March 3 2009 Update – Homeowner Affordability and Stability Plan
For Full Plan Details Click Here
Link To Questions and Answers On Plan
Citi's $500 a month mortgage deal
The sad but sickening news is that very few people are getting any help from the various programs designed to assist homeowners in trouble. I recently asked my followers on Twitter and Facebook for any stories of success with a loan modification. You guessed it, not one story of anyone getting any help. What makes me really angry is when I see big companies like AIG getting billions from the Government, yet the ‘little guy’ gets nothing. What’s worse, are the false promises that help is on the way through catchy slogans and phone numbers that include the word HOPE. Well, yet another new program is on the way; the Obama Administration is saying that $275 billion will be set aside to assist people with troubled mortgages to refinance to lower rates. Even their own figures project that this new program will only help about nine million homeowners. We are already hearing about a list of requirements and restrictions that seem to make this new help very little help at all for most homeowners with troubled mortgages. Here is an outline of the program. Of course, we don’t really get any details about how exactly this will work and who can qualify for help, but the fine print is expected any day. Let’s start a conversation. If you have something to report on this topic, good or bad, please post it in the comments section below.
From the Article Talk to Me
‘But, for borrowers to participate, lenders have to forgive tens of thousands of dollars of debt for each borrower they approve. In theory, lenders ought to be willing to absorb that kind of write-off because foreclosure could cost them even more. In practice, however, they have never quite warmed to the idea. By December, only 312 borrowers had formally applied, and federal officials began looking for people to blame for the program's failure.’
Click Here To Follow Breaking News On Help For Homeowners With Troubled Mortgages
From June 3, 2008 -
The staff of Christian Money.com has spent the last three months researching the various foreclosure assistance programs being promoted by major lenders and the U.S. Government. What we found is that these programs are helping very few people and are offering real assistance to less than 1 in 10 homeowners that are in trouble. As a result, we have created a new e Book, Foreclosure Self Defense intended to provide real solutions for people behind on their mortgage and in risk of losing their homes. Along with today’s blog, we are making available a podcast interview that includes Robert Yetman and myself discussing options for homeowners facing foreclosure.
Click Here and Select The June 3, 2008 Podcast
1. Can You Get A Loan Modification or Forbearance?
Let’s start with a couple of basic definitions that you need to know before going any further. A modification is an agreement between you and your lender that will establish new terms for your loan. For example, you currently have an adjustable rate mortgage and your lender agrees to fix your rate for five years or makes other permanent changes to your terms. A forbearance typically involves taking past due payments and allowing them to be placed at the end of the loan or letting you go without a payment for a few months (or reduced payment).
You do not need anyone to call a toll free number or reference a special government program to be able to contact your lender to discuss your options for a loan modification or a forbearance. Anyone can simply pick up the phone and call their lender and find out what options may be available.
The various government programs being touted are all voluntary up to this point, and really provide nothing more than a basic framework for borrowers and lenders to work out modification agreements. Your lender does not have to do anything to help you and the government programs are not compulsory. Of course, your lender would be better off if you were able to keep making your payments, so they will have an incentive to try and work out a plan that makes sense for both parties.
2. Should You Short Sale Your House?
If you can not come to terms with your lender on a loan modification, maybe it is time to consider a short sale. A short sale comes into play when you owe more on your house than its current market value. Example: Your current mortgage balance is $200,000 and you have a buyer that is willing to pay $180,000. This is a typical short sale situation. Your lender may agree to forgive the $20,000 in negative equity to be able to facilitate a sale. Once rare, there are now more short sales occurring now than at any other time in history. You and your prospective buyer can contact your lender and propose a short sale without a middle man. In reality, you will likely have more success if you engage a knowledgeable real estate agent to handle this for you. You should look for an agent that has experience in transacting short sales.
3. How To Sell If Your Buyer Can’t Get A Mortgage
One of the big challenges today is finding a buyer that can get a mortgage. There are no shortage of people that want to buy, but only a small percentage that have the cash or can obtain their own mortgage. You can sell your house without the necessity of the buyer obtaining a new mortgage. There are two strategies that would make this possible.
Wrap Around Mortgage – Your buyer agrees to a mortgage with you while the existing mortgage on the property is left intact. Each month your buyer makes a payment to you and then you make your regular monthly mortgage payment. This owner financing arrangement is usually agreed to for about five years. After five years, the buyer agrees to obtain their own financing.
