Welcome To The Bristol Tennessee-Virginia Association of REALTORS
AVOIDING Foreclosure
If you are currently having trouble paying your mortgage or expect problems in the future, it’s crucial that you get help now. If you fall behind and don’t take action, your lender will take steps to foreclose your home. If that happens, you may lose your home and all of the money you have already invested in it.
GET HELP NOW.
1. Don’t ignore the problem. Open letters from your lender and answer their phone calls. Be honest about your situation as early as you can. If you communicate early enough with your lender, you have a much greater hope to work together to find a solution.
2. Find your original loan documents. You will need to understand the exact terms of your loan agreement so that you can better evaluate your options.
3. Speak to qualified advisors. Don’t try to handle this alone. Many state and federal entities offer free guidance on this issue. These advisors can help you examine your budget, sort out your options and prepare you to speak with your lender. In the event your lender is not willing to help, they may be able to help you find another source of financing.
4. Understand your options. Once you understand the terms of your loan and have spoken with trusted advisors you will be in a position to seek a solution. Your lender may be willing to offer loan modification options.
5. Avoid scams. Be wary of responding to advertisements such as “We Buy Houses for Cash” or “Avoid Foreclosure.” Those who place such ads in search for homes to buy far below market value, or to convince sellers to sign over ownership as part of a complex refinancing arrangement , are knows are “rescuers.” These rescuers often attempt to make a quick profit or commit outright fraud by preying on a homeowner’s financial and emotional distress. Be suspicious of anyone who approaches you be letter, by phone or who simply shows up on your doorstep.
REVIEW YOUR OPTIONS. (All of these options may not be available to every homeowner.)
1. Loan Modification. Also called a mortgage modification, this enables the homeowner to negotiate a workout solution with the lender to catch up on late or missed payments and lower the monthly mortgage payment by adjusting the terms of the loan. This is currently one of the best, most available, and most popular options.
2. Forbearance. Forbearance provides the borrower with a payment plan for catching up on missed payments. The homeowner is typically allowed to pay a few hundred dollars extra each month over the course of 18-24 months to catch up.
3. Reinstatement. Homeowners may be able to borrow money from relatives who are in a position to do so, to pay any balance currently overdue and then pick on monthly payments as though nothing ever happened. (This is a practical option only for those who have recovered from a temporary financial setback and can now afford the house payment along with any payments required to pay back their relatives.)
4. Refinancing. Given the fact that credit is still pretty tight right now, this option may not be available. If the homeowner can qualify for a fixed-rate, low interest loan to pay off a higher interest loan and perhaps even consolidate their debts, refinancing could be one of the best options.
5. Government Loan Programs. The federal government, through FHA, offers downpayment assistance programs and is developing other programs to enable homeowners to keep their homes. Homeowners should contact the local HUD office to find Out what’s currently available.
6. Bankruptcy. For homeowners who are buried in unsecured debt, including credit card debt, bankruptcy may be the best option. The filing of a bankruptcy petition automatically stops a lender’s foreclosure action until such time as the lender obtains the Bankruptcy Court’s permission to proceed.
7. Selling the home. For homeowners who cannot or do not want to keep their homes, selling the home to “get out from under it” may be the best option. Work with a REALTOR® to list your home and to help you find more affordable accommodations.
8. Short sale. For homeowners who face the prospect of selling the home at a loss, a short sale may be negotiated with the lender. With a short sale, the lender agrees to accept as full payment a partial payment of the loan. In most cases, a lender is more likely to go along with the idea if you already have an offer from an interested and qualified buyer.
9. Selling to an investor. There may be investors in your area who have the cash to purchase properties. Investors are often in a better position to move quickly on a deal, and when you are in a foreclosure situation, time is often of the essence.
