A short sale is only one of six loss mitigation options, and playing the pre-foreclosure game successfully requires a working understanding of the other five. In this article we will look more closely at all of the options available to a homeowner with a defaulted mortgage so that you will be able to present a balanced picture to your client and help them make the decisions that are in their best interest.

Does working with sellers in pre-foreclosure mean you have to be a loss mitigation expert? No, but it does mean you should be familiar with the options available to your client and be able to refer them to a different specialist whenever appropriate.

The purpose of loss mitigation options is to provide an alternative to foreclosure for homeowners who have had difficulty keeping up with their payments but who may still be willing and able to stay in their homes. Generally speaking, a lender is not likely to offer loss mitigation options to the owner of an investment property. And a short sale is usually the last choice on the lender’s list of options, only slightly better than an actual foreclosure.

The first loss mitigation option, in order of the lender’s preference, is a repayment plan. This is where the homeowner catches up the payments and brings the loan current, perhaps by making higher than normal payments for a set period of time. The lender experiences no loss this way. The second option is a loan modification, where the borrower and the lender agree to new loan terms that are acceptable to both, perhaps with a lower interest rate but larger balance.

Third is a forbearance, which is where the lender allows the borrower to go for a specific amount of time without making payments, perhaps adding the back payment amount onto the balance of the loan. Those three options all apply to a homeowner who is able (eventually) to pay for the house.

For the homeowner who doesn’t have the means to stay in the house, the lender’s preferred option is an assumption, which is where somebody else who qualifies assumes the loan and resumes payments. Next is a deed in lieu of foreclosure, which is where a lender agrees not to foreclose but rather accepts the property by quit claim deed, which will protect the borrower’s credit somewhat. And finally, the last option considered by lenders before foreclosing is a short sale.

Understand that making use of any of these alternatives requires strict qualifying by the lender. All loss mitigation alternatives require there to be a legitimate hardship on the part of the borrower. A repayment plan, loan modification, or forbearance will require demonstration of the borrower’s ability to pay, an assumption will require the assumer to qualify for the loan, and a deed in lieu or a short sale will require documentation of the borrower’s inability to pay.

As a pre-foreclosure investor, only after you have informed your client of and eliminated all other options can you confidently proceed with negotiating a short sale.

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Author: Omar Johnson

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A mortgage modification or often times called a loan modification allow borrowers the opportunity to re-negotiate the terms of their mortgage loans, thereby reducing the required monthly payment. This option gives people facing a financial hardship the chance to save their home from a foreclosure. Establishing a new payment plan trough a successful mortgage modification will help you avoid foreclosure.

Lenders and borrowers have many reasons to work through this hard situation together, and establish a suitable plan that works for all parties involved. Selling you home may not be an option, especially with today’s market conditions and the circumstances that have causes this unfortunate situation to begin with. Therefore, if your home is to be saved from foreclosure, you and your lender will have to work together.

Mortgage modifications are often times a reasonable solution to prevent foreclosure. By negotiating a new payment, structure lenders still get their money and the borrower is able to keep their home. However, negotiating a mortgage modification is not that simple. Successful loan modification will require documentation to prove your current financial position with the lender. This information is also use to verify your ability to pay the new loan if the bank is willing to work with the homeowner.

While not all banks offer this type of solution, it never hurts to talk to them and find out. Who knows, it may be just what you need to prevent losing your home to a foreclosure. Lenders are staring to work more with borrowers facing foreclosure in this difficult time, lenders do not want your home, they are in the business of lending money not property management, and with the close to 2 million homes in foreclosure lenders are running out of options too. Qualifications for this type of solution, may be difficult and time consuming, but keep in mind what your goal is. Protect your most valuable asset, save your home from foreclosure with a mortgage loan modification.

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Author: Thomas Bladecki

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1. Reinstatement of Loan (Cure): This option is paying the lender everything that is owed in one lump sum to include missed payments, any late fees associated with these payments, foreclosure fees, legal fees and the principal owed during the delinquency.

