Posted on 01/30/2008 5:52:34 AM PST by RDTF
Real estate markets are slowing. Interest rates are ticking up. And the phones are ringing at ByDesign, a Los Angeles-based credit counselor, as homeowners start to panic about not being able to make their mortgage payments.
"The number of people asking for appointments to talk about foreclosure is definitely up," said Susan Ulaga, the nonprofit service's senior vice president of counseling. Rising rates "are really putting a crunch" on homeowners with adjustable-rate loans.
-snip-
The timeline 30 days: Your troubles actually start as soon as you miss a single payment. Lenders may not contact you until you've skipped a second payment, but most will report the first late payment and every subsequent delinquency to the credit bureaus. Even a single late payment can devastate your credit score, the three-digit number that lenders use to help gauge your creditworthiness. Each subsequent "late" further decreases your score, making it more difficult and expensive to get a loan or a refinance that might help your situation. In addition, lenders typically tack on late fees of 5% or so for each missed payment.
90 days to one year: Eventually, if the payments aren't made, the lender will file a "notice of default" with a local courthouse and send you a letter saying that the foreclosure process will start unless you make good the missing payments.
How quickly the notice is filed depends on the individual lender. Some hold off if you contact them to work out a payment plan or otherwise explain your situation. Others are more aggressive and start the process as soon as possible to try to protect their investment.
-snip-
The notice of default "is a big threshold," Hsieh said. "Once you get into that state, it's a whole different world. Your options are fewer."
-snip-
(Excerpt) Read more at articles.moneycentral.msn.com ...
The loss mitigation departments of the banks are in the business of saving the mortgage, and will try hard to help you. It is a lot cheaper to renegotiate terms or sell short than it is to foreclose.
Unfortunately, many of those in trouble burrow the head in the sand, throw away the bank letters, turn off the message machine...
Considering the environment, if I was the lender I think I would try to work it out by switching these people over to a fix rate that perhaps lower. Assuming that they can afford that. Not for sure how the lender is protecting the loan by foreclosing. As far as I know the lender is likely to take a hit if they have to foreclose. Especially if the property is likely to sit empty for several months.
I’m facing foreclosure. Our mortgage company has been incredibly stubborn to work with and I can’t understand why. I appreciate the article. Thanks for posting.
That’s because nowadays most creditors are not willing to help that much. So most of these people are use to that and just simply give up or become indecisive about what to do. That’s not to mention those that just have no clue of what they are doing in the first, which is to explain why they are hard up to begin with.
I’m sorry for your troubles. I hope it all works out.
: (
Get the help you need to make them work with you.
keeper
there are a lot of people out there in the same boat. Just remember the last thing they want to do is foreclose. They take a huge hit and now probably can’t even get what the loan was for when they sell it. Make sure you use an attorney to communicate with them - you they know you mean business and are serious about working with them. If you work for a corporation you can usually find reasonable legal help through your company’s EAP program. Good luck and stay positive.
I have 4 adult children, all turned out great, but one, albeit a good kid, was pretty irresponsible with debt.
She and son-in-law bought new about 6-7 years ago for $160K, but refied as property values skyrocketed. The home is now worth about $350K and they owe $475K and their latest ARM will put them in a spot they won’t be able to afford the payments...... about $3,800/mo now.
If they walk away, I understand the bank will eat the $125K deficit, but will 1099 the kids and they will owe taxes to the IRS on the $125K which will be ugly.
There are more options appearing all the time:
http://www.youwalkaway.com/index.html
If you saw 60 minutes this past weekend, they basically told people to walk away as well.
BofA and Wachovia have both said on their conference call that they’re seeing a rapid rise in the number of defaults where people have the money to pay the note, they just choose not to. They’re turning in the keys and walking away.
If this becomes a trend, the banks are well and truly screwed.
I think that IRS part is what is terrifying everyone
That doesn’t make any sense! Those people’s credit will be screwed for several years. I have known people(in-laws) that voluntarily reposed their vehicle’s because they got an inheritance and bought new cars, but to do that nonsense on a HOUSE!
Why will they owe taxes on the written off amount? I haven’t heard this before. That will suck, but at the IRS is more than happy to work out a convenient payment plan. Its funny that it has gotten to the point that the IRS is more willing to work with you than a private lender. LOL!
My mortgage “servicer” is worthless as far as helping me.
