What if you can't pay your mortgage due to illness, divorce, loss of income? These questions are haunting and can be one of the scariest situations home owners face. Add to that misinformation and bad advise and often consumers find themselves in the perfect storm.
The recent CARES Act provisions for mortgage forbearance has created a lot of confusion and misinformation - often from national leaders in the real estate, finance and lending community.
Even prior to COVID-19, many home owners facing the possibility of foreclosure had misinformation and bad advise. For instance, did you know that you don't have to be behind on your mortgage to do a short sale?
I've helped luxury home owners successfully negotiate debt forgiveness on upside down properties since 2008. Whether you face the potential of a foreclosure auction, or are simply "stuck" with more debt than the current market value - there are solutions!
Information is power! Before you sign a forbearance agreement with your lien holder, please listen to this 30 minute video of my LIVE Broadcast with Lee M. Perlman, bankruptcy attorney who has helped people with options to avoid foreclosure for many years. He gives some excellent advise!
One of the options not often explained is the possibility of filing a counter suit once you've received a lis pendis notice of foreclosure. My guest, Real Estate Attorney and Litigator Michael Daeillo, is joining me later in May for an in-depth presentation on my LIVE Broadcast Channel. Be sure to follow me on Facebook or subscribe on YouTube for updates. His intro broadcast with me goes over options for you in case your tenants aren't paying rent and you can't pay your mortgage on investment properties.
(My apologies for the poor quality of my interview with Michael Daiello. Ironically I had to do this from my car as I was in the middle of a short sale closing.)
Please know I'm here to help! Contact me for a confidential consultation.
No one plans to be in foreclosure, or to be “upside down” in home value. It’s a stressful situation that can often leave owners feeling hopeless as if there’s no option but to “walk away” and let it go back to the bank. Unfortunately, I hear this advise coming from family members and friends who mean well but don’t understand the consequences that can literally haunt you financially after a foreclosure.
Right now with a temporary moratorium on foreclosures, it can create a false sense of security. The banks are ramping up to take action and will become aggressive once the CARES ACT prohibition lifts. Behind the scenes, they are still moving forward toward foreclosure.
It's important to take action as soon as possible, even if this has been an ongoing issue prior to COVID-19.
When we meet, I’ll share my story of facing foreclosure in the early waves of the mortgage crisis when I lived in Hawaii. Even in that “perfect storm” I could have successfully avoided foreclosure with a short sale if I knew then what I know now. That’s why I’ve dedicated myself to helping home owners for the past 10 years successfully resolve their situations and move on with the next phase of their lives. As a short sale expert with advanced training and an expansive network of resources, I’ve helped people in various situations such as;
Luxury Second Homes – I have completed many successful short sales on high-end luxury vacation homes with debt forgiveness and no capital contribution from the owners.
Multiple properties – many of my sellers have owned more than one home. There’s a “myth” that you can’t do a short sale if you own multiple homes – simply not true.
Wealth preservation – While in the early days of the mortgage crisis we often did end up with some small contribution toward deficiency needed from the seller, in recent years that hasn’t been the case. One of my sellers had $400K in his savings / assets and not one dollar was required toward the deficiency, and we got debt forgiveness!
Underwater properties – you don’t have to be in foreclosure or behind on your mortgage to do a successful short sale. Especially in the luxury market, sometimes the current values simply do not support a sale that will pay off the mortgage. We can negotiate a successful resolution with debt forgiveness for the difference.
While there are options other than a short sale as noted below, please contact me before paying for services to help you. Many of my clients have paid $3-$5K for help and received no resolution while the foreclosure process kept moving forward. I do have reputable referral partners who will consult with you for free and we can see if these options work for you or if you need to do a short sale.
Short sales do not cost the owner anything. You cannot make money from a short sale, but you also do not have to pay for any realtor fees, transfer taxes, etc.
Time is not on your side. Please allow me to help! My consultation with you is confidential and at no cost to you.
FORECLOSURE AVOIDANCE OPTIONS
Foreclosure is one of the most devastating financial challenges that a family can face and one that many times can be avoided. In the chart below are highlights from a summary of short sale vs. foreclosure and the impact on your credit, and ability to get a mortgage again soon.
Options for residents facing foreclosure are many, including but not limited to short sales. Following is a brief explanation of these solutions:
A reinstatement is the simplest solution for a foreclosure, however it is often the most difficult. The homeowner simply requests the total amount owed to the mortgage company to date and pays it. This solution does not require the lender’s approval and will ‘reinstate’ a mortgage up to the day before the final foreclosure sale.
Forbearance or Repayment Plan
A forbearance or repayment plan involves the homeowner negotiating with the mortgage company to allow them to repay back payments over a period of time. The homeowner typically makes their current mortgage payment in addition to a portion of the back payments they owe.
A mortgage modification involves the reduction of one of the following: the interest rate on the loan, the principal balance of the loan, the term of the loan, or any combination of these. These typically result in a lower payment to the homeowner and a more affordable mortgage.
Rent the Property
A homeowner who has a mortgage payment low enough that market rent will allow it to be paid, can convert their property to a rental and use the rental income to pay the mortgage.
Deed-in-Lieu of Foreclosure
Also known as a “friendly foreclosure,” a deed-in-lieu allows the homeowner to return the property to the lender rather than go through the foreclosure process. Lender approval is required for this option, and the homeowner must also vacate the property.
Many have considered and marketed bankruptcy as a “foreclosure solution,” but this is only true in some states and situations. If the homeowner has non-mortgage debts that cause a shortfall of paying their mortgage payments and a personal bankruptcy will eliminate these debts, this may be a viable solution.
If a homeowner has sufficient equity in their property and their credit is still in good standing, they may be able to refinance their mortgage.
If a member of the military is experiencing financial distress due to deployment, and that person can show that their debt was entered into prior to deployment, they may qualify for relief under the Servicemembers Civil Relief Act. The American Bar Association has a network of attorneys that will work with servicemembers in relation to qualifying for this relief.
Sell the Property
Homeowners with sufficient equity can list their property with a qualified agent that understands the foreclosure process in their area.
If a homeowner owes more on their property than it is currently worth, then they can hire a qualified real estate agent to market and sell their property through the negotiation of a short sale with their lender. This typically requires the property to be on the market and the homeowner must have a financial hardship to qualify. Hardship can be simply defined as a material change in the financial stability of the homeowner between the date of the home purchase and the date of the short sale negotiation. Acceptable hardships include but are not limited to: mortgage payment increase, job loss, divorce, excessive debt, forced or unplanned relocation, and more.
This represents only a summary of some of the solutions available to homeowners facing foreclosure. To explore options, set up a time to meet with Susanna for an evaluation of your individual situation, property value, and possible options.