Foreclosure and Deficiency Judgments

Foreclosure and deficiency judgments often go hand-in-hand after the loss of a home through foreclosure. The loss of one’s home to foreclosure is often times financially devastating and personally humiliating. But the problems may not stop when the foreclosure process is completed at the auction sale or even if the lender accepts a deed in lieu of foreclosure.

The lender has additional expenses from the foreclosure and for selling a property to a retail buyer after they get it back at the auction. These expenses include the obvious costs associated with the foreclosure including attorneys’ fees, lost interest, solution of liens on the property not discharged at the auction, and when it is sold, the realtor®) commissions, maintenance, taxes, utilities, closing costs, etc. The larger loss that can’t be passed on to the former homeowner is the loss of the lender’s lending ability, and resultant income, because of Federal Reserve cash reserve requirements for the foreclosed property. This loss of lending ability is the reason lenders do not want to purchase homes from foreclosures unless these properties can be sold quickly for a profit. The lender can easily calculate a “final loss” amount that the court system will validate or grant as a “deficiency judgment” against the former loan guarantor – who may not be the former homeowner. In some states this final judgment can be granted from an appraised value instead of an actual sale amount. The appraised value should be contested by the loan guarantor if it appears to be too high.

For accounting or legal considerations, the lender may choose to report the loan deficiency for the guarantor on Form 1099 to the IRS. This gives the former homeowner or loan guarantor a “phantom income” equal to the amount of the loan deficiency and will require he pay income taxes on this amount. In this case the cost of the guarantor’s foreclosure will be the amount of income taxes he pays the IRS instead of the entire amount of the deficiency judgment plus additional interest and expenses. This can be a substantial savings to the guarantor and the lender benefits because of a better impact to their financial statement. Usually the lender will issue a 1099 unless they feel there was fraud involved with the original loan.

If a lender accepts a deed in lieu of foreclosure and they make a profit from its sale, they will retain the profit. However, if they lose money, they may be able to issue a 1099 depending on the terms of the original loan agreement and the Acceptance Agreement. It is always wise to have an attorney review any agreement before you sign it to preserve your financial interests. Have the terms of your loan agreement reviewed and any agreements a lender offers you.

Carefully weigh your rights and options when you make a decision to allow your home to be lost as there are solutions besides foreclosure and deed transfer to the lender.

3 Proven Methods To Stop Foreclosure That Do Not Completely Destroy Your Credit

Few, if any, homeowners plan to go into foreclosure. Should you be facing foreclosure then you are probably feeling a great deal of anxiety and confusion regarding your situation. Before you pay anyone claiming to stop your foreclosure thousands of dollars be sure that you have investigated all the possible ways to stop foreclosure and save your home. Foreclosure scams are on the rise and many homeowners (just like you) are desperate for a fast solution and are having their homes stolen from them by con artists. The following passages will tell how you can take charge of your situation, avoid scams and get out of foreclosure now.

Once your lender has filed a Notice of Default (NOD), you are in the process of foreclosure and your options become very limited. You will be given a short amount of time to stop foreclosure by bringing payments current and paying the cost of foreclosure filing. This is commonly referred to as reinstating the loan. Obviously if you had the money, you would be out of foreclosure. If the lender is not willing to work out an agreement with you, then you should consider the following: sign a deed-in-lieu; consider a short sale; or sell your home. At first glance none of these seem like they will keep you in your home, but two of these solutions may actually do just that.

Deed-In-Lieu

Under this solution you sign a notarized deed and hand your home over to the lender. This will stop foreclosure; however, deeds-in-lieu of foreclosure will affect your credit the same as a foreclosure. Your lender may also be willing to let you stay in your home until you find a new place to live. You should explain to the lender that if they were to continue with foreclosure you would still retain the right of possession of the home during the proceedings.

Sell Your Home or A Fraction Of It

Depending on the real estate market in your area, you may be able to sell your home and payback the lender. Ask real estate agents their opinion of the value of your home and how fast they think it will sell in your market. Carefully select your real estate agent, because they will greatly determine your ability to sell your home fast. You should probably look to hire the most prominent real estate agent for your neighborhood. Check with a local realtor association chapter to find out who that person is.