Everytime I talk to them I get wound up and I am ready to walkaway. Then my sanity returns but one day soon my sanity is gonna flip and I am going to live here untill they throw me out and then I will rent a nicer place for less then half the price.
Keating Five. Bailout. Coming right up!
What do you do after you “walk away?” My neighbor’s sister and her husband walked away from their house and are now living with their four kids in their parents duplex.
Uh, here’s the irony:
If someone truly cannot afford the house, their credit is going to be hit no matter what they do. A default or foreclosure is actually worse than walking into the bank, telling the bank that you’re turning the house over to the lender while you’re still current on payments. NB that important distinction - the homeowner walked in with the keys while they were current on the mortgage payments.
Once the notice of default is filed, the options dwindle quickly and the credit damage is already done.
Will the homeowner’s credit take a hit? Sure. But there are two possible outcomes here:
1. The bank realizes you’re serious and they quit stonewalling and filibustering you and talk to you about dealing with the issues. Because if there is one thing banks hate more than owning a lot of real estate as a result of foreclosure, it is owning even more real estate as a result of people mailing in their keys or walking the keys in the front door.
2. Let’s say the bank continues to stonewall: the homeowner minimizes the damage to his credit rating because he was current up until the point he turned the house back. There’s still going to be a black mark, yes, but it won’t be anything like going into foreclosure or (worse yet) bankruptcy.
For many people in highly inflated real estate markets, I can understand why this would seem like a viable option. Let’s say the homeowner bought a house with almost no money down (sadly too typical) and the valuation of the house has gone down, oh, more than 15%. It might take 10+ years for that house to regain the price it was when the person bought it. Most people move in less than 10 years now, esp. when they’re under 50, and as a result, people will be thinking “We’ll never get ahead on this, so let’s just walk away and start clean in another house at another time.”
Mind you, I don’t advocate this; a deal is a deal and the homeowner should pay off the mortgage. If they don’t like the situation, they should have looked before they leaped. But I can see how this will become an increasingly viable option for a lot of people in very high LTV loans in markets taking significant price hits.
Oh Boy........here comes the fair tax!
My mortgage “servicer” cannot or will not tell me who owns the loan. They want to send me a doc to fill out to turn in the keys as you suggest while still making payments.
I put servicer in quotes because that is how they refer top themselves when asked who owns it,
You find someplace else to live.
People have been brainwashed by the National Association of Realtors into thinking that they MUST be in a house, that “smart” people always BUY a HOUSE.
Well, the people who are blissfully renting aren’t watching their equity disappear month-over-month.
Buying a house is a good idea, but only at the right price.
And from 2005 onward in a lot of markets, it was not the “right price.”
For people who were willing to wait (a rapidly declining proportion of the US population who is obsessed with instant gratification) and who had a more rational idea of what property was worth, they’re about to be rewarded for their patience.
Who has the lien on your deed of trust? Go down to your county recorder and pull your deed. Someone has to have their name on that document.
bump for later read.
(re lien stripping, automatic stay, ch 13)
I will do that this morning. Thanks
I am fortunate in that I am not desperate yet. I put 10% down and I have some equity but the ARM is 11.25 now.
We were fortunate. When things got tight we contacted our mortgage company before we missed a payment. They proposed “interest only” payments until we were able to get back on our feet, to which we agreed.
If this becomes a trend, the banks are well and truly screwed.
Depends on what state the property is in. For example, in FL, there is no incentrive for lenders to work with homeowners. If the property is sold for a loss, or foreclosed upon, the mortgage holder is still liable for the difference between what the property sold for and what was owed on the mortgage. Walking away does not wok in FL. Only bankruptcy will protect you. But then, you are still liable for your unsecured debts due to the bankruptcy law changes from a few years ago.
I’m sorry to hear that. I wish you the best of luck and hope that everything works out OK.
Debt forgiveness is considered income by the IRS. For example, you had a loan for $100K, can't make the payments and the loan has $75K left on it. You are forgiven this $75K by the bank. So you got $100K from a bank and repaid only $25K. That means the bank technically gave you $75K and that counts as income and you will have to pay federal and state income taxes on it.
The immediate question is ..... what did they do with the $315,000 that they borrowed against the “equity”? Bought the house for $160 and owe $375?
Actually Short Sales are about a 1-5% chance of happening. It takes at least 30-90 days for the bank to make a decision of they will accept it, and that’s after jumping through hoops just to get them to even say they will concider it. And few buyers are going to sit around for 3 months waiting for a yes.
