Are You Facing Foreclosure? We can help.
Most Common causes of foreclosure: Divorce: Separation : Probate
If you are behind on payments and/or facing foreclosure, we can help, whether you want to sell your home quickly or keep your home, we can help, and our service is absolutely free to you.
If you have received a notice of default from the mortgage lender, what are your choices?
1. Sell the property. If you can find a buyer before the house goes to auction, you can sell it and keep whatever equity still exists. However, in a slowing market with homes on the market for over 200 days this might not work and you could still lose the house.
2. Work out a deal – The lender may be willing to work with you if you talk to them early enough and you have enough equity
3. Refinance with a Subprime lender – Your credit is damaged because of the mortgage delinquencies, so most traditional banks will not work with you. If there is equity in the property, you may be able to find a lender who will refinance you – at a higher than normal interest rate – these are called subprime loans. About 20 percent of mortgages today are subprime.
4. File Chapter 7 bankruptcy If you can’t get caught up in time, you will not be able to keep the house — but you’ll generally be able to delay the foreclosure sale a month. Any remaining debt to the lender will be wiped out.
5. File Chapter 13 bankruptcy – If you can afford to make the future mortgage payments and the delinquent payments, too, file for a Chapter 13 bankruptcy. This is different than Chapter 7, in which assets are liquidated but debts are wiped clean. With Chapter 13, you keep your assets and, under court supervision, you repay your debts under a three-to-five-year plan.
6. Short Sale / deed in lieu of foreclosure – A short sale takes place when the bank allows you to sell your property even though their mortgage won’t be paid. Be careful — the bank may allow the sale to go through, but only on the condition that you repay the deficiency. In a deed in lieu of foreclosure, the property is signed over to the bank in exchange for the bank giving up its rights against you. When might a bank agree to either of these? Lenders spend close to or more than $30,000 to foreclose on a property. Most lenders will consider these options to avoid foreclosure costs.
7. Walk away from the house – Pack your things and leave. The only issue remaining is whether your lender can sue you for any deficiency still owed after the sale, and that depends on the state you live in and the type of mortgage you have. You’d be wise to speak to an attorney before taking this step. Any sale or transfer of property has tax consequences, including a foreclosure sale or a deed in lieu of foreclosure. Seeing an accountant is probably a good idea, as well.
Here are two options NOT to consider. In other words, they’re scams.
2 don’ts when foreclosure looms: 
1. Signing over your property title to another company: Some companies say that after the mortgage is current they will re-sign the property back over to you. This rarely happens. Instead, the company is likely to pull out equity, not make any mortgage payments and allow the property to be foreclosed. You will not be able to save the property from future foreclosures because the property is no longer in your name.
2. High-interest second mortgage: When a property has equity, there are companies that will give you a second mortgage, in an amount as high as 70 percent of the equity available. The interest rate could be as high as 18 percent and the fees can be exorbitant. They are hoping that you’ll blow the money and default — which allows them to take the property from you.
Short Sale Process In Brief (It’s simple!)
- Homeowner agrees to have the Laban Johnson Group negotiate with lender (sends signed Borrowers Authorization to LJG [CLICK HERE TO DOWNLOAD AND PRINT – You May Scan and Email Back to me at laban@labanjohnson.com])
- LJG contacts lender and prepares packet for submitting offer to lender (need hardship letter, sales contract, listing agreement (if attempted to sell home), limited power of attorney, bank statements, W2s, etc)
- Lender administers BPO (Broker Price Opinion) to assess market value of property. A representative of LJG will meet with agent administering BPO. LJG may also issue a BPO with a contractor’s estimate of repairs.
- Lender will respond to offer based on BPO results – if necessary, PPI will continue to negotiate with lender.
- Lender accepts offer to purchase
- Final forms are completed, deed is transferred, homeowner moves out (with funds to support moving expenses provided). Homeowner does not have foreclosure on credit report, loan amount is cleared off credit, and credit repair process begins (if applicable).
Here are 10 frequently asked short sale questions that are very helpful especially if you are in the foreclosure process and have not been able to find a buyer:
1. What is a short sale?
A short sale is really a form of pre-foreclosure sale and occurs when the mortgagee agrees to accept less than the loan amount to avoid foreclosure. A negotiated short sale results in a discounted purchase price for the buyer. The buyer would finance the acquisition much the same as in any conventional realty acquisition… but without the luxury of time.