If your hardship is temporary, consider selling a fraction of your home to an investor or family member for the amount that will bring you current. This process will require the a real estate attorney, who can inform you and the investor of your rights and how to work out the future sale of the property. Keep in mind that the investor will be free to sell their fraction of the home to anyone anytime they wish. However, the sale of the home will have to be a mutual decision between you and the other party. If you are in a rising home market, this may be an excellent way to keep your home until your hardship passes. To find a eligible investor check with local business owners, doctors, lawyers, and local real estate investment clubs for individuals who have access to lots of cash.

Consider A Short Sale

Also called a pre-foreclosure redeemed, you and a real estate agent negotiate with the lender to sell the house to a buyer for less than what is owed on the mortgage. Many reputable real estate investors will do this for you and are experienced with the entire process. However, you should be cautious and before you sign any documents have a real estate attorney look over them.

Before you proceed with any of the solutions suggested above, you should fully investigate any realtor or investor that you are doing business with. Ask for at least three past clients and call them. You want to make sure you are dealing with someone who can help you and is comfortable dealing with the lender during this process. Have a real estate attorney look over any document before you sign it, and if anyone asks you to sign a “Quit Claim Deed” chances are it is a scam. Never sign over ownership of your home to anyone without having the lender paid in full first. Otherwise, you’ll be on the hook for the full amount of your mortgage and you won’t even own the house!

The solutions mentioned above are covered in much greater detail in this manual and over 20 other solutions are offered to help you out of foreclosure regardless of home equity, cash, or circumstances. To find out more visit http://www.foreclosure-help-book.com

How to Prevent Home Foreclosure

There is no doubt home foreclosure is one of the worst experiences anyone can endure. Not only do borrowers lose their most valuable asset, they also endure extensive credit damage and may be held financially responsible for deficiency amounts if the property sells for less than owed on the mortgage note.

Individuals who want to avoid home foreclosure must become proactive the moment they cannot afford to pay loan installments. Borrowers should begin their home saving process by contacting their lender’s loss mitigation department. The type of foreclosure prevention strategies offered will depend on various factors including number of delinquent payments and borrowers’ ability to cure mortgage arrears and make future installments.

Borrowers who cannot afford to stay in their home can still engage in foreclosure prevention. Banks may allow borrowers to enter into a short sale contract or deed in lieu of foreclosure. Short sales are somewhat complex, but essentially allow borrowers to sell their home for less than the balance owed on the loan. Deed in lieu allows borrowers to return their home to the lender.

The downside of deed in lieu and short sale transactions is some banks hold borrowers accountable for deficiency amounts between the sale price and loan balance. This can often amount to several thousand dollars which takes years to repay.

When borrowers are unable to pay deficiency amounts in full, banks can obtain court ordered judgments which are reflected on borrowers’ credit reports and can prohibit them from obtaining any type of financing until the judgment is paid in full. Individuals entering into real estate short sales or deed in lieu agreements should attempt to attain ‘Payment in Full’ agreements which release them from paying deficiency amounts.

Mortgagors who want to save their home from foreclosure are required to submit financial records to their assigned bank loss mitigator. Lenders review the information to determine which foreclosure prevention strategy is best suited.

When borrowers are facing temporary financial setbacks, banks may offer the option to defer mortgage payments. Banks normally defer payments for 2 to 3 months. Some lenders roll deferred payments to the end of the loan, while others require mortgagors to pay the full amount of deferred payments once the deferral period expires.

Banks might also offer a real estate forbearance which temporary reduces or suspends mortgage payments. Forbearance plans usually extend for 2 to 3 months, but banks can extend forbearance agreements for as long as 12 months.

When forbearance plans expire, borrowers must pay the full amount of reduced or skipped payments. Should real estate taxes or mortgage insurance become due during the forbearance plan, borrowers must pay expenses out of pocket if they do not have sufficient funds in their escrow account.

Forbearance agreements are best suited for borrowers who have overcome financial problems, but need time to get back on track. Otherwise, mortgage forbearance could potentially end as a home foreclosure because borrowers were incapable of paying missed loan payments.

