Services
Stop Foreclosure with Loss Mitigation Programs
Loss mitigation programs were established by the federal government and the mortgage industry in order to stop home foreclosures. They help foreclosure victims in default on their mortgages to find alternatives to home foreclosure. Every homeowner’s situation is unique and each lender has their own policies regarding the use of these programs to stop foreclosure. Our extensive experience and solid working relationships with mortgage lenders allows us to help you avoid the common pitfalls that many homeowners encounter while trying to work things out directly with their lender. After performing a thorough assessment of your personal finances and analyzing your lender’s loss mitigation policies our professional loss mitigators will negotiate with your lender to get you the best possible solution to your home foreclosure problem. We can help you save your home and credit history through a variety of loss mitigation options:
1. Loan Workout
Many homeowners with the 2/28 and 80%/20% purchase loans are having a pay rate adjustment of 28% to 44% and many homeowners can’t handle the new payments and will not qualify for a new loan. A loan workout is a broad term used in the loss mitigation arena. It is used when you negotiate with your lender any kind of plan that will benefit both you and the lender when you are delinquent or in default. We construct a financial plan that considers your current income and details a list of your monthly expenses and make recommendations to improve your budget and cash flow so your income exceeds your total monthly expenses each month. The key to our 95% rate of success is constructing a financial plan that you and your lender can approve and, most importantly, that you are able to perform. We work with you to compose a hardship letter that describes why the problem occurred and, the good news, why it won’t happen again.
2. Loan Modification
This term has been getting a lot of attention lately and rightfully so. With millions of homeowners stuck in toxic adjustable rate mortgages and no ways to refinance out of them, loan modifications may be the only way to assist struggling borrowers. This term is used when your lender modifies your current mortgage (same loan you have, only changes are made to the note) in order to work with you and make your mortgage more affordable. A modification to your rate, balance of loan, delinquent fees owed, term of loan etc. can be made at the “discretion” of your lender. In the past this was only used when a borrower was delinquent but now we will see it being used before someone is delinquent. This will be the hottest term and the best way to help people avoid foreclosure.
3. Forbearance
This is used most of the time, when a Notice of Default has been filed. You are allowed to delay or reduce payments for a short period, with the understanding that another option will be used at the close of that time to bring your account to a current status. Your lender, if in agreement, will then temporarily cease legal actions. Typically 30% of sub-prime lenders (with high interest rates) will only offer a workout program that requires borrower to immediately pay at least 20% or more of the total delinquencies including foreclosure fees, plus the balance of the delinquency will be added to their regular monthly payments over a period of six to forty-eight months. Forbearance plans do not remove a foreclosure action but simply stop it in place until the loan is current.
FORBEARANCE PROGRAMS OFTEN FAIL IF THE LENDER IS NOT FORCED TO CONSIDER THE ABILITY OF THE BORROWER TO PAY. WE REQUIRE THEM TO CONSIDER YOUR ABILITY TO PAY.
4. Short Sale
Here is another abused tactic that is being pushed on homeowners by over zealous real estate agents (not all agents are like this) that profit from the sale of your home. Bottom line is that if you want to save your home, then this should be one of the last methods you utilize in the loan workout process. If you do not want to save your home and you have resigned to the fact that you are way in over your head, then by all means, find an experienced short sale agent (not just any real estate agent, but one with a proven successful track record) to assist you in dealing with your lender and getting your home sold.
A short sale is primarily used when all negotiations for a loan workout have failed and you are upside down on your mortgage, meaning you owe more on the mortgage than it’s worth. The lender basically agrees to cooperate in the sale of your home and take a loss. You place the home for sale and any offers that are obtained will be presented your lender. Unlike a traditional real estate sale when the homeowner decides what offer to accept or not accept. Your lender will control the negotiations and you will not be involved in the contract negotiation of the sale of your home.
Many lenders are severely back logged in their short sale departments. Many are simply not cooperating and making everyones lives very difficult. Remember they are now debt collectors and you owe them money on a contract and they plan to collect on that.
The best advice is to seek an experienced attorney about the possible consequences of a short sale.
