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If you are falling behind on payments and/or are facing foreclosure, there are some strategies that may help you to avoid foreclosure. In this video, Brian describes these little known facts:
1. Three ways you can work with the bank (loan modification, short sale, bankruptcy).
2. Foreclosure may not wipe out your debt.
3. Banks don’t want your house!
4. The sooner you act, the easier the solutions will be.
If you have questions about this video or about facing foreclosure, call us and talk to our foreclosure experts!
A lot of banks will ask you if you are interested in a loan modification, where they look to see if they can recast your loan, take some of your back payments and extend the interest or the life of the loan; and keep you in your house in the new payment plan. Unfortunately, this can take months while the banks go back and forth requesting information. Unfortunately, during this time, you probably haven’t made mortgage payments have might have gotten further behind. So, if the modification isn’t approved at the end, you could be 6-9 months behind on your payments, instead of just a little behind where you started.
Short sales can work really well. A lot of people think short sales steal equity or only pay half price for a house. In reality, the bank doesn’t want your house. So, they will help you work with a short sale specialist, agent or a company that can help get your property on the market, get as much as you can for it, and sometimes the bank will allow you to sell the house for that price. It may not cover all the principal balance on the mortgage, but you may be able to get a release to prevent the foreclosure.
Lastly, you will get a lot of letters from bankruptcy attorneys. The bankruptcy will stop the foreclosure process, but you have to be able to make the bankruptcy payments during the whole term of the bankruptcy. A lot of times it is a very short term solution. If you are not able to keep up with the payments, the bank will petition the court to release the home from your bankruptcy and then will foreclose on it. Many times, people end up with a bankruptcy AND a foreclosure; so make sure that a bankruptcy is truly in your best interest before proceeding.
#2. Foreclosures May Not Wipe Out Debt
Most people don’t realize that a foreclosure doesn’t usually wipe out your debt. The primary collector is actually the taxing authorities, so you have to have the taxes paid first. If you are behind on taxes, the bank will actually pay last year’s taxes for you to protect their interest. The primary mortgage holder gets filed first, and they will be the first ones to file foreclosure. They will make sure the taxes are paid to ensure their asset, and then if they foreclose they will get paid first. There are other liens that could be due (junior liens, homeowners association liens, other subsequent things on title, but the primary collector is the primary mortgage holder).
#3. The Bank Doesn’t Want Your House
Another thing that is important to keep in mind throughout the process is that the bank doesn’t want your house. They are not in the business of buying and selling real estate – they are in the business of lending money. To hire attorneys, hire an agent to sell the house, have the house cleaned out, and maintain utilities and other holding costs is very costly for large institutions. They are equipped to do it, but it is a last resort for them, just like foreclosure is a last resort for you.
A lot of times a bank will offer cash for keys. Cash for keys is a program where the bank pays the seller as much as 1% of the home value to move out and agree not to take appliances or cause damage to the property. This is great for the seller because it gives you the opportunity to get some money to start over, and because any fees the bank has to pay will get tacked on to what is owed to the balance of your loan.
#4. The Sooner You Take Action, The Easier the Solution.
The sooner you take action when you realize you are getting behind on payments, the better. If you see yourself getting behind on payments from job loss or other troubles, its good to talk to your lender and try to work through the situation. Remember: the bank doesn’t want your house, so they are going to try to keep you in it.
Once you are 90 days behind on your loan, at that time, you are in default of the note and the collection process begins. The further you get down the line, the more likely you will be served with a foreclosure notice. In Texas, they have to give 21 days notice, so the very soonest you could be foreclosed on is 4 months after you miss the first payment. However, once it gets into the attorney’s hands, the fees go up and you are then negotiating with debt collectors instead of the mortgage holder. It’s always better to work it out with the mortgage company.
You want to try to avoid having a foreclosure on your record. The problem is, a lot of people become embarrassed. A lot of people will find calling companies like ours a good way to find a solution. The most important thing you can do is to constantly communicate. Communicate with your lender, communicate with your agent, communicate with your family and figure out what to expect and what the best solution is. Call us for more free information.