STOP FORECLOSURE!

Are you a distressed homeowner facing foreclosure? You’re not alone, as you know many Americans are facing foreclosure in today’s real estate market. Get Informed! Know what your options are.

1. A Loan Modification

· A loan modification is simply that – a modification to your existing loan.
· You’ll need to catch up on 60%-70% of your late payments.
· Call the bank & tell them you have six or seven payments to make up and you want to do a “loan modification”.
· The bank will in turn put the other three or four payments on the end of the loan.
· You will also be required to pay all attorney fee and back taxes at this time.

Example:
Value of the house $200,000
What is owed $185,000
Monthly payments $1,500
Payments behind 10
Back payments Owed $15,000
Attorney fees $2,500

Therefore, you’ll have to pay:

$1500(late payments) X 7 = $10,500 +$2500(attorney fees) =$13,000

*You can only do 1 loan modification per year and 4 per length of the loan.
*Bank will ask for “proof of funds”.

2. Forbearance Agreement

· A workable agreement between you and the bank. If the Loan Modification doesn’t work because you don’t have all the cash, then this may be a better option for you.
· The bank will require 40%-50% of back payments plus all attorney fees up front…the rest of the payments will be added to your monthly payments over the course of a set period of time (6-12mnths).
· If you choose this option make sure you have enough money saved so that you don’t fall back into foreclosure. If you miss a payment you end up right where you left off in the foreclosure process.
Example:
Today is Feb. 6th and you strike a deal with the bank.
Your original Sale date is March 1st.
The bank will push your sale date back to April 1st.
And will continue like this until you have caught up on your payments.
If you miss a payment you will be right back in foreclosure the next month.

3. The Subject-To

· Sell the property Subject-To your existing loan. The Buyer will bring your loan current and pay all the arrearages at the time of the sale.
· This method will help build your credit by making timely payments each month. You should have a third party management company collect payments from the new buyer and then pay them to the lender.
· Your loan may have a due-on-sale clause that may call your loan due at the time of sale. You can ask your lender for permission to waive this clause.

4. Short Sale

· When your lender agrees to take less the amount owed on your current mortgage, this is called a short sale.
· In order for this option to work you must be faced with a financial hardship.
· A lot of paperwork and negotiating is required
· The Negotiator must state a case to the bank as to why you are deserving of a short sale.
· Banks don’t require you to be in foreclosure to do a short sale!
· Short Sales vary in processing time…it can take 3 weeks to 6 months and longer if you file bankruptcy.
· Short sales can buy you time
· Normally the banks give you a deficiency judgment(which is negotiable) is tax as income, as of 1/08 this has be waived

5. Chapter 13 Bankruptcy

· Contact your bankruptcy attorney

6. Deed in Lieu of Foreclosure

· Process where you just “give up” and give your home back to the bank.
· You will definitely be given a deficiency judgment, unless you get it in writing that they will not hold you liable.
· The bank will also hold you responsible for a “1099 tax liability”. This means you’ll have to pay taxes on any “shortage” of mortgage balance.
Example: Mortgage is $200,000
Bank sold for $150,000
You’ll be taxed for the difference of $50,000

7. Collateralizing your Defaulted Note with a Discounted Note

· Meet/Call your lender and negotiate a Substitution of Collateral of the defaulted property.
· Find a discounted note
· Find a lending source
· Replace the defaulted paper with the discounted note…this may actually put money into your pocket
· Easier said than done


I am not an attorney, nor do I pretend to be…Please contact your attorney for legal advice.