What homeowners need to know about avoiding foreclosure

I am reposting this article word for word that I got from Steve Nimmer here at Coldwell Banker Mortgage. (912) 604-3834 NMLS #: 186680.

Even though the recovery is over and people are getting rich in real estate(Flip That House Now! radio ads are playing again) there are plenty of home owners bank borrowers that are still struggling. And for some reason I sense there is a kind of stigma against them now that it is common knowledge that the recession is over.

So, here is Steve's article to help you out.

Since September 2008, the industry has seen some 4.5 million foreclosures completed, according to the June 2013 CoreLogic® National Foreclosure Report. And while those numbers have been coming down, it is still important that borrowers and homeowners understand what they can do to prevent foreclosure.

That means taking action at the first sign of trouble, such as the first time a homeowner makes a late payment or misses a payment altogether.

1. Analyze the cause
Was the payment late because the borrower had an unexpected expense, like a car repair or a medical bill? Or is the problem due to a job loss, disability or serious illness that could affect income for an indefinite period of time? The answers to these questions can help determine the best next steps.

2. Understand the foreclosure timeline
For most mortgages, a payment made one to 14 days late falls within a grace period. Payments 15 to 30 days late incur a late fee, which must be included at the time of payment. After 30 days, missed payments impact the borrower's credit score. Foreclosure procedures usually begin after four missed payments.

3. Optimize cash flow
Regardless of the scenario, it may be helpful for borrowers to revisit their budget and consider trimming extras like eating out, entertainment and other discretionary spending. It may also be necessary to generate additional income through part-time work or a second job.

4. Make a full payment – including late fees
A partial payment is usually credited as a principal reduction, not a regular mortgage payment. It's better to make a full payment, including any late fees, as soon as the money is available.

5. Communicate with their lender
The lender can help determine whether the borrower is eligible for any of several alternatives to foreclosure, such as refinancing or loan modifications. Even if the mortgage amount is more than the home is worth, the lender may be willing to accept a short sale or a deed-in-lieu of foreclosure.

The bottom line
A willingness to step back and assess the financial situation, take positive action to address shortfalls and work with the lender can go a long way toward helping borrowers avoid becoming foreclosure statistics.

Sources:
CoreLogic® National Foreclosure Report, June 2013
Freddie Mac: Alternatives to Foreclosure
7 Steps to Avoid Foreclosure by Tara-Nicholle Nelson, Esq.


A. Joseph Marshall
Coldwell Banker Commercial
Commercial Real Estate Advisor
Savannah, Ga
912-790-6999

What You Need to Know about Cancellation of Mortgage Debt

By Linda Goold RISMEDIA, Monday, March 12, 2012— This column is brought to you by the NAR Real Estate Services group

Summary: The mortgage company holding your note can cancel the remainder of your debt in the event of foreclosure. The lender reserves the right to sue the note holder for the difference owed from what is due and what the house sold for in foreclosure.

My opinion: If you even think you might lose your house because you're falling behind on payments and the future looks bleak, immediately contact a Realtor to initiate a "short sale." A short sale takes about 4-6 months, but when complete, absolves the borrower from the remaining debt and future litigation. If you do initiate a short sale, don't be distracted by time consuming paper work, like the HAFA program or BoA industry programs. While these programs are fantastic because they provide up to $3K in closing cost or moving assistance, don't lose sight of the big picture. The goal is to sell the house and be absolved from tens of thousands of dollars of debt, not qualify for a potential $3K in assistance.

Key Quotes:
The general tax rule that applies to any debt forgiveness is that the amount forgiven is treated as taxable income to the borrower. Some exceptions to this rule are available, but, until recently, the borrower was required to pay tax on the debt forgiven. A new law enacted in December 2007 provides relief to troubled borrowers when some portion of mortgage debt is forgiven. However, this relief expires on December 31, 2012 and NAR will be working to obtain an extension throughout the year.

