Taking the Fear Out of Foreclosure
Posted: Monday, December 05, 2005
by Dave Kelley
South Enterprises
Taking The Fear Out Of Foreclosure They don’t want your house, it just seems that way So…. you’ve gotten a Notice of Foreclosure from your bank or mortgage company. How could this have happened? What are you going to do now? Where will you live? Will you be “thrown out" into the street? All of the neighbors will know what is going on and you’ll be humiliated. Very frightening, isn’t it?
Pick up your head, take a deep breath and RELAX. I know how hard that is to do as I have been faced with foreclosure, too. I want you to pay attention to what I am going to say next. NOTHING IS GOING TO HAPPEN THAT YOU CAN"T CONTROL AND, IN MOST CIRCUMSTANCES, FIGHT OFF. That is the truth of the matter. As hard as it is right now to accept that statement and relax, you will get the solution you want if you don’t panic.
Once you understand the foreclosure process, you will see that you can be in control. You can avoid foreclosure. It won’t automatically mess up your credit and there is a good chance that you can stay in your home.
Let me start by telling you what the WORST that could happen will be. This way, you will know how the road ahead might look. I feel that it’s always better to know how bad something will be so that you can prepare for the worst. Most times, when it gets there, it’s not so bad! Here it is in all of its most frightening detail. I have ranked these in order of severity.
You could lose your home, all of your equity and the cost of any improvements you may have recently made.
You could see your name in the legal section of the newspaper.
A Sheriff or Policeman may come to your door, for all to see, and deliver legal documents concerning the foreclosure.
An appraiser, hired by the lender, will call and tell you he wants to see the house inside and out.
You will receive countless calls from “foreclosure sharks" telling you that all you have to do to avoid everything above is to sell your home to them for less than ½ its value.
There may be a sign posted in your yard telling every human being in your neighborhood that your mortgage has been foreclosed. This is more likely if you have a VA, FHA or some other type of government loan.
Now, that’s about as bad as it will get. While not pleasant, it is not lethal. You will still have your family and the ability to move on with your life. The social stigma of most bad things that happen to good people is short lived and soon forgotten by your true friends.
I know that some of you who are reading this don’t want anything like I have laid out to happen to you and your reputation. I don’t blame you. It hurts. You have my empathy and understanding. Item number one and EVERYTHING below it happened to my family and me 4 years ago.
Now for the good news. Here is what could easily happen to everyone reading this article. As a footnote, I was not aware that options like these existed when my foreclosure happened.
You could work through an experienced loss mitigation company to restructure your delinquent loan. Your delinquency could be moved to the end of your loan. You then stay where you are and make the same (or nearly the same) payments as if nothing had happened.
You could qualify for a refinance “foreclosure" loan that would pay off your current loan in full. Then, you would simply send your payments to the new lender. Again you keep your house.
You could sell your home to an investor network that would help you preserve some of your equity.
You could file a Chapter 7 bankruptcy. This would preserve your home and, depending on your state of residence, preserve all or most of your equity.
You could enter a legitimate “credit repair" agreement (they DO exist) and in a fairly short time, qualify for a mortgage on a different property.
I have more good news for you. Your bank or mortgage company DOES NOT WANT YOUR HOUSE! Banks are in the lending business, not real estate companies. They will LOSE MONEY by taking your property and having to remarket it. These lenders have everything to gain by working things out with you. They don’t like non-performing loans on their books.
It will not appear to you that the lender is eager to avoid foreclosure. Lots of folks immediately call the lender and tell them “Good news! I have all of my back payments and I’m going to send them to you today. Please stop this foreclosure and I promise I’ll never be late again".
To your heartfelt plea, the bank will say, “We can’t accept anything less than all of the delinquent payments plus our $1500 foreclosure fee, the legal costs, and a reinstatement fee of $750. That would be $6,750 plus whatever legal fees we have encountered to date. Can you pay that amount?"
If you are able, pay it and get on with your life. Most of us can’t. To add insult to injury, if you can’t pay everything due, they will tell you not to call them, as they are not allowed to deal with you directly. You will have to deal with their attorney speaking through your attorney.
The bank certainly isn’t acting like they want to settle things are they?
Under all of this puff, there really is a willingness to settle without foreclosing. This is where a reputable loss mitigation company can be your best investment. They will interview you thoroughly and determine what you can and cannot do. Then they will present an offer to the lender and, if it is reasonable AND DOABLE on your part, they will agree.
Let me fill in some of the details as you look again at the loss mitigation option. Positive results can be easily achieved if the reason for your default was out of your control such as loss of job, prolonged personal illness, temporary lay-off, serious illness or death of a family member. You must be able to show that the problem has been resolved and that you are capable of fulfilling your obligation. When this can be proven, you chances of success exceed 95%!
Feeling a bit better yet?
Let’s look at the rest of the list as if it were just one item. If your situation doesn’t lend itself to loss mitigation or refinance you may not be able to keep your home. If you choose a refinance option, you can save your home, but the terms will not be as friendly as your current mortgage. You may pay a higher interest rate in the short term but you will not have to surrender your home. These loans can be refinanced in one to two years. It is quite possible that your situation would have “repaired" itself in that time period. This would allow you to borrow at market rates once again.
If you sell your home to an investor network, they can help preserve enough equity so that you can afford to move, rent a new place and pay the deposits for utilities. Contact me at dave@southent.ws if you are considering this option. I will make a recommendation of a company I know and trust.
A Chapter 7 bankruptcy is a TOTAL LIQUIDATION of your assets. That of course, includes your home. The US Congress has exempted your primary residence from liquidation if your equity position is less than a certain percentage of value. You may want to check the “new" bankruptcy laws to determine the current percentage. Last I knew it was 35%.
A Chapter 7 filing is a serious step. It will appear on your credit report for 10 full years and will make borrowing difficult in the first two to three years following your discharge. It also becomes part of the public record and must be divulged on applications for employment, insurance and credit. Your name is likely to be in the paper. You will not be able to work in the financial field for that 10-year period.
CAUTION! Attorneys who specialize in bankruptcy will want you to take that road. It is far easier for them to file for you than it is to take on your loss mitigation case. Bankruptcy is something to be fully considered. It will be with you for quite some time.
Once the dust has settled, you owe it to yourself to contact a reputable “credit repair" attorney. Their job is to correct items on your credit report with the three major reporting agencies Trans Union, Experian and Equifax. There is a very high instance of misreporting when a foreclosure proceeding is started. Mistakes are even more prevalent with a bankruptcy filing. You want to be back on your feet as soon as possible and an accurate credit profile is one of the fastest ways to get there.
In closing, I hope you can see that all is not lost. Your next few days will be less and less tense as you begin, to explore some of the resources I have listed. Most of all, I don’t want you to feel alone in this process. Feel free to contact me by email if I can help or make a recommendation for you. All the best and remember: they don’t want your house, it just seems that way!
Dave Kelley
dave@southent.ws
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Top-level comments on this article: (4 total)This article was very very informative. I am currently going through a foreclosure and thought that I have exhalted all of my options untill I read this article. Thanks for all of your help Dave. ~Philadelphia, Pa
What is a foreclosure shark and how do they gain buying a property in foreclosure even at less than 1/2 the value?
All i want to know is i want out don't care less about were to live move to different country and start all over,please help stressman
Hello Dave,Thanks you very much for your valuable information, now I feel much better.Luis Borge
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