5. Foreclosure Bail Out Loan
A new loan where the defaulted mortgage is paid off. This is usually a hard money mortgage and it is common for interest rates to approach 10-15%. Points can be as high as 5 and terms are usually short. In the 5 year range where a balloon payment will be due for the remaining balance. In order to qualify you must have sufficient equity. Hard money lenders are looking for 65-75% max loan to value and a decent equity cushion. You also would need to have ability to repay as in a traditional mortgage.
6. Deed-in-lieu
Deed-in-lieu is a deed instrument in which a mortgagor (i.e., the borrower) conveys all interest in a real property to the mortgagee (i.e., the lender) to satisfy a loan that is in default and avoid foreclosure proceedings. The deed in lieu of foreclosure offers several advantages to both the borrower and the lender.
The principal advantage to the borrower is that it immediately releases him from most or all of the personal indebtedness associated with the defaulted loan. The borrower also avoids the public notoriety of a foreclosure proceeding and may receive more generous terms than he would in a formal foreclosure.
Advantages to a lender include a reduction in the time and cost of a repossession, and additional advantages if the borrower subsequently files for bankruptcy. In order to be considered a deed in lieu of foreclosure, the indebtedness must be secured by the real estate being transferred.
Both sides must enter into the transaction voluntarily and in good faith. The settlement agreement must have total consideration that is at least equal to the fair market value of the property being conveyed. Generally, the lender will not proceed with a deed in lieu of foreclosure if the current fair market value of the property exceeds the outstanding indebtedness of the borrower. Because of the requirement that the instrument be voluntary, lenders will often not act upon a deed in lieu of foreclosure unless they receive a written offer of such a conveyance from the borrower that specifically states that the offer to enter into negotiations is being made voluntarily. This will enact the parol evidence rule and protect the lender from a possible subsequent claim that the lender acted in bad faith or pressured the borrower into the settlement. Both sides may then proceed with settlement negotiations.
Neither the borrower nor the lender is obliged to proceed with the deed in lieu of foreclosure until a final agreement is reached.
7. Chapter 13 Bankruptcy
As of the date of this writing, the federal bankruptcy courts do not have the authority to restructure mortgages. However, this seems to be a popular method that is being used by homeowners and attorneys to delay foreclosure on their home.
This is primarily used as a “stall” tactic and is not a “cure-all” for your mortgage problems. In some cases Chapter 13 bankruptcy filings are being abused and portrayed by some bankruptcy attorneys as an effective way to “stop” foreclosure when in fact it is only an effective method to “delay” foreclosure.
In order to qualify for Chapter 13 bankruptcy you will be required to have a steady income.The bankruptcy petition would need to be filed before the sale date of your property.
After filing, you will propose a plan to repay the amount you fell behind on the mortgage. You will also begin to again pay your regular mortgage payments, which under the operation of law must be accepted by your mortgage company.
A forced loan modification (non-mortgage) can be sanctioned by the courts if it is proved that the borrower cannot afford the current payments. The concept is similar to debt consolidation, but it permits you, the consumer(s) to pay unsecured debt down without accruing interest (student loans are an exception) and without having to deal with those annoying calls from debt collectors.
Under a typical plan, you make monthly payments to a court appointed bankruptcy trustee for generally three to five years. The amount of your monthly payment is determined by several factors such as the amount of debt you have, your ability to repay and the extent that you have assets. In exchange for stopping any and all collection activity, one proposes to pay all or, in specific circumstances, a portion of the debt through a Chapter 13 plan. The filing of a Chapter 13 bankruptcy stops ALL collection activity through something called the automatic stay. The automatic stay remains in effect during the life of the case unless the court orders otherwise.
You can always refinance or sell your home while under Chapter 13 if you wish to pay off the bankruptcy and move on with your life. The Chapter 13 stops the foreclosure immediately. Often, your only other option would be to refinance, or enter into a repayment agreement with your mortgage company. All too often, they want a double payment each month until you can catch up.
We believe that bankruptcy is the absolute LAST resort.