Lease Purchase – Your buyer agrees to lease the property for 3 to 5 years and ultimately purchase the home and obtain their own financing by the end of the lease term. Lease purchase agreements typically include a requirement of a substantial downpayment (5% or more of the purchase price). The downpayment can be used by you to get caught up on back payments and/or use to be able to secure your next residence (your first month’s rent and security deposit, if you are going to be renting for a while).
An additional feature of a lease purchase is the ability to obtain above market rent. Let’s say that market rent for your house is $1,200 per month. Under a lease purchase, you may be able to get $1,500 per month rent. People will pay more on a lease purchase if you offer them a partial credit. How this works is that you offer that $300 of the monthly rent count as a credit (price reduction) at the final sale of the home. Be careful that you plan on receiving less money at the final sale due to the higher rent you are collecting. A $300 monthly credit can quickly add up (in 3 years it would represent nearly $11,000). Don’t put yourself in the position that you would end up having to bring money to the closing table when the property is ultimately sold.
If your new buyer defaults on the lease purchase, they lose their downpayment and monthly rent credit. So, you can start the process all over again with a new buyer. Only about 1/3 to 1/2 of lease purchase buyers will follow through with the purchase. As a Christian, we don’t want to structure a deal and hope for the buyer to fail, this is simply the reality of what happens on lease purchases.
Caution: If you have an ever rising payment due to being in an adjustable rate loan, the above strategies may not be good solutions. It would be more prudent to get your lender to at least give you a fixed rate modification first, so you would be in a position to make a long term agreement for a lease purchase or wrap around mortgage buyer. It would not be ethical to agree to payments with your buyer that will not be sufficient for you to cover increases in your own payments.
Partial Owner Financing – If you have paid down your mortgage and have substantial equity, you may be willing to carry a second mortgage for 5 years or longer to help your buyer get approved on a new first mortgage. If you can finance a second mortgage for 10% of the purchase price and your buyer can make a 10% downpayment, a lender has to only make an 80% loan.
4. Consider Leasing Out Your House
One segment of the real estate industry that is booming is the rental market. With more and more people losing their homes to foreclosure, rental properties are in huge demand. If you can find a tenant to lease your property and cover your mortgage, you can move out and make other plans. Move out? Where will I go? Some people move in with family, others rent an apartment or move into a mobile home, you have to be resourceful. If you can not make your monthly mortgage payment, you will eventually have to move, it is just a matter when not if.
5. Selling Your House To An Investor
It is unfortunate that the media has portrayed all foreclosure investors as sharks that are trying to steal people’s homes. The truth is that most are just real estate investors looking for opportunities to make decent returns on their money. I have had numerous e mails from people asking me whether or not they should let an investor take over their mortgage. How this typically works is that you sign over your deed to an investor who makes the payments on your mortgage until they are able to get their own financing. If you have no equity in your home, you are on the road to foreclosure, what do you have to lose? If the investor does not make your mortgage payment you will still end up in foreclosure, but if they do, you may be able to walk away without destroying your credit.
Where people get burned with investors is when they sign over the deed and place at risk real equity they have in the home. If you have equity in the property, you should require the investor to pay you for your equity prior to signing over the deed. Once they get the deed, it may be very difficult to collect what you are owed.
6. Deed In Lieu Of Foreclosure
Rather than going through the lengthy court process, your lender may allow you to sign over the deed and forgive any balance you might owe if the house does not sell for a high enough price. Most states laws provide the lender the option to pursue the borrower for any deficiency after the foreclosure sale. If you think your house is worth less than you owe on your mortgage, and your lender is willing to agree to this kind of a settlement, you should consider it a reasonable way out. If you don’t, they can come after you for a deficiency judgment and drive you into bankruptcy.
7. Get Help From An Attorney For $26 per Month
I have been investing in real estate for over 20 years and have personally transacted millions of dollars as a mortgage broker and a real estate broker. So, it is easy for me to punch out a quick blog with a list of strategies for extricating yourself from foreclosure. This is a serious matter and you will likely need an attorney’s assistance. Consider becoming a member of Pre Paid Legal. For $26 per month, you will have unlimited access to attorneys for advice on any legal matter, including foreclosure. If you have questions about Pre Paid Legal, please send me an e mail. CMC receives an ongoing commission from each membership we refer to this company. So, buy signing up you are helping yourself and supporting our ongoing work.
