Welcome to ERA Belsito & Associates

Foreclosure Prevention


 

 

       "Never forget 
                that you have Options."


 

 

With the recent mortgage crisis and economic downturn, there are countless people going through difficulties which often lead to foreclosure. It's a devastating event - when you've worked so hard to acheive the "American Dream" to have it ripped away from you. But it's been happening quite frequently, lately. Unexpected life changes contribute to the rise in foreclosures – particularly those that impact a family's finances, such as:

  • Loss of employment or reduction of hours
  • Major illness or injury
  • Divorce or separation
  • Death of a spouse

What makes it so difficult to think about your options when you are facing a crisis is that you are so focused on the problem at hand, and are not likely to have the time or energy to consider how it could impact other aspects of your life. That is why it is best to have a plan in place before you run into trouble.

By having a "Plan B" in place, you won't have to scrutinize and organize your finances while you are stressed about finding employment or dealing with a major illness. The plan will already be there – you will need to just follow it.

Financial warning signs

Sometimes, there isn't a major life event signaling potential trouble – you simply may be having a difficult time properly managing your finances. Don't underestimate (for instance) how damaging credit card debt can be to your financial health. Credit problems often take a toll on your ability to cope with your mortgage. It is important to realize that financial difficulties in one area can, and often do, spill over to other areas. These difficulties are all warning signs of financial problems that can lead to foreclosure on your home if you do not act quickly. They include:

  • Maxing out credit cards
  • Using credit to pay for day-to-day expenses, such as groceries, utilities, etc.
  • Being unable to pay your bills on time
  • Paying only the minimum amount on credit cards
  • Applying for new credit cards after maxing out on existing ones
  • Having to choose which bills to pay

Talk to a housing or finance counselor immediately if you see these signs in your lifestyle. You may be able to get your finances back on track before foreclosure becomes a reality.

Early Steps to Prevent Foreclosure

Knowing that Plan B can be critical is a first step, but what should your plan include? Most important to your contingency plan are to:

  • Save money.
    Put away some money each month to have an emergency fund in case something unexpected happens, such as losing your job. You should have several months of housing costs saved to protect you from unexpected financial problems.

  • Reduce expenses.
    Prioritize your expenses and look for areas in which you may be able to sale money; for instance, temporarily canceling cable or your gym membership. By cutting down to the bare necessities, you may be able to save a significant amount of money. Even if it doesn’t seem like enough of a savings to make a big difference, remember – every little bit helps.

If after you've put Plan B into action you still find yourself having trouble paying the mortgage, you should:

  • Call your lender.
    This is the single most important thing you can do. Lenders want borrowers, not properties – they would prefer to see you keep your home. Most will work with you while you get back on your feet.

  • Be honest with your lender.
    Different situations require different solutions. It will matter to your lender to know if your financial problems are temporary, for example, due to an injury that puts you out of work for a few months, or are more long term, such as a cut in pay or a layoff.

  • Know what you owe.
    Have a clear picture of what your debts are and make your mortgage the priority if you have to make choices. Debt collectors can be very aggressive, but if you can't pay all your debts, make sure your home is protected from foreclosure by paying your mortgage.

  • Talk to a housing counselor.
    A non-profit housing counseling agency may be able to help you restructure your bills so that you have an easier time paying them. Additionally, they can help you create a budget that suits your specific needs.

  • Contact a housing non-profit.
    A housing non-profit can give you valuable advice. The HOPE National helpline, 888-995-HOPE, is dedicated to helping homeowners facing foreclosure 24 hours every day. Spanish – speaking counselors are available.

Dos and Don'ts of Foreclosure

Facing a foreclosure is a scary thing, but there are things you should do – and shouldn't do – to avoid making the situation worse.

  • DO answer the phone and read your mail.
    Avoiding your lender won't make the problem go away. In fact, it will only make the problem worse. Your lender may be able to help you, so be sure to answer the phone and read any mail they may have sent you.

  • DO realistically assess your situation.
    Are your financial problems temporary? If you are temporarily out of work and will be fine once you find a new job, call your lender. Lenders may be able to offer a forbearance or repayment plan.  

  • DO consider your options.
    If you are not in a position to keep your home, consider selling it before you face a foreclosure. If you have already missed a mortgage payment, call your lender. There may be purchase options, like a short payoff or assumption (see sidebar) that help avoid foreclosure. If you act before your home goes to auction, you may be able to salvage some of your credit standing. Contact a real estate professional to see what your home is worth today.

  • DO be aware of certain financial responsibilities.
    Even if your lender sells your property, you may still be responsible for the difference in the sale price and what you owe. It is also important to realize that you may be responsible for certain taxes when a lender forecloses on your property. However, the IRS does provide tax relief in certain situations.

  • DO protect your wealth.
    Recognize that you may have significant equity in your property that must be preserved.

  • DON'T move out of your home.
    In order to qualify for assistance, homeowners are often required to be living in their home. Be sure to talk to your lender before you think about moving.

  • DON'T ignore the problem.
    It may be possible to keep your home, but if you wait to take action, fewer options will be available. You have certain rights and can take certain actions to help you keep your home; however, you only have a limited amount of time to assert those rights or take those actions.