A cure may involve the seller curing or deeding it to the investor “subject to” the existing loans, who will cure. There is a risk to the homeowner that the lender may accelerate the loan because of the due-on-sale, and the homeowner no longer owns the property and has no recourse of the investor doesn’t pay the loans.

2. Repayment Plan: This is a written agreement between the lender and the seller. These plans require higher payments than the regular monthly mortgage amount for a period of time until the loan is brought up-to-date.

3. Loan Modification: A loan modification involves changing one or more terms of a mortgage. Modifications can be considered to reduce the interest rate of the mortgage, change the mortgage product (from an adjustable rate to a fixed rate, for example), extend the term of the mortgage or capitalize delinquent payments (add delinquent payments to the mortgage balance-only available in extreme hardship situations). Modifications are not easily granted and there must be strong, justifiable reasons for the request.

4. Forbearance Agreement: The lender will allow you a period of time (3-6 months typically) of either low payments or no payments at all. Unless the loan term is extended (which happens rarely), the later payments generally will have to be higher than the original monthly mortgage payments until the loan is up-to-date.

5. Special Forbearance (FHA Loans only): Allows eligible borrowers to postpone monthly mortgage payments for a minimum of four months. While there is no limit on the maximum number of months, at no time may the agreement allow the delinquency to exceed the equivalent of 12 monthly PITI installments.

6. Deed-in-Lieu: A Deed in Lieu is an option in which a borrower voluntarily deeds collateral property in exchange for a release from all obligations under the mortgage.

A DIL may not be accepted from borrowers who can financially make their payments. If a borrower qualifies for a DIL program they may be eligible for cash back from the lender as in the Cash for Keys program.

7. Cash Sale: The borrower sells the property, pays off his loan, and, depending on the equity, may net some cash out of the deal. The challenge, of course, is being able to sell it quickly enough, which most often requires a substantial drop in the price.

8. Short Sale: The borrower makes an agreement with the investor to sell it for less than is actually owed, subject to approval of the lien holders. This generally results in no cash to the homeowner, but will be better for the better for his credit than a completed foreclosure.

9. Refinance: The borrower may be able to refinance and get a new loan, but generally this is difficult because the borrower has little equity and poor credit. The new loan likely will have higher payments than the old loan.

10. Do Nothing: The worst choice for the seller, whose credit will be ruined, but he can stay in the house for several months for nothing, save up some cash, and move when the lender or the high bidder from the auction eventually evicts the homeowner.

Explain each of these choices, and be honest with the homeowner. In many cases, he will trust you for your candid explanations.

You may lose a deal or two by offering the homeowner choices that are actually better than your offer, but that’s ok,always take the high road and you will have a long and properous business in real estate investing.

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Author: Richard Reichmann

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The first thing you need to do is swallow your pride, quit ignoring the situation, and talk to your lender at the first sign of trouble. Before it gets too out of hand is the best time to try to work out a solution. There are many reasons that people fall behind in their house payments and you are no exception.

The most common causes of foreclosure generally fall under one of four categories. These include: 1) Loss of income from the main breadwinner in the family, 2) Illness, 3) Death in the family or 4) Expensive and unexpected repairs.

If the reason you are behind in a payment is the loss of income, go to your lender and tell them the situation. They more than likely will work out a plan to stop foreclosure that will allow you to have a specific amount of time to catch up your payment.

Even by adding a little extra to your regular payments until the amount is caught up is better than not paying anything at all. Should this happen a repayment plan can help you to stop foreclosure.

An illness may cause lost time from work, which can put you in a financial bind. If this is the case, another solution to stop foreclosure is called forbearance. What this entails is the situation looking good for a repayment if a temporary delay of the payments is needed to give you some breathing room. Once you get back on your feet or if you are expecting a tax refund, you can catch the payment up and everything goes back to normal. This is called reinstatement.

If a spouse dies and an income suddenly stops, you can get behind in your mortgage payment very easily. This definitely is a time you should go talk to your lender and see what solution they come up with to stop foreclosure. Since they are more experienced with these types of situations that you are, they have a good idea of what can be done for different situations.

Sometimes unexpected expenses crop up and are quite costly. If your car breaks down for example, maybe it can be fixed or maybe not. If not, you are looking at having to purchase another one. If it can be fixed but the repair is going to be expensive, this is money that you were not planning to have to spend.

