Alternatives to the Home Affordable Refinance and Loan Modification Options.

The Home Affordable refinance and modification options are designed specifically to allow existing homeowners to keep their homes by making mortgage payments affordable. The plan will not help everyone. For example, it will not help investor borrowers or borrowers who have no income and cannot make any mortgage payment.

If you do not qualify for a Home Affordable Refinance or Modification, your mortgage servicer or HUD-approved housing counselor may have other options that are available to you. 

These options may include:

•FORBEARANCE:
The “forbearance” agreement means that you pay only a portion of your regular payment or no payment at all for a specific period of time based on your current financial status. At the end of the forbearance period, you will begin making regular payments as well as an additional amount to pay off the past-due amount.

•REPAYMENT PLAN:
If you have missed some of your monthly payments, your mortgage servicer may be able to help you catch up by creating a schedule for repaying the past-due amounts.

In some cases, you may need to sell your home and move to more affordable housing.

Call your mortgage servicer or a HUD-approved housing counselor to discuss:

•SHORT SALE:
If you cannot sell your home for an amount that will pay off the mortgage loan, talk to your mortgage servicer about a pre-foreclosure or “short” sale. The mortgage servicer may be willing to accept a payoff amount less than what you owe on the mortgage balance in certain situations.  If you would like to explore this option, contact me (Susan Hopper) and I will help you get started.

•DEED-IN-LIEU OF FORECLOSURE:
If you cannot sell your home in a reasonable amount of time, your mortgage servicer may agree to have you voluntarily transfer the deed to the property to them to help avoid the impact of a foreclosure on your credit rating.

Are You Eligible for a Home Affordable Refinance?

If you are a homeowner who is current on your mortgage payments but unable to refinance to a lower interest rate because your home value has decreased, you may be able to refinance.

The Making Home Affordable website has a quick assesment tool to help you determine if you are eligible for a refinance under the Making Home Affordable Program.

Loan Modification: Your Path to a More Affordable Mortgage

Find Out if You're Eligible for Loan Modification Under the Making Home Affordable Plan.

If you can no longer afford to make your monthly loan payments, you may qualify for a loan modification to make your monthly mortgage payment more affordable.

Millions of borrowers who are current, but having difficulty making their payments and borrowers who have already missed one or more payments may be eligible.

The Making Home Affordable website has a quick self-assesment that can help you determine whether you might be eligible for loan modification.

http://makinghomeaffordable.gov/modification_eligibility.html

What is a Short Sale? And is Your Best Option?

What is a Short Sale?
A short sale occurs when the net proceeds from the sale of a home are not enought to cover the seller's mortgage obligations and closing costs, such as property taxes, transfer taxes, and the real estate commission, and the seller is unable to cover the difference.

When can a Short Sale be used?
When the owner of the house is behind in payments and the bank has started the foreclosure process. The foreclosure process usually starts when the owner’s house payment is at least three payments behind. A short sale can often be your best option if you cannot qualify for Loan Modification through the Making Home Affordable Plan or you do not desire to stay in your home.

Why would I as a Homeowner agree to a Short Sale?
Since you are behind on payments, it is likely your house has become a financial burden and possibly an emotional burden. You are probably looking for relief from the debt, and relief from the financial and emotional distress. One of the best reasons is that the short sale prevents you from getting a foreclosure on your credit report.

Why would the Bank (Primary Lien Holder) Agree to a Short Sale?
Foreclosure is an expensive process for the bank. Most of the time, the short sale can actually save the bank money. Also, when a bank holds a foreclosed property, it limits the amount of other loans they can make. It looks unfavorable for a bank to have too many real estate owned (REO) homes on their books at one time.

Can I as the Owner Make a Profit from the Short Sale?
No. Since the bank is agreeing to lose money by taking an amount less than the loan payoff, they have a rule that the owner cannot make any profit either.

Does the Short Sale Cost me Anything?
No, typically there are no costs to you.

Can the Bank Sue me for the Difference Between the Loan Payoff and the Amount of the Short Sale?
Since the bank must be in FULL AGREEMENT with the amount of the short sale payoff, it is typical for the bank to forgive the remaining indebtedness. However, it is advisable to have the final lender short sale approval reviewed by legal and/or tax professionals to ensure that the lender releases the lien and forgives the remaining indebtedness.