Banks may offer loan modifications to borrowers who need to reduce payment amounts. Loan modifications temporarily alter loan terms through reducing interest rates or principal amounts. Borrowers must undergo a loan modification approval process which can take several months to complete.

Mortgage refinance can stop foreclosure as long as borrowers are able to qualify for a new loan. Refinancing into a home loan with reduced interest can save borrowers a substantial amount of money over the duration of the loan. However, borrowers must pay costs associated with entering into a new loan. Common closing costs include property inspections, real estate appraisals, legal fees, and loan origination and application fees.

Contrary to popular belief, mortgage lenders prefer to avoid foreclosing on real estate. The foreclosure process is time-consuming and costly. Borrowers who take action early will have more options available to prevent foreclosure than those who ignore phone calls and collection letters.

Strategies to Prevent Mortgage Foreclosure

There’s no doubt mortgage foreclosure is at the forefront of economic concerns. Every news outlet predicts a gloomy outlook. Realtors and mortgage lenders are feeling the financial wreckage that has ensued from subprime lending and unprecedented unemployment. Even with economic improvements, mortgage financiers predict nearly 4 million Americans will receive foreclosure notices by the end of 2010.

Although mortgage foreclosure is a serious problem, options still exist to help homeowners avoid losing their home or at least minimize the financial impacts associated with bank repossession of their property.

Lenders offer an array of foreclosure options including: mortgage forbearance, loan modification, mortgage refinance, real estate short sales, and deed in lieu of foreclosure. Each offers advantages and disadvantages, so borrowers should take time to investigate each available option and weigh the financial consequences.

The Obama Administration established the Making Home Affordable program which offers homeowners the option of entering into a loan modification or mortgage refinance. Unfortunately, this government sponsored program is only offered to borrowers who are current on their mortgage note and have not been delinquent by more than thirty days during the previous twelve months.

Loan modifications can be helpful for borrowers who endured temporary financial setbacks but are now able to maintain future mortgage payments. Lenders can offer various loan modification options to help borrowers cure mortgage arrears. The most common strategy is to temporarily reduce the rate of interest to lower payments. Some lenders allow borrowers to provide partial payments for a set period of time and roll the remaining outstanding balance to the end of the loan.

With mortgage refinance, homeowners must apply for a new mortgage loan which pays off their existing mortgage. Borrowers with poor credit may not qualify for mortgage refinance due to tightened credit criteria. Homeowners in need of bad credit lender loan mortgage should first apply for Making Home Affordable refinancing.

Mortgage forbearance can be a good foreclosure prevention option for borrowers who have become delinquent on their home loan but have overcome financial challenges. Mortgage forbearance is typically reserved for borrowers who can cure mortgage arrears within a short period of time.

It is important to note that borrowers are required to submit their regular home loan payment along with additional funds which are contributed to past due amounts. When forbearance agreements are active, lenders are prohibited from commencing with foreclosure action as long as borrowers adhere to the contract. Mortgage forbearance plans typically extend for three to six months.

In rare instances, banks will grant short sale approval to borrowers who are financially insolvent. Using real estate short sales, lenders agree to accept less than the full loan balance in exchange for a quick sale of the property.

Short sales are complicated and usually require the assistance of a real estate attorney or short sale specialist. At present, lenders accept less than 20-percent of short sale requests. Working with a short sale professional can improve chances of approval ten-fold.

Borrowers who do not qualify for any of the aforementioned foreclosure alternatives might be able to obtain a deed in lieu of foreclosure. Using deed in lieu contracts, borrowers must give their house back to the lender and vacate the premises. Borrowers entering into deed in lieu agreements should work with a foreclosure lawyer to ensure they are not responsible for monetary deficiency between the loan balance and sale price.

One trusted source for learning about foreclosure prevention options is the Department of Housing and Urban Development. HUD offers low- or no-cost housing counseling to help borrowers determine which strategy is best suited for their needs. Details of foreclosure programs and housing counseling services are presented at HUD.gov.

