How Do I Avoid Foreclosure:

A step by step process for distressed homeowners.

Part 6

This is the sixth in a series of posts designed to be a step-by-step directory for distressed homeowners to use to try an avoid foreclosure.

We continue the discussion of various options that a distressed homeowner may have.  Some of these options only apply to homeowners in very specific situations and will not apply to most; however, if you meet the criteria you should take advantage of any opportunity that presents itself.

Short-Refi

This is a relatively new option in which the lender may reduce either the principal on the loan and the monthly payment.  The qualification process is demanding and not all lenders will consider it.  It does show how far some lenders are willing to go to avoid foreclosure.  Make sure you have all of your documents in order and ready to submit.  Naturally, you will have to show on paper that you can meet the commitment on the new loan.

Deed-in-Lieu of Foreclosure

Known as a friendly foreclosure, in this option the borrower surrenders the deed to the property in exchange for a commitment from the lender not to pursue any further action against the borrower.  This usually only works when there is only one loan on the property.  If the owner has any equity in the property it is not a recommended course of action. 

The advantage to the lender is that they do not have to incur the cost of foreclosure.  Some lenders require that the borrower be up to date on their payments in order to qualify. 

Here are links to a few web sites with helpful information for less specific situations:

                               http://portal.hud.gov/portal/page/portal/hud/topics/avoiding_foreclosure

http://www.ForeclosureStopper.org

http://www.CDPE.com

In future posts we will discuss other options people may use to avoid foreclosure.  Those posts will be coming soon.

Feel free to contact Mike West, Realtor, CDPE if you have any questions or need help.

(916) 337-0658              e-mail:   Mike@BMikeWest.com 

How Do I Avoid Foreclosure:

A step by step process for distressed homeowners.

Part 5

This is the fifth in a series of posts designed to be a step-by-step directory for distressed homeowners to use to try an avoid foreclosure.

We continue the discussion of various options that a distressed homeowner may have.  Some of these options only apply to homeowners in very specific situations and will not apply to most; however, if you meet the criteria you should take advantage of any opportunity that presents itself.

Refinance

This option may work if you can meet two critical criteria. First, you have to have sufficient equity in the property to be able to qualify for a refinance.  In this market that usually means at least ten percent of the current market value.  Lenders would like to see more.  Second, your credit can not have been too badly damaged.  Missed mortgage payments have a major impact on credit scores.

Few refinances result in a reduction in the monthly payment and/or a reduction in principal.  Even if you do meet the two primary requirements, unless you have a chunk of cash to contribute to reduce the principal, higher payments will be the most likely result.   

Also, unless the underlying hardship has been resolved, you may still have difficulty making the revised mortgage payment.    

Mortgage Modification

Homeowners who can prove that they can come close to affording their monthly mortgage payment may qualify for a loan modification.  Lenders are sometimes willing to change the terms of a loan if the modification will keep the loan producing.  The most common form of modification is an interest rate and payment reduction for a period of time, usually one to five years.  At the end of the adjusted period the terms revert back to those originally set.  Any short fall that the lender takes during the adjustment period is usually added to the principal. So in effect, the payments are reduced for a period of time and the term of the loan is extended to allow the borrower to repay the loan in full. 

There are very few instances in which the lender reduces the principal balance.  The borrower signed a commitment to pay the loan balance and the lender expects payment in full. 

Lenders are very cautious when considering loan modifications and will require extensive documentation as proof that the borrower will be able to meet the entire commitment of the modification.

A note of caution to those considering a loan modification.  Loan modification fraud is rampant in the marketplace.  Exercise great care before you pay any individual or organization to represent you in an attempt to modify your existent mortgage.  Those asking for payment in advance should be scrutinized even more carefully.  The California Department of Real Estate publishes a list of individuals and organizations that are suspected of fraudulent activities and the California State Bar has published a list of attorneys who have crossed the ethics line.  Dealing with individuals and organizations outside of California is even more dangerous.  The link to the HUD web site below should be helpful.

Here are links to a few web sites with helpful information for less specific situations:

                               http://portal.hud.gov/portal/page/portal/hud/topics/avoiding_foreclosure

http://www.ForeclosureStopper.org

http://www.CDPE.com

In future posts we will discuss other options people may use to avoid foreclosure.  Those posts will be coming soon.

Feel free to contact Mike West, Realtor, CDPE if you have any questions or need help.

(916) 337-0658              e-mail:   Mike@BMikeWest.com 

How Do I Avoid Foreclosure:

A step by step process for distressed homeowners.

Part 4

This is the fourth in a series of posts designed to be a step-by-step directory for distressed homeowners to use to try an avoid foreclosure.