Ideally, everyone should have a savings account that they try to add to on a regular basis. However, that is not always possible when struggling to make ends meet today.

Another solution to help you stop foreclosure is loan modification. This can be done by the interest rate you are paying being lowered to reduce monthly payments so that you can afford them. Ideally, this would be the best method to stop foreclosure.

These are only a few of the many solutions to help you stop foreclosure. As serious as the problem is, there are numerous resolutions if you start early enough by either talking to your lender or to a credit counselor.

About the Author: Alan Largo

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Speaking on a frank note, the entire process of loan modification is truly exhaustive, and sans the perfect professional guidance, at times if turns out to be exasperating as well. And this is exactly where the role of comes into play; if you are seeking some expert opinion and loan modification assistance take the pleasure to help you in saving your dream house, and live a hassle-free life. Furthermore, considering the current economic scenario, loan modification services offered by the website turns out to be a genuine lifesaver for many of the flustered homeowners and their families. An exceptionally comprehensive website, provides all kinds of professional assistance whenever it comes to modifying your loan amount. Comprised of a team of highly qualified and trained loan modification negotiators, compliance officers and lawyers, processors and real estate attorneys and paralegals, the website is surely a cut above the rest.

It’s quite common to come across loads of baffling and erroneous data, courtesy the internet, wherein the so-called “facts” and “news” are pyramids of cant, penned down either by blog writers or our journalist friends, who in reality are absolutely clueless about the on-goings in the loss mitigation arena.

Even if you are not a computer geek, and are being apprehensive about the website navigation, I suggest don’t be so. So what are you waiting for? Go ahead and take your first step; help yourself to regain your peace of mind. A tour across the site, you’ll come across several business endorsements the witnesses to the site being a verified and trusted professional platform.

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Author: Gerald Greene

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As we all probably witnessed, the 2007 Real Estate Word of the Year, had to have been ‘Foreclosure’.

Even though the 2008 year’s predictions show the market may stabilize, statistics show that one out of 95 home owners here in Florida will have to come to terms that the possibility of foreclosure is creeping up and something will have to be done to avoid it.

For those of you who bought a home in the last few years and are a part of the subprime lending category receiving an adjustable rate (ARM), your loan terms will be up soon. What is the cause and effect of this? Higher interest rates yields higher payments yields stress about being able to afford the new payments.

The prime target for this cause and effect will be the home owners that still have credit issues and think that they do not or will not qualify to refinance their home.

So what can you do to avoid the possibility of foreclosure?

Be proactive!

If you are proactive about your potential situation, the less likely you will have to deal with the torment and embarrassment of the foreclosure process.

How can you be proactive?

Talk to your lender:

First talk to your lender to see what options are available to you. You never know what they will be willing to do to keep your business. Essentially, they want people, not homes. It cost them more money to follow through with the legal process of taking your home than working with you to try to avoid the foreclosure.

Some of the options that lenders may give you are:
* Partial Reinstatement – lenders will allow you to make monthly installments of your past due amount on top of your regular mortgage payment.
* Short-term Forbearance – lender may suspend your payments for a few months or reduce for payment for a period of time and then set something up like what was is stated above to pay the amount owed.
* Long-term Forbearance – lender may suspend payments for up to 12 months and then set up a repayment plan like what is stated above.
* Loan Modification – lender may modify the terms of the loan by either cutting the interest rate or extend the payment period.
* Refinance – lender may give you the option to refinance your loan if you have equity built up and a descent credit score.
* Deed-in-lieu of Foreclosure – (this will affect your credit score) lender may be willing to let you sign the deed of the property to the bank giving up your home and them forgiving the money you owe them.
* Short Sale – (this will affect your credit score) lender may allow you to perform a short sale if the situation and conditions are right. Short Sales are an intensive process that should be handled by a Realtor who has experience in dealing with the Banks and Lenders.

Short sales have become more financially manageable these days with the new law that has been passed called the Mortgage Forgiveness Debt Relief Act. This law eases the tax burden for home owners who had debt forgiven on a mortgage due to a short sale. Now, any debt that has been forgiven from a mortgage company will not be taxed.

Sell your home:

* Sell by REALTOR – If you know the clock is ticking and the time is coming for your interest rate to adjust, or you just can’t afford to make your payments any more, contact a REALTOR to see what they can do to get your home sold fast. Selling your home, especially if you have equity built, will always be your best choice.
* Sell to an Investor – If the seller’s market is bad in your area and you need to sell your home fast, find an investor to buy your home. The only downfall to this is that you will more than likely take about a 20% hit to the value of the home. But if you have enough equity built up, this may not be a bad idea.

You could also ask an investor if he/she would be willing to buy the home and lease-purchase it back to you. Basically, the investor buys your home, leases it to you with the option to buy the home back at the end of a set term. This is especially helpful if you have children that are still in school. This way, you won’t have to leave the area and disturb their education.

So there you have it. There are several ways that you can avoid foreclosure listed in this article. You just have to be aware of your situation, be honest about your situation and lastly, be proactive.

Get on the phone today… find out what your options are… and let’s try and make a difference in 2008’s real estate conditions.

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Author: Carey Frankel

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These homeowners call their lender and explain the problem and are met with no sympathy and a resounding “no” for an answer. The lender’s rep will go on to explain that it is the bank’s policy that they are not allowed to accept partial payments. Sometimes they even say it is “law” that they can’t help. Frankly, the rep is telling the homeowner the truth depending on whether the lender is the actual lender or just a processing company. So the general answer is always going to be “no”.

So what is a homeowner to do to not lose his home to foreclosure? In the recent past, lenders would not compromise and help the homeowner. In today’s mortgage and real estate markets, they have become somewhat flexible. The first option is to request a loan modification. The mortgage would be “modified” in one of two ways, either by extending the payments and adding the past due amount on the end, or by increasing the monthly payments by a very small amount each month until the end of the loan. Either of these methods would allow the homeowner to get out of the missed payments and keep his credit score from free-falling.

If the lender is uncooperative, another option is to have friends or family members loan you the difference until you can get back on your feet. These people will be your toughest critics and usually will tell you what you shouldn’t have done wrong, etc. However, bite your tongue and offer them a second mortgage so they know they will get their money back.

Even using credit card advances could work if you take the time to make certain that your future cash flow will cover your living expenses and your new credit card payments. Using credit card funds to pay your mortgage is a desperation measure, and before you do it, make certain you will have enough income to make it work, otherwise you could be looking at a “second mortgage” on a credit card that has a 33% interest rate if you pay late. Work on an “exit strategy” to get the cards paid off first and always on time. Simply put, “Where is the money coming from?”

In summary, the first step to take in resolving the potential foreclosure is to do some basic financial planning and determine if you can really afford your “American Dream” before it becomes your greatest nightmare.

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Author: Dave Dinkel

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The real estate market may be flooded with foreclosures, but those properties are tied-up in legal proceedings and auction sales and it may be months before they can be sold or placed into rental property status, if at all. This places a tighter squeeze on the rental property market, where renters may find their rents rising at lease renewal time beyond what they can afford to pay. A flood of homeowners moving from homes in foreclosure proceedings and moving into rental homes places upward pressure on rental property rates.

In addition to home owners who are losing their homes to foreclosure lenders are generally take big hits on foreclosed houses. Not only do the foreclosed homes generally bring less in a sale than the amount of the mortgages owed but the cost of maintaining a home and keeping it in good shape while empty falls upon the lender. Most lenders just do not have the in house resources to be good property managers.

Vacant homes become eyesores in their communities and are often vandalized and have expensive to replace items stolen from them, like copper wiring and plumbing and kitchen equipment. In some cases squatters invade the homes and can be difficult and expensive to remove. A deteriorating housing market brings a lot of cost to everyone involved with housing including home owners, lenders, and local communities that experience a decline in their tax base.

Lenders do not generally build the homes they are giving out loans for. So while 0 percent mortgages sounds pretty appealing to most potential borrowers (heck it sounds pretty appealing to me), I assume the lenders are not in love with the concept since they would quickly go out of business. Lenders must wait at least 90 days after a borrower defaults on a loan before initiating foreclosure proceedings. Lenders must also warn homeowners at least 45 days in advance that they are initiating foreclosure actions.

Recently, it was reported that prices of single-family homes were down 14.4 percent in March 2008, compared with March 2007. This downward trend has accelerated since then. Moreover, in an eye-catching combo of celebrity gossip and real estate news, TV personality Ed McMahon is in danger of losing his Beverly Hills estate to foreclosure. Good old Ed probably took out too much equity from his almost $5,000,000 home as the price was increasing and now can’t service his mortgage payments as prices fall. This appears to be a sad high profile case of being underwater with a mortgage.

Loan modifications are used when homeowners want to save their home from foreclosure and have the financial means to get back on track with delinquent payments. Short sales are used when the homeowner does not have the ability to become current on payments. Loan officers, attorneys, or other people handle many details, but the real estate agent must ensure that they are properly carried out.

Homeowners should remember that it is in the best interest of the lender to find a solution to a mortgage payment problem instead of proceeding with foreclosure proceedings so a home owner in mortgage trouble should make every effort to work with the lender to try to find some solution. Even if you are underwater with your home mortgage it would be a mistake to cut off communications with your lender.

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Author: Gerald Greene

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Mortgage loan modification is the process of changing the terms of your mortgage. There are a few terms that can be changed such as the term of the mortgage the interest rate on it and so on. Some other things that can be modified are applying for interest only payments for a period of time or changing the principal on the loan.

It is important to be prepared before approaching your lender with regard to a mortgage loan modification. Mortgage loan modification is a negotiation process between the borrower and the lender. Like any other negotiation there should be a point where the interests of both parties match thus resulting in a successful negotiation outcome. Remember that when approaching the financial institute asking for a mortgage modification they are under no obligation to agree or to modify the loan. There must be a reason for the institute to go ahead with such a process.

The first thing to do when approaching the lender is to write down the reason why you would need the mortgage modified. For example losing a job or having your loan under water are common reasons. After writing down the reasons you should write down potential reasons for the lender to modify the loan. For example if you lost your job and can not pay your loan until you land a new job the bank has an interest to help you go through this period to prevent having the house go into foreclosure. Make sure to articulate the lender motivation as opposed to yours as when approaching the lender it is best to feed it with why this process is in its best interest.

So for example if you lost your job and can not pay the mortgage for a period of time you should go to the lender with a precise reasoning and plan. For example go to the lender and let it know that you lost your job and can not afford to pay the monthly payments until you land a new job. You should also make the lender feel confident that you are capable to land a new job. For example tell the lender you already sent your resume and hired a recruiter and that you have interviews lined up. Also provide some estimate for when you think you could land a new job.

Having the lender feel confident about you doing your homework is important. If the bank believes that your problem is indeed temporary and that you will eventually be able to pay the loan in full it will have a better incentive to help you going through that tough period. For example ask the bank to allow for lower interest only payments for a period until you land a new job. Or if that would be too much as the bank to freeze the payments for that period.

Mortgage modification is a negotiation process. In addition to letting the lender know why it is in its best interest to make the modification it is also good to let the lender know why not making the modification would result in a loss to the lender. For example let the lender understand that if you can not modify the loan you will be willing to go to a foreclosure or bankruptcy process which will result in further loss to the lender.

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Author: Maricela Parks

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At the same time, with lower payments spread out over longer terms means your working capital is not greatly reduced which is definitely an important benefit. In addition, this does not increase your debt because this type of agreement is not considered a debt but a lease. This leaves you more room to borrow if you need to in the future and since this is considered an expense the tax benefits are even better. Keeping your cash flow on an even keel is always a challenge and purchasing your equipment this way allows you to have a concrete amount to budget every month that will not change.

Many types of equipment that can be purchased this way from copiers to tractors to cars can include extra benefits in the contract that will offer extra necessary services at a reduced cost or for free such as oil changes and routine maintenance on the equipment.

Article Source: the-Articles.com

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Author: Tom Sangers

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