Verified Short-Sale and Deed-in-Lieu Results

Verified Short-Sale and Deed-in-Lieu Results

A Saint Charles man sued his lender (First Franklin) for improperly trying to foreclose on his second home.  First Franklin agreed to a Short-Sale along with debt forgiveness for the 0,000 loss that First Franklin absorbed at closing.  The homeowner also walked away with ,000 at closing that was disclosed in the sales contract and settlement statement to lender, title company and buyer.  The entire credit history of the foreclosure was removed from the homeowners credit history.  If there is a problem with your loan there may a surprisingly positive solution available.

A Geneva man received ,000 “Cash for Keys” to hand over the keys to his home rather than fight foreclosure.  The house had been on the market for a long time with no serious offers and was worth far less than the mortgage loan amount. 

Have you experienced a reduction in income?  Has your mortgage rate adjusted up?  Have you gotten so far behind that you can’t catch up but could make future payments at a lower rate if your loan was reset?  Are you just in a really lousy subprime loan and would like something better?  It is possible to seek a loan modification on your own directly with your lender or through a government counseling center.  That should be easier to do but the fact is that it isn’t.  Many of my clients have tried to do it on their own and were frustrated.  By all means don’t even consider paying anyone a large upfront fee to seek a loan modification on your behalf however, I do recommend that you consider using a real estate attorney that requires only a small retainer and charges for obtaining loan modifications and not just for applying for them.  

Most of my clients seek mortgage modifications but if you just want out and are looking to not walk away empty handed then maybe one  of these other solutions would make more sense for you.  Use the free online evaluation at www.illinoismortgagemods.com to see what options are available.  

Verified Short-Sale and Deed-in-Lieu Results

Verified Short-Sale and Deed-in-Lieu Results

A Saint Charles man sued his lender (First Franklin) for improperly trying to foreclose on his second home.  First Franklin agreed to a Short-Sale along with debt forgiveness for the 0,000 loss that First Franklin absorbed at closing.  The homeowner also walked away with ,000 at closing that was disclosed in the sales contract and settlement statement to lender, title company and buyer.  The entire credit history of the foreclosure was removed from the homeowners credit history.  If there is a problem with your loan there may a surprisingly positive solution available.

A Geneva man received ,000 “Cash for Keys” to hand over the keys to his home rather than fight foreclosure.  The house had been on the market for a long time with no serious offers and was worth far less than the mortgage loan amount. 

Most of my clients seek mortgage modifications but if you just want out and are looking to not walk away empty handed then maybe one  of these other solutions would make more sense for you.  Use the free online evaluation at www.illinoismortgagemods.com to see what options are available.  

Is your current mortgage payment (Including property tax and insurance) more than 31% of your income?  The governments “Making Home Affordable” program is incredibly generous, the home equivalent of the “Cash for Clunkers” program.   We (At www.illinoismortgagemods.com) have achieved mortgage payment reductions of over 50% for clients that were never late on their mortgage- they had just experienced or were about to experience a reduction in income.

Signing Over The Deed To Stop A Foreclosure Quickly

Most individuals that are facing the loss of their home are delaying the inevitable and avoiding contact with their mortgage company for as long as possible.

But it is important for consumers to understand that they do actually have options and that it is possible to stop foreclosure proceedings even if they are dangerously close.

Aurora Lillo Editor of the “Loan Modification Foreclosure” website — http://www.LoanModificationForeclosures.com — pointed out;

“…The negative effects associated with such a legal filing are not going to go away anytime soon and could even stay on a credit report for up to ten years. While it is easy to empathize with attempts to avoid any uncomfortable conversations with creditors, it is also critical that consumers realize that they are only hurting themselves by not being proactive with potential alternatives…”

Few homeowners that are struggling with their mortgage payments and are facing severe circumstances know that they can actually sign over the deed of their home and stop foreclosure quickly. Most people have a hard time believing that their lender will allow them to do so, but it is important to note that most mortgagors will jump at an opportunity to avoid legal costs and court filing fees if at all possible. In addition, statistics have proven that individuals who utilize the deed in lieu of process are much less likely to seriously damage the home when they move. Mortgage companies, contrary to popular belief, are not out to harm their borrowers and are normally willing to help reach a method that will provide advantages to both parties.