We continue the discussion of various options that a distressed homeowner may have.  Some of these options only apply to homeowners in very specific situations and will not apply to most; however, if you meet the criteria you should take advantage of any opportunity that presents itself.

Rent the Property

This is an option that will work if you can rent the property to a tenant who can meet their rental commitment long term.  The danger in an economy with over 10% unemployment and 26% underemployment is that the tenant can lose their job or take a pay cut in order to keep their job.  If that happens, the rent checks are likely to stop coming in while the mortgage payments are still due each month. 

Over 40% of home in foreclosure were not owner occupied, meaning that they were rentals or vacation properties.  When the rent checks stopped coming in the owners could not continue to make their payments and lost the property to foreclosure.  The F word has a major impact on their ability to buy anything on credit for seven to ten years.

The issue of cash flow is also important.  Not all homes will rent for enough to cover the mortgage, taxes, insurance and upkeep.  Many landlords try to cover the mortgage payment with rental income and have to cover some or all of the taxes, insurance and upkeep with income from other sources; a difficult thing for most of us to be able to do long term.    

Refinance

This option becomes increasingly more difficult as housing values decline.  A few years ago, when home prices were increasing in leaps and bounds 100% financing was easy to obtain.  Today, lenders want to see some equity in the property before they will even consider a loan.  Lenders want to see an 80% loan-to-value ratio; that is to say, that they will loan up to 80% of the current market value on a property if all other factors are acceptable.  Some will consider going up to 90% of current market value in rare circumstances, but they will charge higher interest rates.  It is the risk/reward issue.  The higher the risk, the greater the reward to the investor.

Unless you have an equity position of 20% or more given the present market value of your property, refinancing will be very difficult at best.

If your equity position is less than 10% it is not an option.

Here are links to a few web sites with helpful information for less specific situations:

                               http://portal.hud.gov/portal/page/portal/hud/topics/avoiding_foreclosure

http://www.ForeclosureStopper.org

http://www.CDPE.com

In future posts we will discuss other options people may use to avoid foreclosure.  Those posts will be coming soon.

Feel free to contact Mike West, Realtor, CDPE if you have any questions or need help.

(916) 337-0658              e-mail:   Mike@BMikeWest.com 

How Do I Avoid Foreclosure:

A step by step process for distressed homeowners.

Part 3

This is the third in a series of posts designed to be a step-by-step directory for distressed homeowners to use to try an avoid foreclosure.

We continue the discussion of various options that a distressed homeowner may have.  Some of these options only apply to homeowners in very specific situations and will not apply to most; however, if you meet the criteria you should take advantage of any opportunity that presents itself.

Forbearance or Repayment Plan

The reinstatement option discussed (in post # 2) in this series is limited to those very few who, after going in to default, can come up with a large, lump sum cash payment to get their loan back on track. 

This option is likely to work for a larger number of distressed homeowners.  The hardship causing the borrower to miss one or more payments must be resolved.  The borrower must be able to prove that they have the income to continue to make the required payments.   

The borrower must make up all of their missed payments, pay late fees and any other fees the lien holder charges.  However, in this option, rather than making a lump sum payment they ask the lien holder to allow monthly payments of the total reinstatement balance, usually three to twelve.

Naturally, the lien holder must approve this option.  Bear in mind that these payments will be in addition to the regular monthly payments.

So, for the time it takes to repay the reinstatement balance the total monthly payments will be very large.

The danger here is that if only one of the payments is missed, or not paid completely, the borrower goes right back to the same stage of the foreclosure process where they were when they started to make the forbearance payments.

 This is difficult for most borrowers, but some use this option successfully to avoid foreclosure.

Sell The Property

This option was probably in the back of many borrower’s minds as an exit strategy if they got into trouble, when they really did the financial stretch to buy their dream home.  It can still work IF conditions are right.

In order to sell the property the current market value of the property has to me high enough for the seller to satisfy all liens against the property, plus commissions and all closing costs.  Today few will qualify.

Here are links to a few web sites with helpful information for less specific situations:

                               http://portal.hud.gov/portal/page/portal/hud/topics/avoiding_foreclosure

http://www.ForeclosureStopper.org

http://www.CDPE.com

In future posts we will discuss other options people may use to avoid foreclosure.  Those posts will be coming soon.

Feel free to contact Mike West, Realtor, CDPE if you have any questions or need help.

(916) 337-0658              e-mail:   Mike@BMikeWest.com 

How Do I Avoid Foreclosure:

A step by step process for distressed homeowners.

Part 2

This is the second in a series of posts designed to be a step-by-step directory for distressed homeowners to use to try an avoid foreclosure.

We will discuss the various options that distressed homeowners have.  Some of these options only apply to homeowners in very specific situations and will not apply to most; however, if they apply to you should take advantage of any opportunity the presents itself.