2. What happens to the seller’s credit rating when they allow an investor to short sell their property?
What typically happens is the loan will show up as “paid” on their credit report; however there will be a notation that says “settled for less than originally owed” or something along these lines. It is more favorable for a homeowner to short sell than to have a foreclosure on their credit report.
3. What if the Bank agrees to settle for $50,000 less than the amount I owe on my loan. Am I responsible to pay that back?
No. The purpose of a Short Sale is to free the lender and their investors from a delinquent or non-profitable loan. If the correct forms are not filled out for tax purposes then the IRS has the option of taxing the difference as income.
4. What are the drawbacks?
The Internal Revenue Service my treat vanished debt as taxable income if the correct forms are not filled out at closing. The process is complicated and time-consuming if this is an agent’s first time negotiating a short sale.
5. What are the alternatives?
Foreclosure, bankruptcy, finding another person to assume the loan, applying to a lender for a new repayment schedule to catch up over time.
6. Can an owner profit from a short sale?
The seller cannot profit (monetarily) from a pre-foreclosure short sale. But there are always exceptions to the rule.
7. What documents do I have to include in a short sale package?
Documents depend on the lender. Each lender has different requirements. It is typical to require a hardship letter, purchase and sales contract, ECOR, Limited POA (only pertaining to your property), settlement statement (HUD 1), net sheet, pay stubs, bank statements, personal financial sheet (monthly budget), amongst other things.
8. What percentage of mortgage companies send someone out for an appraisal on a possible short sale?
All lenders order a BPO or full appraisal of the property before making their decision to accept or reject the short sale offer. This is their only way of assessing the value of the property.
9. How late in the pre-foreclosure process can you start a short sale?
Try to allow a window of at least 90 days to effectuate a mortgagee approved, pre-foreclosure Short Sale.
10. What is a Due on Sale clause?
“Due on Sale” Clause (DOS) Provision in a mortgage or deed of trust calling for the total payoff of the loan balance in the event of a sale or transfer of title to the secured real property. A contract provision which authorizes the lender, at its option, to declare immediately due and payable sums secured by the lender’s security instrument upon a sale of all or any part of the real property securing the loan without the lender’s prior written consent.
For purposes of this definition, a sale or transfer means the conveyance of real property, of any right, title or interest theirin, whether legal or equitable, whether voluntary or involuntary, by for feed, leasehold interest with a term greater than threee years, lease-option contract or any other method of conveyance of real property interests. Standard language which states that the loan must be paid when a house is sold.
Click to access borrowers_auth_form.pdf
Most Common causes of foreclosure: Divorce: Separation : Probate
If you are behind on payments and/or facing foreclosure, we can help, whether you want to sell your home quickly or keep your home, we can help, and our service is absolutely free to you.
If you have received a notice of default from the mortgage lender, what are your choices?
1. Sell the property. If you can find a buyer before the house goes to auction, you can sell it and keep whatever equity still exists. However, in a slowing market with homes on the market for over 200 days this might not work and you could still lose the house.
2. Work out a deal – The lender may be willing to work with you if you talk to them early enough and you have enough equity
3. Refinance with a Subprime lender – Your credit is damaged because of the mortgage delinquencies, so most traditional banks will not work with you. If there is equity in the property, you may be able to find a lender who will refinance you – at a higher than normal interest rate – these are called subprime loans. About 20 percent of mortgages today are subprime.
4. File Chapter 7 bankruptcy If you can’t get caught up in time, you will not be able to keep the house — but you’ll generally be able to delay the foreclosure sale a month. Any remaining debt to the lender will be wiped out.
5. File Chapter 13 bankruptcy – If you can afford to make the future mortgage payments and the delinquent payments, too, file for a Chapter 13 bankruptcy. This is different than Chapter 7, in which assets are liquidated but debts are wiped clean. With Chapter 13, you keep your assets and, under court supervision, you repay your debts under a three-to-five-year plan.
6. Short Sale / deed in lieu of foreclosure – A short sale takes place when the bank allows you to sell your property even though their mortgage won’t be paid. Be careful — the bank may allow the sale to go through, but only on the condition that you repay the deficiency. In a deed in lieu of foreclosure, the property is signed over to the bank in exchange for the bank giving up its rights against you. When might a bank agree to either of these? Lenders spend close to or more than $30,000 to foreclose on a property. Most lenders will consider these options to avoid foreclosure costs.