The majority of consumers will attempt to stay in the home as long as possible, but this approach is almost certain to end in legal action and unwanted results. Signing over the deed can help reduce the negative impact to a credit rating or score and help the homeowners move on without having a shadow that will follow them around for up to 10 years. While the process of course must be approved by the mortgage company, it seldom is denied for suitable reasons.

“…Dealing with foreclosure is certainly not a pleasant experience for homeowners, but it also doesn’t have to be painful. The good news is that there are professionals willing to provide advice and help consumers navigate through the difficult situation. There are alternatives and a person should not fail to investigate them simply because they are embarrassed or ashamed. Bad things happen to good people and there are people who can help…” added A. Lillo.

Further information about how to get professional assistance with a mortgage loan modification by http://www.LoanModificationForeclosures.com

Using A “deed In Lieu Of” To Stop A Foreclosure Proceeding

Any pending legal matter can prove to be both stressful and frightening, but struggling to stop a foreclosure is even worse due to the fact that it often entails a family losing their home and looking for a new place to live.

The long term negative impact to a credit score can be seriously detrimental and most likely will make it difficult to obtain new loans anytime in the near future. The good news is that there are ways to stop a foreclosure proceeding and there are many alternatives that consumers may not be aware of. One such method of preventing such an adverse event is using a “deed in lieu of.”

Aurora Lillo Editor of the “Best Loan Modification Companies” website — http://www.BestLoanModificationCompanies.com — pointed out;

“…If a person’s housing situation has become drastic and requires some immediate intervention, it may actually be possible to voluntarily surrender the ownership of a home to the lender. Instead of dealing with all of the legal consequences and stress of court proceedings, it is often possible to use a “deed in lieu of” and opt to sign the deed over to the mortgage company. The lender in return agrees to stop all foreclosure proceedings…”

Few consumers understand why a lender would be willing to entertain such a concept, but the simple fact of the matter is that court filings take an incredible amount of time and can be very costly. It is often much cheaper to allow homeowners to voluntarily surrender their property. In addition, many residents are more likely to leave the home in good condition if they feel that their mortgagor is helping them get back on the right track with minimum lasting issues.

Contrary to popular belief, a mortgage company does not desire the opportunity to permanently damage a consumer’s credit rating. As is similar in automobile loans and collateral, a voluntary surrender is often seen as preferred and may provide an important indicator to future lenders. Most individuals are ready to move on and pursue other options later down the road, and a deed in lieu of can be an excellent way to do this.

“…Losing a home can be very disappointing and the struggles are already frustrating enough. Consumers need to realize that there are alternatives and ways to cease legal filings and battles. A qualified professional can help provide advice in a variety of different situations no matter how simple or complex they may seem to individuals. Before simply giving up, a person truly needs to understand their options…” added A. Lillo.

Further information about how to get professional assistance with a mortgage loan modification by http://www.BestLoanModificationCompanies.com

Facing Foreclosure? Deed in Lieu Foreclosure Can Salvage Some Credit History

There’s no hiding from the ugly truth out there; the economic crisis as well as the housing industry collapse has left millions of people scrambling for answers where it pertains to keeping their homes or, if that’s simply no longer possible, how to get out with the least amount of damage done to their credit score. Responsible homeowners know that sometimes losing a home isn’t the worst thing that can happen during unforeseen circumstances.

When a homeowner is facing the possibility of foreclosure, they may be able to apply for a deed in lieu foreclosure proceeding that will keep the actual foreclosure from becoming a black eye on their credit report.

<b>Setting the stage</b>

For those of us in the industry, we have seen many different scenarios play out right before our eyes. We have seen the homeowners who were struggling to keep up with their payments finally give up, then remain in their homes until the legal foreclosure process was completed and they were forced from their home. While the story may end there for most people throughout the public eye, these individuals often find themselves facing even greater financial pressure after the home is lost to foreclosure.

Taxes are often left unpaid, forcing the towns to sue the former homeowner to collect them. Also, banks can attempt to sue and collect on time spent in the home without paying mortgage. These little known facts of life about foreclosure are not foregone conclusions, but they occur far more frequently than many private citizens realize.