Reinstatement

If the reason the borrower missed one or even a few payments was temporary and has been resolved, they may decide to have their mortgage reinstated.  In order to get back on track the borrower must make all of their missed payments, pay late fees and any other fees the lien holder charges. 

The borrower should contact their lien holder, explain the nature of their situation and request specific information about what is require to get back on track.  Expect there to be legal and processing fees on top of the late fees.

The late payments will be reported on your credit report, but those are not nearly as damaging as a foreclosure will be.  After two years lenders do not consider “mortgage lates” when deciding to extend you credit.

Once you make the necessary payment you will have avoided the foreclosure.  The collection calls will stop and you can get on with your life. 

Service members Civil Relief Act (SCRA)

In December of 2003, this Act was signed into law.  It provides protection for military personnel in specific situations.  It is designed to provide temporary relief from paying a mortgage if the criteria are met.

For specific information you can go to:

http://www.USCG.mil/legal/la/topics/sscra/abput_the_sscra.htm

It is appropriate that those in the military are afforded some kind of protection while they are defending our country.

Here are a few web sites with helpful information for less specific situations:

                               http://portal.hud.gov/portal/page/portal/hud/topics/avoiding_foreclosure

http://www.ForeclosureStopper.org

http://www.CDPE.com

In future posts we will discuss options to provide the information people need to make an informed decision.  Those posts will be coming soon.

Feel free to contact Mike West, Realtor, CDPE if you have any questions or need help.

(916) 337-0658              e-mail:   Mike@BMikeWest.com 

How Do I Avoid Foreclosure:

A step by step process for distressed homeowners.

Part 1

“O.K., I’m in trouble, real financial trouble.  Due to circumstances beyond my control I can’t pay my bills.  The mortgage is due and I can’t come close to covering the payment.  What can I do”?

Unfortunately this scenario is playing out with thousands of home owners in our country today.  In fact, one in ten mortgages throughout the country are in trouble with even more headed in that direction.

Unemployment is at 10.2% and underemployment is at 20% in California.  Many of the wild west mortgages of the past few years are due to adjust, making the payments impossible to make for an ever growing number of borrowers.

Homeowners need help in the form of information and education.  Unfortunately, this is such an emotionally devastating situation many people shut down and do nothing.  The cold hard truth is that doing nothing is a sure fire formula for losing their home to foreclosure.

And foreclosure is not just a one time event.  Once a foreclosure is on you credit record it stays there for seven to ten years, making it difficult to obtain any kind of financing (home, auto, credit card, store card).  Those in this situation that do obtain credit are looking at interest rates well into the double digits.  People should do EVERYTHING POSSIBLE to avoid foreclosure.

We have to get the word out family, friends and neighbors that there are options available to them to increase their chances of avoiding foreclosure.  The thing is that they have to take action.  

There are many organizations available and willing to help without charging a fee.  Unfortunately, there are also far too many who will take advantage: fraud is rampant. 

The bottom line is that the distressed homeowner has to take action and be careful not to let an individual or organization taken advantage of them.

Contacting the lien holder and discussing your situation honestly is absolutely necessary.  However, before doing that there are a few steps to take first.

Take some time to learn what all your options are first.  This information is available in many places. 

Here are a few web sites:

                               http://portal.hud.gov/portal/page/portal/hud/topics/avoiding_foreclosure

http://www.ForeclosureStopper.org

http://www.CDPE.com

In future posts we will discuss these options to provide the information people need to make an informed decision.  Those posts will be coming soon.

Feel free to contact Mike West, Realtor, CDPE if you have any questions or need help.

(916) 337-0658              e-mail:   Mike@BMikeWest.com  

El Dorado Hills, CA REO (BANK OWNED) SALES DATA FOR OCTOBER 2009

This is a continuation of my monthly report on Bank Owned home sales for El Dorado Hills, CA.  This report covers REO homes sold in October of 2009, the latest in my study of over two years.

There were 22 REO homes sold in October, up from 14 in September.  The average days-on-market jumped to 43, up from the record low of eleven days in September.  There were three homes that sold in October that had been on the market for 249, 127 and 108 days respectively, which had an effect on this statistic.   Of the REO homes sold, 31.9% were on the market for two weeks or less.     

The 22 homes sold represent 40% of all homes sold in El Dorado Hills.

Bank owned and Short Sales represent a majority of the home sales in today’s market. 

The cost per square foot of REO homes in October decreased to $ 149, down from $ 158 in September.  The cost per square foot of all homes sold in October dropped twelve dollars, to $ 156. 

The difference between the cost per square foot of REO properties and the cost per square foot of all properties sold indicates that REO sales represented a 4.4% savings for REO buyers.  

The overall sales price for REO homes was 101.9% of the final asking price. Only 36.4% of the REO homes that sold did so for less than the asking price. 

