal income tax law during that four-year period. Among other things, this law extends through 2012 provisions allowing taxpayers to exclude from income the amount of mortgage debt on their principal residence that has been discharged by a lender after a short sale, foreclosure, or loan modification. It also increases the amount of debt that can be excluded as income from $250,000 to $500,000. SB 931 (eff. Jan. 1, 2011) Discharge of balance of loan indebtedness after a short sale for residential 1-4 real property by holder of a first deed of trust This new law prohibits a lender holding a first deed of trust (purchase money or refinance) for a dwelling of 1-4 units to demand a deficiency judgment (unpaid balance due on the loan) from the trustor or mortgagor (owner) who sells the dwelling for less than the remaining amount of the indebtedness due at the time of the short sale to which the lender has consented in writing. However, if the owner commits either fraud with respect to the short sale, or waste with respect to the secured real property, then the lender may seek damages and use existing rights and remedies against the owner or any third party for fraud or waste. Note that this law doesn't apply if the trustor or mortgagor is a corporation or political subdivision of the state. Adds Section 580e to the Code of Civil Procedure. AB 2325 (eff. Jan. 1, 2011) Forensic loan audits added to definition of services under Mortgage Foreclosure Consultant law A foreclosure consultant is any person who makes any solicitation, representation, or offer to any homeowner to perform certain services relating to foreclosure sales and loan modifications ("forbearance from any beneficiary or mortgagee"), including debt, budget, or financial counseling, and credit repair, for compensation. There are certain exemptions under the law. A violation of the law can impose criminal penalties. This new law adds forensic loan audits to the definition of services under the Mortgage FORECLOSURE Consultant law by adding CA Civil Code Section 2945.1(e)(9). Amends Section 2945.1 of CA Civil Code. SB 1221 (eff. Jan. 1, 2011) Trustee's Sale - Notice of Sale can be given 85 days after recordation of NOD instead of 3 months (90 days) A foreclosure consultant is any person who makes any solicitation, representation, or offer to any homeowner to perform certain services relating to foreclosure sales and loan modifications ("forbearance from any beneficiary or mortgagee"), including debt, budget, or financial counseling, and credit repair, for compensation. There are certain exemptions under the law. A violation of the law can impose criminal penalties. This new law adds forensic loan audits to the definition of services under the Mortgage FORECLOSURE Consultant law by adding CA Civil Code Section 2945.1(e)(9). Amends Section 2945.1 of CA Civil Code. SB 458 (eff. July 15, 2011) Discharge of balance of loan indebtedness after a short sale for residential 1-4 real property by holder of a subordinate deed of trust. Subordinate lien holder cannot pursue the borrower (seller) for any deficiency under the note if the lender consents to the short sale in writing. No deficiency can be rendered or even requested. The borrower (seller) is protected even if the loan is refinanced as long as it's secured by a trust deed. INTERESTING ARTICLES AND LINKS: Overview of Short Sales - C.A.R.article 6/14/2011 Credit after Foreclosure, Bankruptcy, or Short Sale - C.A.R. article 8/4/2010 Short Sale vs. Judicial Foreclosure Deficiencies - C.A.R. article 2/24/2011 Taxation of Foreclosures & Short Sales- C,A.R. Advisory- C.A.R. article 4/20/2010 Home Foreclosure and Debt Cancellation - IRS tax guidelines DRE Foreclosure Guide 2010 (July 2010) DRE Brochure on the Foreclosure Process and Alternatives (Nov. 2009)
Red Flags for Foreclosure Scams (C.A.R. March 18, 2009) 5 tips for Avoiding Foreclosure Scams (March 5, 2009)
Loan Modification Self-Help Guide (July 2011 - D.R.E.) Mortgage Workout Programs for Homeowners (March 24, 2009) C.A.R. Summary of Loan Modifications MortgageReliefOnline.com (April 17, 2009) Do you qualify for a loan modification or refinance? FICO's new Web site helps consumers see if they qualify for a loan modification or refinance for free. Making Home Affordable FAQS (March 18, 2009) A Consumer's Guide to Mortgage Refinancing (Aug. 27, 2008 - Federal Reserve Board) PLEASE NOTE: Information on this website is intended to provide information as to some of the options that may be available for foreclosure prevention. It is for informational purposes only. Since every financial situation may be different, options will vary from case to case.Please note that some solutions may result in deficiency (balance that must still be repaid) and/or tax liability, and others may not. If considering a foreclosure prevention option or facing foreclosure, it is always a good idea to consult with a CPA who specializes and is familiar with Loan Default Tax Liability issues. This site is not intended to provide legal or tax advice. Although every attempt is made to provide valid and current data, no guarantee is made as to the accuracy of information provided on this website. |
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Serving your unique real estate needs through your changing life!
Brenda Avilla-Kintz
REALTOR, GRI, SRES, RCS-D, CDPE, SFR
REALTOR, GRI, SRES, RCS-D, CDPE, SFR
Brenda Avilla-Kintz
REALTOR, GRI, SRES, RCS-D, CDPE, SFR
REALTOR, GRI, SRES, RCS-D, CDPE, SFR
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| Brenda Avilla-Kintz REALTOR, GRI, SRES, RCS-D, CDPE, SFR Altera Real Estate 1124 Meridian Avenue San Jose, CA 95125 Phone: (408) 828-2020 Fax: (408) 754-3910 Toll Free: (866) 978-2800 ext.232 Email: Brenda@CaRealEstateOnline.com |