In Foreclosure? Here's what you need to know.

Hello everyone,

Let me start by saying that seven years ago I began investing in buying these distressed property types. And in those years I've learned a lot about how a home owner can get into trouble and go about trying to save their home. The sad part is there are many investors that take advantage of the stress the home owner is under. On this post I will grant advice on how these hard working unfortunate home owners can go about mitigating their current situation.

As you've seen on television and newspapers, there are plenty of people going into foreclosure at this moment and the problem will get worse as adjustable mortgages' payments rise and underwriting guidelines become stricter. I won't go into the reasons behind it, but to be short I will admit it's due to the market pressures appraisers experienced from the greedy agents and loan officers chasing higher commissions and the easy "lier loans" the lenders offered; and I know since I'm an insider.

To simply start, foreclosure, in the states, is the legal process when the bank takes possession of a default debt on real estate. Some states laws are based on the trust deed system and others on the mortgage system, but either way the final outcome is the bank repossessing a home. Most lenders have a three consecutive month late payment grace period before they call the loan due, yet a few do it on the first month you fall behind.

Prior to the execution of the notice of default, it is better to initiate an open communication with the lender on a weekly basis. Why? Lenders freak out when you don't call to update them on your circumstances. Frankly they are quite understanding of your predicament. I implore you to stay in constant communication with them as you negotiate a solution to your temporary issue. Here are a few action plans you can perform.

As you foresee yourself getting into financial problems send in as much money as you can. The lender may not like the fact that the payment is short, but it shows a good faith effort from the home owner to meet the monthly obligation. Some lenders will let the small amount add up and delay the default notice by as much as six months once they cash your half mortgage amount payment.

Imagine a $1,000 a month debt and you only send in $500 for four months. Some lender's computer systems will only show you two months behind since during the four month period you sent in two months worth of half payments. So this "may" be a useful strategy with the lenders. Remember that they don't want you to default as much as you so they will negotiate. One thing I will say is to be honest with the lender and get ready to provide documentation to back up your current financial problem, for example lay off notice, medical bills, accident reports, and so on.

Another angle you can sell to the lender is to add the late months to the end of the loan contract. Hey, any loan agreement can be modified with both parties consent. I've done deals where I got my client's four months of back payments added to the end of their note with the signing of a one page addendum to the contract. That's it. Just make sure you stay on the lenders good grace by constantly communicating with them. Once again, they will ask to verify your situation, but it's not a big deal if your honest about it.

Now you may say that I owe more than my house is worth. Well, that too can be negotiated. It's called a short sale. My office does plenty of these and all you need to do is provide the lender with a buyer that's willing to buy the property while your falling behind in payments. The lender may take a hit on the total balance due, but it's was their risk to fund the loan. Just make sure that in the process the short sale agreement has a clause that protects you from the lender reporting their loss to the IRS as income to the home owner. Yes, they do that as a 1099 form at the end of the year. So be absolutely sure that you will not maintain "any" tax liability for the shortage in the pay off amount.

Well, I'm a wealth of info and for those that want to ask me for assistance, so feel free to PM me so you can maintain your unanimity on this forum. I do keep a confidentiality among people I advice. Please, if not here, seek foreclosure assistance from an attorney or state housing program. Do not trust investors that advertise to save your home or loan you hard money to bring you current. There are many investors that give this branch of my business a bad reputation. These investors will delay and play you so when the sale date is two weeks away you will sell them the property at a cut throat price. Check your local laws to protect yourself, okay. Well, this is all I can write in my limited time so I wish you the best and don't give up hope for a better tomorrow.

hi - thanks! I don't see myself getting foreclosed anytime soon, but this is useful info! definitely, at least send part of the payment, I think most lenders just want to see the money coming in. I watch a lot of those house-flipping shows on TV, I love them!

hi - thanks! I don't see myself getting foreclosed anytime soon, but this is useful info! definitely, at least send part of the payment, I think most lenders just want to see the money coming in. I watch a lot of those house-flipping shows on TV, I love them!

As for the house flipping programs, there's only one that's honest about this business. The rest are a joke. It normally takes two months to properly rehab a home meeting local building codes and legal paperwork.