Those Pesky Toll Free Numbers Everyone Else Gives Out:
HUD (800) 569-4287
Hope Now (888) 995–HOPE www.hopenow.com
Click Here For Phone Numbers To Loss Mitigation Departments of Major Lenders
Agree or disagree, or have your own ideas click on comments below.
Foreclosure Self Defense Is Available For Just $9.95 For Immediate Download
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My main website is www.ChristianMoney.com
James L. Paris
We purchased a home 3 years ago. We were NOT a "no money down loan" we had sold our other home and placed all we had (our life earnings and savings) as downpayment on our new home. In July 2207 my husbands employer (who he worked for steadily for 16 years) said times were tough and he would need to cut everyones hours....he wasn't sure for how long the cuts would be but he knew it would need to be at least 1 year. Realizing that with the cut in salary we would no longer be able to afford our home...1 month after HEARING of the cut we placed our home on the market with a realtor. We were being responsbile. Well with the enconomy it sat 18 months and did not sell. We could not make payments with the cut in hours and asked the lender if we could make partial payments they WOULD NOT accept that. we told them we tried to sell the home and we also paid someone recently 2,200.00 to loan modify....and we just ended up losing that 2,200.00 because the day they received the FINAL PAYMENT on their 2,200.00 was the day they told us....
they could not do anything for us. WE HONESTLY TRIED TO DO ALL THE RIGHT THINGS. We have 6 young children we lost our 2,200.00 for a rental home now, we lose everything we put down in this home, our credit will be shot because as of April 1st 2009 because this will be a foreclosure and we will never ever be able to save enough to
own a home again. We are simply heartbroken. And although our President keeps saying there is help....I have not seen one person who truly knows any direction to help or evidence of it. We worked very hard for the American dream.... and now my husband & I and our 6 young children have no where to go and no money to go with and
the lender SAXON MORTGAGE will not help us...and we lost 2,200.00
trying. How can they sit on an empty home??? How can they RENT it to someone else but not modify our payments??? There are 6 empty homes in our subdivison right now. WHY NOT WORK WITH THE PEOPLE
who invested in the property and have an interest in taking care of it??? Also if the home goes into Foreclosure doesn't the bank sit with no income AND have to pay the taxes till tghe home is resold or rented???? Seems so cruel to me that they would prefer this
then to modifiy a loan to a customer who was effected by the obvious drop in the economy. We are just so heartbroken.
THANK YOU for letting me vent.
God Bless
Lynda & Les Bishop
Posted by: Les & Lynda BIshop | March 04, 2009 at 03:49 PM
I think you may benefit by joining our Facebook Group http://www.facebook.com/group.php?gid=47042517902
Posted by: Jim Paris | March 04, 2009 at 03:57 PM
The mortgage market is diverse for sure. Everyone can tell you what you need to do, but they are not in your shoes and you need to do your homework. Don't believe everything you hear. There are loop-holes everywhere. If you are in trouble with your home payment, I would suggest that you go to www.NACA.com and ask them to help you. Their services are completely free. That's right, I said completely free. They will help you get your loan modified. Modifying a loan means they take your interest rate down and they will not reamortize, no appraisal, and no credit qualifications. What could be better. A wrap around or refi in my opinion is not the way to go. I have been in the mortgage business for 16 years and there are over 250 programs out there. My health does not allow me to keep in that business so good luck. The banks don't want you to know about the good loans. Do your homework. God Bless.
Posted by: Eleanor Harper | March 25, 2009 at 10:02 PM
If your home is close to foreclosure, or in foreclosure you may be able to save it before the bank sells it. Go to www.NACA.com. Totally free.
Another interesting note is that if you are paying mortgage insurance MI or PMI remember that the bank does not care if your home goes into foreclosure. They will get their pay from the insurance company so the bank is not going to lose. Remember, mortgage insurance is for the banks good and you pay the premium. Now if you have more than 20% equity in your home, they still want you to lose it because they will probably make money on the resale. Don't let this happen. Your hard earned money should stay in your household. Don't take their harassing. Do Something.
Posted by: Eleanor Harper | March 25, 2009 at 10:14 PM