7. Walk away from the house – Pack your things and leave. The only issue remaining is whether your lender can sue you for any deficiency still owed after the sale, and that depends on the state you live in and the type of mortgage you have. You’d be wise to speak to an attorney before taking this step. Any sale or transfer of property has tax consequences, including a foreclosure sale or a deed in lieu of foreclosure. Seeing an accountant is probably a good idea, as well.
Here are two options NOT to consider. In other words, they’re scams.
2 don’ts when foreclosure looms:
1. Signing over your property title to another company: Some companies say that after the mortgage is current they will re-sign the property back over to you. This rarely happens. Instead, the company is likely to pull out equity, not make any mortgage payments and allow the property to be foreclosed. You will not be able to save the property from future foreclosures because the property is no longer in your name.
2. High-interest second mortgage: When a property has equity, there are companies that will give you a second mortgage, in an amount as high as 70 percent of the equity available. The interest rate could be as high as 18 percent and the fees can be exorbitant. They are hoping that you’ll blow the money and default — which allows them to take the property from you.
Short Sale Process In Brief (It’s simple!)
Here are 10 frequently asked short sale questions that are very helpful especially if you are in the foreclosure process and have not been able to find a buyer:
1. What is a short sale?
A short sale is really a form of pre-foreclosure sale and occurs when the mortgagee agrees to accept less than the loan amount to avoid foreclosure. A negotiated short sale results in a discounted purchase price for the buyer. The buyer would finance the acquisition much the same as in any conventional realty acquisition… but without the luxury of time.
2. What happens to the seller’s credit rating when they allow an investor to short sell their property?
What typically happens is the loan will show up as “paid” on their credit report; however there will be a notation that says “settled for less than originally owed” or something along these lines. It is more favorable for a homeowner to short sell than to have a foreclosure on their credit report.
3. What if the Bank agrees to settle for $50,000 less than the amount I owe on my loan. Am I responsible to pay that back?
No. The purpose of a Short Sale is to free the lender and their investors from a delinquent or non-profitable loan. If the correct forms are not filled out for tax purposes then the IRS has the option of taxing the difference as income.
4. What are the drawbacks?
The Internal Revenue Service my treat vanished debt as taxable income if the correct forms are not filled out at closing. The process is complicated and time-consuming if this is an agent’s first time negotiating a short sale.
5. What are the alternatives?
Foreclosure, bankruptcy, finding another person to assume the loan, applying to a lender for a new repayment schedule to catch up over time.
6. Can an owner profit from a short sale?
The seller cannot profit (monetarily) from a pre-foreclosure short sale. But there are always exceptions to the rule.
7. What documents do I have to include in a short sale package?
Documents depend on the lender. Each lender has different requirements. It is typical to require a hardship letter, purchase and sales contract, ECOR, Limited POA (only pertaining to your property), settlement statement (HUD 1), net sheet, pay stubs, bank statements, personal financial sheet (monthly budget), amongst other things.
8. What percentage of mortgage companies send someone out for an appraisal on a possible short sale?
All lenders order a BPO or full appraisal of the property before making their decision to accept or reject the short sale offer. This is their only way of assessing the value of the property.
9. How late in the pre-foreclosure process can you start a short sale?
Try to allow a window of at least 90 days to effectuate a mortgagee approved, pre-foreclosure Short Sale.
10. What is a Due on Sale clause?
“Due on Sale” Clause (DOS) Provision in a mortgage or deed of trust calling for the total payoff of the loan balance in the event of a sale or transfer of title to the secured real property. A contract provision which authorizes the lender, at its option, to declare immediately due and payable sums secured by the lender’s security instrument upon a sale of all or any part of the real property securing the loan without the lender’s prior written consent.
For purposes of this definition, a sale or transfer means the conveyance of real property, of any right, title or interest theirin, whether legal or equitable, whether voluntary or involuntary, by for feed, leasehold interest with a term greater than threee years, lease-option contract or any other method of conveyance of real property interests. Standard language which states that the loan must be paid when a house is sold.
Click to access borrowers_auth_form.pdf