    Talk to a lawyer or legal aid organization, since your rights vary from state to state. Most states and large cities have legal aid organizations; to find one near you, go to the Legal Services Corporation, a government-sponsored organization that provides high-quality civil legal assistance to low-income Americans.

  • DON'T convince yourself you can afford a home if you can't.
    Most lenders will only lend what a borrower can afford, but some less scrupulous lenders will allow borrowers to get in over their heads. In some cases, a home that was affordable becomes unaffordable due to changes in your life circumstances. If your mortgage is truly beyond your means, consider selling your home and purchasing a less expensive home or renting for a period of time before the only option left is foreclosure. Call your mortgage company; they may be able to help you avoid foreclosure by agreeing to an assumption or a short payoff.

  • DON'T fall victim to a scheme.
    Some people want to profit by your misfortune by offering to contact and conduct all work-outs and negotiations with your lender on your behalf – for a fee.

Recognizing predatory lenders

Unfortunately, when dealing with foreclosure not all mortgage lenders or credit repair companies have your best interest in mind. Beware of predatory lending traps, such as:

  • High-Risk Second Mortgages.
    These may seem like a good option, but be cautious – they could further complicate the problem.

  • Unsolicited "Loan Approvals."
    Predatory lenders often send homeowners information stating that they are pre-approved for a loan. Although a loan can look very attractive if you are desperate to avoid foreclosure, talk to your lender, not a stranger. If refinancing is your best option, your lender will let you know.

  • Refinancing to Access Equity.
    By stripping your home of equity, you may actually be going further into debt – decreasing your chances of keeping your home. Again, talk to your lender or a reputable housing counselor before making any decisions.

  • Equity Skimming.
    A buyer may offer to pay off your mortgage or sell your property if you sign over the deed and leave your house. Don't do it. Your lender may be able to help you, but usually only if you still live in your home.

  • Phony Counseling. 
    Reputable counseling is readily available – often free of charge. Be sure you are talking to a reputable agency or the counseling could hurt instead of help you.

  • Don't Sign What You Don't Understand.
    Some predatory lenders can be aggressive in trying to get you to sign paperwork. If you are unsure, don't sign. Take the paperwork with you and go over it with a trusted advisor. If the paperwork is legitimate, the lender should have no problem if you want to review it.


"What are my options if I cannot afford to make the payments?"


If you are working with your lender to keep your home, (known as retention), there are several options:

Forbearance: Your lender may offer a temporary reduction or suspension of your mortgage payments while you get back on your feet. Forbearance is often combined with a reinstatement or a repayment plan to pay off the missed or reduced mortgage payments.

Reinstatement: Your lender may agree to let you pay the total amount you are behind, in a lump sum payment by a specific date. This is often combined with forbearance when you can show that funds from a bonus, tax refund, or other source will become available at a specific time in the future. Be aware that there may be late fees and other costs associated with a reinstatement plan.

Repayment Plan: If your account is past due, but you can now make payments, the lender may agree to let you catch up by adding a portion of the past due amount to each current monthly payment until your account is current.

Loan modification: This is a written agreement between you and your mortgage company that permanently changes one or more of the original terms of your note to make the payments more affordable.

If you and your lender agree that you can not keep your home...

There are a number of liquidation options you should understand:

Short Payoff (or Short Sale): If you can sell your house but the sale proceeds are less than the total amount you owe on your mortgage, your mortgage company may agree to a short payoff and write off the portion of your mortgage that exceeds the net proceeds from the sale.

Deed-in-lieu of foreclosure: A Deed-in-lieu of foreclosure is a cancellation of your mortgage if you voluntarily transfer title of your property to your mortgage company. Usually you must try to sell your home for its fair market value for at least 90 days before a mortgage company will consider this option. A deed-in-lieu of foreclosure may not be an option if there are other liens on the property, such as second mortgages, judgments from creditors, or tax liens.

Assumption: An assumption permits a qualified buyer to take over your mortgage debt and make the mortgage payments, even if the mortgage is non-assumable. As a result, you may be able to sell your property and avoid foreclosure.

While refinancing is not necessarily a good option when facing foreclosure and can sometimes even be a predatory practice, there are instances where it may help. Talk to your lender to see if refinancing is an option for you.

   

Call on us TODAY...


Our Loss Mitigation Specialists can evaluate your specific situation, and help you to determine your best options. There is no obligation, no judgment, just a helpful professional with experience in pre-foreclosure sales and retention programs.

Don't wait. You don't have to face this alone. 

(508) 746-8100


Tips to Remember


Financial problems don’t usually happen overnight; learn to recognize the warning signs early.

If you are experiencing financial difficulties, there are immediate steps you can take to avoid foreclosure on your home:

  • Seek financial counseling right away
  • Call your mortgage company and creditors
  • Be honest with your creditors
  • Don't be discouraged
  • Begin to save as soon as possible

    Use a checklist to perform and keep track of maintenance tasks to maintain the value of your home and prevent costly repairs.

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