At this point pretty much all of us have known someone, or experienced ourselves, the many woes of yesteryear’s bad mortgages and faulty lending practices….. People of all walks of life, some even highly educated, got involved in a loan that went wrong to buy the home of their dreams and are still paying dearly to catch up. Negative amortization loans and ARM mortgages have been re-evaluated through strengthened lending practices today in 2014, but many Americans are still facing the cloud of foreclosure looming over their heads.
Many don’t know what to do when they are facing foreclosure or carrying the burden of trying to keep their home after a major life change or financial hardship. Between the bad loans and the recession causing job loss, so many owe a significant amount more than their home is worth. What you didn’t know? YOU HAVE OPTIONS!
1. Home Affordable Modification Program (HAMP): “The very first thing you should do is check if you qualify for HAMP,” says Rich Hayden, senior loan officer with HomeFirst Mortgage in Alexandria, Va. Through HAMP, the federal government offers borrowers with loans insured by Fannie Mae or Freddie Mac the opportunity to refinance into lower interest rate loans.
According to the Consumer Mortgage Audit Center, or CMAC, most loan modifications take at least one year to complete. The more organized you can be, the faster you’ll help your case move through the system. Lenders, says CMAC, are asking for a minimum of:
- 30 days of paystubs, or most recent tax return, if self-employed.
- A personal debt report from one of the three major credit bureaus.
- A hardship letter, the format and requirements for which varies.
According to the Treasury Department, at the end of November 2009, only about 4 percent of the homeowners who signed up for loan modifications had received them.
If you qualify, it’s time to call your lender. “You must be able to clearly state why you can’t make your payment in full,” says Hayden. Some lenders will set up a short-term payment reduction or temporarily waive your payment and add that unpaid amount to your principal. “And,” says Hayden, “if the situation is dire, consider talking to a bankruptcy attorney to review your options.”
2. Short sale: A short sale is when you sell a home for less than what is owed on the mortgage. While not as damaging to your credit report as a foreclosure, your credit score will take a hit nonetheless.
Before approving a short sale, lenders take into consideration the amount of assets a borrower has and whether the borrower is already in default.
To sell the home as a short sale, you should list it with a real estate professional that’s well versed in these types of sales. “The concept of short sales being a viable option has gained new traction,” says Aaron Lewis, a broker-associate with The Lewis Team at Prudential California Realty in Modesto, Calif. Servicers are hiring to handle the volume and the Treasury Department, Fannie Mae and Freddie Mac are all attempting to streamline the short-sales approval process.
3. Deed in lieu of foreclosure: “Basically, you’re handing over the keys to the lender in lieu of actually going through the foreclosure process,” says Hayden. The lender then sells the property to recoup a part or all of the loan balance. “It may be less invasive than a foreclosure, but it’s just as destructive to your credit. If there isn’t a clear path in sight, some borrowers make this choice,” says Hayden.
4. Call your lender: The bottom line: If you’re struggling to make your monthly mortgage payment or you’ve missed a payment, make a call to your lender. “Stay on top of it,” says Hayden. “Far too often those who are behind on credit card or mortgage payments are afraid of the phone, because they’ve been receiving calls from collection agencies and fear they’ll have their house taken out from underneath them. Know your rights and be honest about your situation.”
Tatyana Sturm and The Storck Team have been honored to serve the Denver and surrounding areas in relocation real estate for the last 10 years as one of Denver’s leading short sale specialists. If you or someone you know is facing foreclosure, make sure you are educated on your options. You might have equity or money in your home that you are unaware of in this ever changing real estate market. Call or text The Storck Team at (720) 350-5909.