Homes in Foreclosure
No one knows the exact number of homes in foreclosure. Financial publications, such as Money CNN and Business Week, estimate the number of foreclosure properties to exceed two million in 2010. Add in the 2.3 million foreclosed homes of 2008 and nearly three million in 2009 and it is easy to see the magnitude of the situation.
Homes in foreclosure affect not only borrowers and banks, but neighborhoods and entire communities. Foreclosure real estate reduces property values of all homes within the area. Communities receive less government funding which in turn forces budget cuts within schools, public services and infrastructure.
When property values decline many borrowers end up owing more on their home mortgage loan than their house is worth. Those who are struggling to make ends meet often elect to walk away from their home. Unfortunately, this act can lead to further financial hardship because lenders can persue homeowners for the balance due on their mortgage note.
Borrowers facing foreclosure can avoid financial ruin by becoming proactive. While they may not be able to save their home, strategies exist to prevent total financial chaos. These can include loan modifications, short sale agreements or deed in lieu of foreclosure.
Loan modifications are available to borrowers who possess the financial ability to make future mortgage payments. In recent weeks, modified mortgage loans have made headline news. Reason being that homeowners are becoming increasingly frustrated because their lender is slow to respond or do not follow through on filing appropriate paperwork.
When working with lenders to avoid foreclosure, the first rule of thumb is to be persistent. This can be challenging when trying to juggle a fulltime job and family life. However, if you want to save your home you must find a way to make necessary phone calls, write letters, and submit financial documents to your lender.
Short sales are an option where banks allow borrowers to sell their home for less than the amount owed on the home loan. The short sale process is complex and can take several months to complete. This option is only available to borrowers who are 31 days or more delinquent on their mortgage payments, but not yet entered into foreclosure.
Borrowers must submit a short sale packet which includes financial documents. Bank loss mitigators review the information to determine if the borrower qualifies for this type of real estate transaction. A qualified buyer must be in place and borrowers must leave the residence once short sale approval is obtained.
One crucial element of short sale real estate is to obtain a payment in full agreement. Lenders have the option to accept the short sale purchase price as payment in full to satisfy the outstanding home loan or persue borrowers for the deficiency.
For example, a homeowner short sells his property for $40,000 less than is owed on the loan. If the bank does not enter into payment in full agreement, the borrower is responsible for paying $40,000 on a home he no longer owns.
To make matters worse, banks issue deficiency judgments which are reflected on borrowers' credit history until the balance in paid in full. Deficiency judgments can be collected through wage garnishment in some states. As you can see, short selling real estate can be a blessing or a curse. When engaging in short sales it is wise to consult with a real estate attorney or short sale specialist.
Deed in lieu of foreclosure allows borrowers to give the house back to the bank. Deed in lieu is available to borrowers who have already entered into foreclosure and all options to save the property have been exhausted. Similar to short sales, deed in lieu agreements can consist of payment in full or deficiency judgments.
We offer extensive information regarding each of the aforementioned strategies in our homes in foreclosure article library. While foreclosure can be a frightening experience, the more educated you become about options, the easier it will be to make informed decisions. Don't allow fear to take over. Become educated about the foreclosure process and be persistent in contacting your lender to work out a plan.