At this writing there are 321 homes on the market in El Dorado hills, representing a 5.8 month inventory.  We have edged into a seller’s market.    

The actual, measurable savings is the difference in cost per square foot between REO homes sold and the cost per square foot of all homes sold:  in October, seven dollars per square foot.  That is a        $ 17,500 savings on a 2500 square foot home, still a tidy sum.  

thE DATA FOLLOWS:

Folsom, CA REO (BANK OWNED) SALES DATA FOR OCTOBER 2009

This is a continuation two year study of Bank Owned home sales data for Folsom, CA.  This report covers REO homes sold in October of 2009.

There were 19 REO homes sold in October, up from 11 in September.  That is a 72.8% increase.  The days-on-market increased from 20 in October to 27 in September.  The primary reason for the increase is that one home that had been on the market for 156 days sold last month, skewing the average days-on-market figure.  The fact that 52.7% of the REO homes sold in two weeks or less shows that REO homes are still selling quickly. 

The 19 homes sold represent 27.6% of all homes sold in Folsom, within the normal range for this study. 

The overall home inventory in Folsom is presently 250, a 3.6 month inventory, down from 4.7 in August, indicating a continuing strong seller’s market.  At this rate there will be a shortage of available homes very soon.  A neutral market is considered a 6 month inventory.

The cost per square foot of REO homes in October decreased to $ 163, down from $ 170 in August.  The cost per square foot of all homes sold in October decreased to $ 180, down two dollars from September.  Prices are still trending downward but more slowly than in the past few years.

The difference between the cost per square foot of REO properties and the cost per square foot of all properties sold indicates that REO sales represented a 9.4% savings for REO buyers.   

The overall sales price for REO homes was 99.5% of the final asking price.  In October only 31.6% of the REO homes that sold did so for less than the asking price!  

However, the banks are still pricing these homes well and in September there was a seventeen dollar per square foot savings, compared to the cost of all homes sold.  That is still a $ 42,500 savings on a 2500 square foot home, something worth considering when selecting a home.

The data follows:

HOW TO AVOID FORECLOSURE

Fannie Mae Deed-for-Lease Program

Fannie Mae has come out with another option to help distressed home owners avoid foreclosure.  Any program that will help is worth looking at. The program guidelines are very specific and not everyone will qualify.

It is a variation of the deed-in-lieu process, through which the homeowner/borrower gives the lien holder the deed to the property in lieu of foreclosure.  The lien holder becomes the owner of the property and the distressed homeowner who meets the guidelines remains in the home as a tenant.

• The borrower must have sufficient income to qualify to pay the market rent for the property.  The cap is 31% of the borrower(s) gross income.  So a family with a $ 2000 per month gross income can only qualify for a $ 620 monthly rent payment.  The borrower must submit proof of income.
• The borrower must continue to occupy the property.  They can not initiate the program, move out and sublet to another party.
• The property must be kept in good condition.

This program was announced on November 5, 2009, and not many loan servicers have embraced it at this writing.  The guidelines will not allow many to qualify, but is an option for those who do.

For more information go to:

http://www.fanniemae.com/newsreleases/2009/4844.jhtml

If you have further questions feel free to contact Mike West:

(916) 337-0658

http://www.ForeclosureStopper.ORG

El Dorado Hills, CA REO (BANK OWNED) SALES DATA FOR SEPTEMBER 2009

This is a continuation of my monthly report on Bank Owned home sales for El Dorado Hills, CA.  This report covers REO homes sold in September of 2009, the latest in my study of over two years.

There were 14 REO homes sold in September, four more than sold in August.  The average days-on-market dropped drastically to eleven, down from 36 days in August.  REO homes are selling like hot cakes.  Of the REO homes sold, 35.8% were on the market for less than two weeks.  The longest one on the market was 23 days.   

The 14 homes sold represent 34.2% of all homes sold in El Dorado Hills, up from 26.4 in August. 

The cost per square foot of REO homes in June increased to $ 158, up from $ 144 in August.  The cost per square foot of all homes sold in September increased seven dollars, to $ 168. 

The difference between the cost per square foot of REO properties and the cost per square foot of all properties sold indicates that REO sales represented a 5.9% savings for REO buyers.  

The overall sales price for REO homes was 102.7% of the final asking price. Worthy of note is the fact that only one of the REO homes sold did so for less than the asking price.   The limited inventory and aggressive pricing result in offers at or above the asking price; the only way for buyers to get their offers accepted over competing buyers.    

The actual, measurable savings is the difference in cost per square foot between REO homes sold and the cost per square foot of all homes sold:  in September, $10 per square foot.  That is a $ 25,000 savings on a 2500 square foot home, a tidy sum.  

The data follows: