FORECLOSURE PREVENTION

A.REFINANCE

  1. Most Desirable Option
  2. Doesn’t Impact Credit Score
  3. Get to Keep Home
  4. What’s Required?
  5. Decent Credit History
  6. 620 FICO’s for FHA(Limited to $270,000)
  7. 620 FICO Minimum for Conventional (Limited to $417,000)
  8. 680 FICO for a Decent Rate(Conventional)
  9. Proof of Sufficient Income is Required
  10. Equity in Home
  11. 3% for FHA
  12. 5% for Conventional
  13. If you can qualify for this you probably aren’t looking at Foreclosure

B.REINSTATEMENT

  1. Requires all back payments, interest and late charges be paid immediately
  2. Stop Foreclosure Process, doesn’t require negotiation or lender approval
  3. Applies to very few situations

C.FOREBEARANCE OR REPAYMENT PLAN

  1. Similar to Reinstatement Plan except you get to pay the shortage or back payments over time
  2. Must be negotiated and Approved by Lender
  3. Requires you to make current mortgage payments PLUS back payments
  4. More ideal for people who got behind because of unemployment and are now back to work and can afford to make payments over and above their original mortgage payment

D.RENOGOTIATION OF MORTGAGE TERMS

  1. Communication is Key
  2. Don’t expect immediate satisfactory results
  3. Be prepared to disclose your overall financial picture
  4. What is your income
  5. What are your monthly debts
  6. What are your monthly obligations
  7. How much can you REALLY afford
  8. Can you downsize vehicles
  9. May be willing to lower interest rate
  10. May be willing to lower principal balance
  11. May require you to prove need by missing mortgage payments
  12. May have tax consequences
  13. Forgiving debt can be treated as income
  14. Can affect credit

E.SALE OF HOME

  1. Use a PROFESSIONAL Realtor
  2. Trying to save the seller’s commission fee will end up costing you
  3. Have to either have enough equity or have the shortfall to bring to the closing
  4. Ie Owe $240,000 Home will Sell for $280,000 net proceeds from the sale to help get re-established
  5. Can usually rent a home for lower payment than a mortgage to build reserves and get out of debt
  6. Owe $240,000 on Home, Home is worth $230,000 will have to bring shortage to closing (about $30,000)
  7. If you have $30,000 cash, probably not looking at foreclosure
  8. Can Borrow Money
  9. Have Second Mortgage converted to unsecured loan
  10. Dramatically Lowers Monthly Payment
  11. Not so Much Money going to Interest
  12. Doesn’t Hurt Credit
  13. No Tax Consequence as long as you make payments
  14. Last of the least painful options

F.BANKRUPTCY

  1. Honest Analysis of Income and Debt Obligations
  2. If credit card bills are causing financial stress a BK may be an option
  3. Must consult a reputable Bankruptcy attorney
  1. BK will show up on Credit for 10 years
  2. As of NOW
  3. Can’t finance a home for 3 Years FHA
  4. 5 Years Conventional
  5. Subject to Change, could be longer
  1. Very difficult to get a car loan
  2. Very limited future credit options for many years to come
  3. Will Dramatically Affect Insurance Rates for years
  4. Affect Security Clearance
  5. Affect Ability to get a job
  6. May be grounds for Termination from Some Jobs
  7. New laws make it not an option for everyone
  8. Chapter 7 – Don’t have to pay back debt
  9. Chapter 13 – Do have to pay back debt (5 Year Plan)

G.SHORT SALE

  1. Use a PROFESSIONAL Realtor
  2. Be prepared for delays and frustration as banks don’t like the idea of losing money
  3. Minimizes loss on Home – Usually sell closer to market value
  4. May have to pay back deficiency
  5. May have tax consequences on forgiven debt(1099)
  6. No set industry standard – Case by case basis
  7. Will Impact Credit and FICO scores
  8. Many Mortgage Companies Treat Short Sales as Foreclosures
  9. Some allow for home financing in as little as 2 years
  10. Subject to change
  11. Not likely to affect security clearance or future job prospects as much as BK or Foreclosure.
  12. Not a public Record Item like BK or Foreclosure – no specific reporting on credit

H.FORECLOSURE

  1. Very damaging to credit score and history
  2. Currently
  3. No FHA Loan for 3 Years
  4. No Conventional Financing for 5 years(4 with 10% down)
  5. Subject to change for the worse
  6. Have to report on credit applications for 7 years
  7. May not get approved for Car Loans
  8. Increase Insurance Rates
  9. Lose Security Clearance/Job/Future Job
  10. May be pursued for deficiency
  11. If forgiven, may be 1099’d for shortfall as income
  12. $40,000 forgiveness could result in $15,000 or more tax liability
  13. Home will sell at much lower price than selling it voluntarily through a professional realtor with a regular sale or a short sale
  14. Option of Last Resort
  15. DON’T WAIT UNTIL IT GETS TO THIS POINT
  16. REACH OUT FOR HELP
  17. Talk to professionals who can go over options with you
  18. Denial or Avoidance will lead to this worse case scenario