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.
Disclaimer: Opinions posted on Free Republic are those of the individual posters and do not necessarily represent the opinion of Free Republic or its management. All materials posted herein are protected by copyright law and the exemption for fair use of copyrighted works.