...that recorded deed may be visible online through the county online records search database.
Gonna cry myself to sleep about that, you betcha.
Maybe next time "the banks" will try some exotic, sophisticated strategy like CHECKING PEOPLE OUT BEFORE LENDING THEM MONEY. You think??
That is one bad thing about FR.
I have people call me a lush just because of my screen name.
Back in the day, mortgage companies made money by collecting interest on their book of loans. They had a vested interest in loaning only to those who could demonstrate willingness and ability to make the payments.
In recent years, the mortgage industry's business plan has become essentially transaction driven. Money is made by fees charged to write, package, and sell loans to parties further along the food chain.
With that in mind, it should surprise no one that the only one who gives a damn about repayment is the institution who is holding the bag when the bubble finally bursts.
not so fast.
do not lump all debts together.
there ARE some lien stripping cases working through the court system and legislation to fix the lien stipping issue.
You already have such lien stipping BACK with regards to motor vehicle sales.
Lien stripping, for those who don’t know, is when a piece of collateral undersecures a loan. The UNsecured portion is stripped off into the unsecured nonpriority debt and the collateral only secures that portion of the loan equal to the value of the collateral.
The changes have become a joke. While at the start it was 85% of debtors were not affected by the “forced 13” provisions, it has now steadily increased.
The debt consololation agencies that have sprouted up are just as predatory as the sub prime lenders.
And you might be able to view this info online. I can view our docs here in Arizona.
no debt is the only good debt
there is one additional part of the equation.
The lender, and subsequent note buyer, thought they were “secured” because they could always sell the property. They did not calculate a “25%” correction in their formula.
the “sub prime mess” is really about bad COLLATERAL calculations. When forclosers were for skrocketing value properties there was no crisis.
Good luck to you...I mean it...alot here on FR will go on and on and on how they never use a credit card, yadayadayada...but living where I do (S. W. Pa) I have known alot of good people who have ended up in foreclosure situations. It unfortunately happens, but there are options...explore them. Best wishes to you and your family, FRegards, PaMom.
Make sure you photograph/film each room (and probably the outside) and have the current newspaper’s front page (readable) somewhere in the picture. Then if the place gets trashed and they come on you for repairs, you have proof that you left the place in good condition.
If a person surrenders the home in bankruptcy, the unsecured portion of the debt is discharged. There is also no 1099 because the debt was not forgiven.
Pool, spa, outdoor bbq, vacations, keeping up with the Jone's, etc.....
But it hurts America in the long run.
I'm inclined to tell them to get a 2nd job each, and instead of paying taxes on $125,000 to pay that money toward the loan. Put the house for sale. And come up with the money at closing to get out of the stupid mess they have gotten themselves into. Sell the cars, sell the furniture, borrow from Parents :).... do whatever it takes... but make their word of value. Stand up to their end of their own stupididness. And learn a lesson.
The government would have punished them severely if they had done that, remember?
Government is a disease masquerading as its own cure.
So what you are saying applies to the bankruptcy process? Meaning that the upside down portion of the debt becomes unsecured debt during bankruptcy? And what about state to state variations in law?
As a Realtor who is currently working two short sales, your comment about the loss mitigation department trying to save the mortgage couldn't be more wrong. In the good old days of the housing bubble, lenders easily took 80% of the market value of a home and shorted the home in order to not take the home back.
Lately, the lenders are attempting to get market value out of these homes and have been reluctant to make deals. Not sure why the change, but I've seen many homes simply go back to the bank for auction rather than having them accept an offer. Often, I will receive multiple offers usually around the same price which should tell the lenders what the value of the home is. They don't care.
Right. Everybody (certainly the MSM) seems to forget the Great Mortgage Lending Discrimination CRISIS of a few years ago.
Scumbag bankers weren't lending money to folks with no jobs and bad habits.
That's a portion of it, and probably a way overrepresented portion in MSM sob stories.
There was also plenty of bad loaning to white middle class folks who: "bought" a $700,000 house on a $60,000 income, "bought" second and third houses to flip based on fairy-tale projections of home values, or were serial refinancers, turning paper equity into cash to buy shiny toys or make other bad investments.
I think you are discussing homestead expemptions.
the objective is to move the undersecured portion of the debt into the schedule F column.
Of course under the 2005 reform act the mortgage holders TRIED to rewrite the law so lien stripping was outlawed. That is still up in the air due to the fact the law was so incredibly poorly written.
paper losses which can be written off?
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