Read the full article to obtain all the info you need about this law and the cancellation of mortgage debt at: What You Need to Know about Cancellation of Mortgage Debt

A. Joseph Marshall
Coldwell Banker Commercial
Commercial Real Estate Advisor
Savannah, Ga

Foreclosure: A Community Bank Perspective

Two weeks ago I attended a meeting headlined by management of local community banks. They spoke about their perspective of commercial property foreclosure. While not all of you own commercial property, the information can be readily applied to residential property, too. Keep in mind that all the following information concerns local institutions, like Ameris Bank, The Savannah Bank, Queensborough, etc… and not larger companies like Wells Fargo or Suntrust.

When someone goes into default on their commercial (or residential) property, local Savannah banks know they are dealing primarily with distressed people not distressed assets. Foreclosure is the last thing a bank wants. So at the first sign of trouble, talk to the bank and avoid surprises. The lien holder is immediately notified when property taxes or insurance premiums are unpaid or late. If you are in trouble, the bank already knows before you bring it to their attention. Pretending like nothing is wrong or avoiding a conversation with the lender about these missed payments makes lenders nervous. It looks like you don’t know about the problem, don’t care or both.

If you are given a notice of default it is not the end of the world; don’t take it personally. Respond quickly and avoid an adversarial stance. Also be open to communication and don’t assume it is too late to find a solution. A notice of default is what it is- it isn’t a moral judgment or personal condemnation.

If you have a “game plan” (a way to get back on track), banks can justify negotiating any part of your loan. A game plan is not immediately asking that the bank take a write down or take back the property. A game plan helps the lender make fact-based decisions about what they should do. Give them information about the current status of the property, tenants, recent comparable sales or rental data. If the property is for sale, provide data on traffic, showings, feedback, etc…

The most important thing is to make sure your plan shows a way the bank loses less than taking the property back. If the result of your game plan is that the bank takes a loss, that doesn’t mean your plan is awful. The bank may have already figured a potential loss into the equation when they gave you a loan in the first place.

But what if the bank has sued you? This means you’ve either ignored notices of default and/or they think you have the assets with which to pay your loan. Try to get back to the negotiating table. Small town lenders want to work with you. The last thing they want is to foreclose on your property. Because people on both sides of a negotiating table are stressed or distressed all parties have common goals- resolving the problems and doing what’s best.

Nothing written about herein constitutes legal advice!

FHA 203(k) Loans for Foreclosures or Properties in Disrepair

As we are all aware, there are plenty of foreclosures out there and more coming on the market. While each property has unique challenges and opportunities, it is not true that you need to pay all cash for one.

If the property in question is in need of substantial repair you can apply for a FHA 203(k) loan. Upon acceptance, qualified buyers can purchase the house as-is and finance the purchase, repairs, and improvements with a single mortgage loan. The loan amount is based on the value of the home after the construction is finished and the loan down payment is only 3.5%

Lenders, like Bank of America's Buy and Renovate home financing program, are even providing extra help by lining up contractors and project management services before the loan is entered into. The service provider, like Lowe's Home

Improvement, works with the customer and the lender through the entire repair process. If you have questions about a foreclosure you're interested in, give me a call- 912-352-1222.

Special thanks to Jim Ragan with Bank of America Home Loans for the 203(k) information. RealEstate Vol. 28, #12, 2010.

How the construction industry is affecting your neighborhood

(Originally published October 2010)

You might think the construction industry only affects your neighborhood when a new house or business is built nearby. Nothing could be further from the truth. Construction in any area affects the economy in terms of tax revenues, jobs and growth.

Currently, local new home and commercial construction costs are at record lows; 10%-15% less than they were 3-4 years ago. However, these costs will go up during the next 6-24 months, but builders won't be able to charge more for their work.

Builders are only guaranteeing their quotes for 30 days because materials prices are fluctuating.

When build costs increase that does not mean the price of the building will. Unfortunately, most of these costs will come out of the builder's profit margin and the consumer will make up the rest.