<b>Deed in lieu</b>

Which leads us to deed in lieu foreclosure. This is an option that could be made available to many homeowners who are facing the prospect of foreclosure, but haven’t actually reached that stage in the game. Basically, the homeowner signs the deed over to the lender. Of course, as with most other aspects within the real estate and mortgage industry, there are many things that need to be considered for this to be a profitable and feasible transaction for both parties.

The first thing that clients should keep in mind when considering this option is that lenders won’t agree to a deed in lieu foreclosure if they have a home equity line of credit taken out against the mortgage, a second mortgage, or if they are upside down on their mortgage.

It’s also crucial to inform clients that everything they agree to with their lender, if they are able to do a deed in lieu foreclosure, should be written down and signed by both parties. This may seem like a no-brainer, but when it comes to desperate times, desperate homeowners will accept almost anything their lender agrees to on faith. Only when they attempt to go to court and realize that there is no legal recourse for them will they understand the importance of having everything written down, documented, and signed.

<b>An almost last resort</b>

For homeowners to consider a deed in lieu foreclosure, they should be well aware that they are tripping down the slope toward foreclosure and be honest enough with themselves, and their broker or lender, that they do not foresee any other way to avoid foreclosure. Some families have faced layoffs from their jobs and have ultimately been called back, or found other work, and have managed to work out a forebearance arrangement to delay payments by several months.

When a homeowner faces foreclosure, it can be difficult for them to accept that they are going to lose their house. Short sales are one option and still homeowners sometimes can’t seem to let go. Deed in lieu foreclosure is another, but it’s also important to disclose to the homeowners up front that most lenders do not want to deal with selling the home and will leave this up to the homeowner to find a real estate agent and work through the entire process to sell the home.

<b>The benefit?</b>

While it may not seem like much of a benefit for the homeowner, deed in lieu foreclosure basically protects the homeowner’s credit. And in this day and age of tougher lender restrictions, that could be worth the effort in itself.

David

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Facing Foreclosure: Use A Deed In Lieu To Protect Your Credit

Facing a foreclosure, you may have another option, consider a “Deed in Lieu”; with a deed in lieu, you are relinquishing your rights to the property, especially giving the property to the lender. This is much better then a foreclosure, if you are able to do it, each state has different laws therefore you need to do some research and ask for legal advise before pursuing this type of transaction.

Some lenders may prefer this to the foreclosure process, it is expensive and time consuming. A “Deed in Lieu” also comes across your credit report much better then a full-blown foreclosure; the foreclosure process will have exceptional damaging affects on your credit report and therefore will take a long time to fix. It could hamper your ability to purchase another home for 7-10 years.

A “Deed in Lieu”, if negotiate properly should keep a foreclosure off your credit report and protect your credit from the damages of such a recording. While working with your lender during the default process, negotiate the terms of how it will report to the credit agencies. The lenders will save a tremendous amount of time and expense by you simply giving the house back to them in lieu of the foreclosure process. For doing your part to save them as much time and money as possible, if is only fair that they assist you with trying to keep your credit as clean as possible.

Let the lender know that leaving the house, clean and in good shape is not a problem, but by doing so you do not want to have a foreclosure reported to the agencies. Get it is writing. Agreeing to this verbally, will not help you, banks love to give “lip service”, it is what they do to get what they want.

There are other options if you are facing a foreclosure; a “Deed in Lieu” is not necessarily the best one. Depending on how equitable the property is you may be better off selling the home to a private buyer, or even an investor. Salvage the equity if you can you did work for it. They may even let you do a rent back so that you will not have to move. If your best option is to do a “Deed in Lieu”, doing so with the lender is preferred, more so then an investor. Only by dealing with the lender are you able to terminate the original loan agreement. Dealing with an investor will not terminate the original contractual obligation with the lender. A lender that fails to perform on the agreement will you, will leave you vulnerable in the event the bank moves forward with a foreclosure. If you decide to use an investor, investigate them, make sure that they have adequate resources to keep the loan up-to-date.

A home foreclosure is not the end of the world; there are many options available to homeowners that are facing one. While it may seem that you have few options, or that your world is falling apart, remember investigate all options prior to making a decision. Hire a professional to assist you with all the legal and personal ramifications or each option. While most homeowners will not resort to a “deed in lieu”, address the situation immediately, and choose wisely.