Are there Tax Consequences to me on a Short Sale?
Prior to the Mortgage Debt Relief and Emergency Economic Stabilization Act of 2008 being put into effect, money forgiven by a lender in a short sale was considered taxable income. In many circumstances, the new law no longer requires taxpayers to pay federal income tax on the forgiven debt, provided the property is their principal residence only.  Taxpayers may exclude debt forgiven on their principal residence if the loan balance was less than $2 million. The limit is $1 million for a married person filing a separate return. The law applies to debt forgiven in 2007, 2008, and 2009, and the Economic Stabilization Act of 2008 has extended this forgiveness through 2012. It includes debt reduced through mortgage restructuring, refinancing, home equity lines of credit, short sales as well as mortgage debt forgiven in connection with foreclosures. As a reminder, this is debt that was used to buy, build, or improve a principal residence ONLY.

How Long Does the Short Sale Process Take?
It depends on how easy or difficult the bank is to deal with, and how quickly they respond once we contact them. The entire process could take 7 days, 30 days, 90 days, or longer. Again, it just depends.

How Do we get the Short Sale Process Started?
If you'd like to explore whether you might be a candidate for a short sale, please contact me and I will be happy to help you through the process.

What are the Alternatives to Foreclosure?

First, it's important for you to understand that many lenders would rather not foreclose. They take a large financial hit on a foreclosure. So in many cases, they'll consider alternatives. Some of these options may keep you in your home.

Here are some of the options:

1. Special Forbearance. Your lender may be able to arrange a repayment plan based on your financial situation. Your lender may even provide for a temporary reduction or suspension of your payments. You may qualify for this if you have recently lost your job or your source of income or if you had an unexpected increase in living expenses. You must furnish information to your lender to show that you would be able to meet the requirements of the new payment plan.

2. Mortgage Modification. You may be able to refinance the debt and/or extend the term of your mortgage loan. This may help you catch up by reducing the monthly payments to a more affordable level. You may qualify if you have recovered from a financial problem but your net income is less than it was before the default (failure to pay).

3. Partial Claim. Your lender may be able to work with you to obtain an interest-free loan from HUD to bring your mortgage current. You may qualify if: 1)your loan is at least 4 months delinquent but no more than 12 months delinquent; 2) your mortgage is not in foreclosure; and 3) you are able to begin making full mortgage payments. When your lender files a partial claim, HUD will pay your lender the amount necessary to bring your mortgage current. You must execute a promissory note, and a Lien will be placed on your property until the promissory note is paid in full. The promissory note is interest-free and will be due if you sell or leave your property, or when your mortgage matures.

4. Pre-foreclosure sale (also known as a "Short Sale"). This is the fastest-growing foreclosure alternative. Many banks will allow a short sale, in which the home sells for less than the amount of the loan. This is attractive for lenders because they lose less money than in a foreclosure. Also, short sales generally take less time than foreclosures, so the banks don't have to carry the properties on their books as liabilities. This is an attractive option for you, the homeowner, because the impact on your credit is far less than in a foreclosure. A short sale can stay on the credit report for only two years, as opposed to seven years for a foreclosure.

5. Deed-in-lieu of foreclosure. As a last resort, you may be able to voluntarily “give back” your property to the lender. This won’t save your house, but it will help your chances of getting another mortgage loan in the future. You can qualify if: 1)you are in default and don’t qualify for any of the other options; 2) your attempts at selling the house before foreclosure were unsuccessful; and 3) you don’t have another FHA mortgage in default.

A HUD-approved housing counseling agency, such as HOPENOW (http://www.hopenow.com/)can help you determine which, if any, of these options may meet your needs. You should also discuss the situation with your lender.

If you determine that your best course of action is to pursue a short sale with your lender, make sure you choose an experienced agent with specialized short sale training. Short sales are paperwork-intensive, and there are many, many details involved. If you're considering this option, it's critical to work with a trained real estate agent who knows all the steps required to successfully complete a short sale. I have experience and have received specialized training necessary to understand the intricacies of these transactions.

Call me today and let's start working through your options.

Facing Foreclosure? Beware of Scams.

Facing foreclosure? Scammers are targeting people who are having trouble paying their mortgages.

Some claim to be able to “rescue” homeowners from foreclosures, while others promise loan modifications – for a fee.

The Federal Trade Commission, the nation’s consumer protection agency, wants you to know how to avoid scams that could make your housing situation go from bad to worse.

More details on foreclosure scams from the Federal Trade Commission.