Financing for large projects is still very difficult to obtain. Federal regulators are tying banks up and private investment money is hard to come by. Therefore, smaller, local investors are really the only ones available to fund new construction.

The $8,000 buyer tax credit, which was great for Realtors like me, slammed home builders. For example, let's say a builder finished a house on April 30, 2010 and planned the closing in 30 days. Then the program deadline was extended another 90 days. Suddenly that builder is left paying loans on their construction for 120 days instead of 30, which significantly decreased their profit.

Construction is most hampered by foreclosures, which are still steadily coming on the market. A home buyer will go to the bank for a loan, and upon telling the banker she intends to buy a new home, the banker will say, "Why do you want to buy a new home when we've got all these great foreclosures at bargain basement prices?" Suddenly that new home is not sold.

It happens just like that every day.

The bottom line is the local construction industry is 60% off what it was 3 years ago and putting downward pressure on our economy. But, if you have the capital and want to build your business or dream home the timing is perfect.

Should I walk away from my home?

(Originally published October, 2010)

My Selling Savannah Now newsletter, which is currently more read than my website, generated a reader question:
"Joseph, my home is valued far less than what I paid for it and I can't afford my mortgage payments. I am tired of struggling; should I just walk away?"

Dear Reader, The answer is NO!

Please consider all your options. Perhaps you could rent a room in your house for $500 a month. Could you rent your home and downsize to an apartment?  Have you explored all refinancing options? If your lender agrees, you can renegotiate the interest rate, the number of payments and even the balance due. Talk with your lender about obtaining permission to sell the house for less than the balance due on the mortgage in a short sale. Talk with a lawyer about bankruptcy. Please do not walk away. Here's three reasons why.

Even though the Whitehouse officially rejected a foreclosure moratorium on October 12, 2010, that is not a "green light" to have your home foreclosed on. This is an election year and, as we've seen so far, a foreclosure moratorium is still a big issue in battleground states.

And remember that on June 24, 2010 Fannie Mae amended policy "to encourage borrowers to work with their servicers and pursue alternatives to foreclosure." And by "encourage" they meant punish defaulting borrowers who walked away and did not have that capacity to pay or did not complete a work-out alternative in good faith with their lender.

Punish how? By making the borrower ineligible for a new Fannie Mae loan for seven years starting on the foreclosure date.

Now that this policy is in place, I'm willing to bet it will become more stringent to encourage even more people to pursure foreclosure alternatives.

Lastly, Georgia is a judicial foreclosure state and deficiency judgments are allowed. This means that if you walk away a lender can sue you for the difference between what you owe on the house and what it is worth. And this could occur years down the road after you've gotten back on your feet.

Go over your budget carefully and do your research. Walking away seems easy, but in the long run it definitely is not.
http://www.fanniemae.com/newsreleases/2010/5071.jhtml?p=Media&s=News+Releases&searchid=1287691844653

What should I know about buying a foreclosed home?

(Originally published Oct. 2010)

Virtually every potential buyer that contacts my office asks about our Savannah area foreclosure listings.
We've all the heard or read the stories about buyers who bought a $120,000 home from a desparate bank for $70,000. Or buyers who found a distressed seller who sold her house at a fraction of what it was worth.

Unfortunately, most of these callers are very excited about buying a foreclosure, but have no idea what they are getting into. There are advantages and disadvantages to buying a foreclosed home. Here are some general tips anyone can follow if they want to purchase a home in forclosure or in a short sale:

See the house in person. Don't rely on a low price and internet pictures.

Conduct a title search. Find out whether it has a second mortgage or a lien on it.

Get an up-to-date inspection. Conditions change and older inspections probably no longer apply.

Budget for repairs and renovations. Chances are the longer the house has been vacant, the more problems there may be.

Study the neighborhood. Is the house in a crime area or surrounded by other foreclosures?

Get expert help. Work with a real estate agent who is experienced in foreclosures.

If you have additional questions, or need capable and trustworthy representation, please call me at 912-352-1222.