10. Deed in lieu of foreclosure. For homeowners who are unable to make payments (even significantly lower payments) and cannot sell the property and at least break even on the sale, the lender may accept the deed in lieu of foreclosure. The homeowner should hire an attorney, to make sure that the del allows them to walk away totally debt free and prohibits the lender from seeking a delinquency judgment. In some cases, the lender may be willing to pay the homeowner a small amount in exchange for keys and leaving the property “broom clean,” which the homeowner can use to move to more affordable housing.
11. Abandoning the home. Walking away is an option, but it is not always the best option, because it can leave some legal strings untied. In some jurisdictions, the lender can sell the house at auction and then pursue a deficiency judgment against the homeowner for the difference between what the house sold for and the balance of the judgment.
12. Do nothing. One of the worst options is to do nothing, in which case the homeowners lose their home along with any equity they may have had in it and have to go through the humiliation of being evicted.
The Economics of Foreclosure
Foreclosure is a devastating tragedy. For a family, it brings economic loss, displacement and emotional stress. Foreclosure presents an economic burden to the original lender (or subsequent investors in the loan) and it has been associated with decreased home values, increased crime and neighborhood blight. It is for all these reasons that every effort should be made to attempt to find a solution to the crisis.
Foreclosures cost lenders and investors more than loan modification. Loan modifications typically preserve the value of the property the lender took as collateral. In a foreclosure, the lender receives liquidation value rather than fair market value; faces long delays in the process; incurs expenses in fixing up the property; and needs to pay for legal and selling costs.
Preventing foreclosures will preserve home prices and assist the overall housing market. Foreclosures depress housing prices overall. Millions of families not facing foreclosure—those who have faithfully paid their mortgage on time—lose equity through property value declines every time there is a foreclosure in their neighborhood. Averting 600,000 foreclosures will save an additional $72.5 billion in wealth lost by American families not facing foreclosure. This in turn will save local government property tax revenues, as well as the significant costs of police and administrative support that foreclosures require.
Consider steps you might take to improve your cash-flow situation. Even if these efforts don’t completely cover your budgetary shortfall, taking strong and decisive action demonstrates to your lender the level of commitment you are willing to make towards the
goal of saving your home.
The National Association of REALTORS® has free, downloadable consumer brochures:
Shopping for a Mortgage – Do your Homework First
Learn How to Avoid Foreclosure
Specialty (Nontraditional) Mortgages: Risks and Advantages
Shopping for a Mortgage – FHA Improvements benefit you
Counseling & Other Advocacy Resources
• To find a counselor, contact the U. S. Department of Housing and Urban Development (HUD) at 800-569-4287 or 877-483-1515, or go to www.hud.gov/offices/hsg/sfh/hcc/hccprof14.cfm
• Call 888-995-HOPE, the Homeowner’s HOPE Hotline to reach a non-profit, HUD-approved counselor through HOPE NOW, a cooperative effort of mortgage counselors and lenders to assist homeowners.
• Visit NeighborWorks America’s Web site at www.nw.org/network/home.asp
• Go to this website for information on federal mortgage modification and refinancing programs: www.makinghomeaffordable.gov
• The Controller of the Currency’s consumer information site for banking related questions is www.helpwithmybank.gov
• OCC Customer Assistance Group and consumer assistance site: www.occ.gov/customer.htm
• Federal Trade Commission: www.ftc.gov/bcp/edu/pubs/consumer/homes/rea04.shtm
• Federal Reserve Board: www.federalreserve.gov/pubs/foreclosurescamtips/default.htm
• NeighborWorks America: http://www.nw.org
• HOPE NOW: www.hopenow.com
Geographically located in both Tennessee and Virginia, BTVAR is a trade association of real estate professionals and affiliate members serving as the voice for real estate in our area communities.
As a REALTOR®, our members have earned the right to use the REALTOR® trademark and proudly display it to symbolize the high standards, ethics and professional service that go hand-in-hand with being a REALTOR®.
The Bristol Tennessee-Virginia Association of REALTORS® continually strives to be the leading real estate advocate for our members and the communities we serve, to endorse ethical standards enforcement of the REALTOR® Code of Ethics, provide education and promote private property rights.
