Worried About Losing Your Home To Foreclosure?
Are you behind in your mortgage, don't have enough equity or savings to sell your home? If you are facing financial hardship do to one or or more of these scenarios:
Loss of job, business failure, damage to property, death of a spouse, death of family member, severe illness, inheritance, divorce, mandatory job relocation, medical bills, military service, payment increase or mortgage adjustment, insurance or tax increase, reduced income, separation, too much debt, incarceration and other?
Sometimes, bad things happen to good people. You are not alone. Nationwide, almost 10% of all mortgages are in default, meaning that they are 30+ days late with their payment. There are many different reasons for someone to be unable to make their mortgage payment, and regardless of what yours may be, there is most likely a way to avoid foreclosure!
Kinga Korpacz is Certified Distressed Property Expert (CDPE), and can help you find a solution. Whether your solution will keep you in your home, or allow you to sell your home in what is called a "short sale," my goal is to negotiate with your lender and help you avoid a credit-destroying and emotionally-damaging foreclosure.
To speak confidentially with Kinga about what your options are, simply call 773-484-6006.
There is light at the end of the tunnel, and I can help you reach it.
Why Not Just Let It "Go Back To The Bank?"
While it may not seem like it now, there will come a time when your current financial troubles will pass. You will feel much better knowing that you did everything you could to avoid this devastating financial consequence. The chance at avoiding foreclosure takes only effort and cooperation on your part. As your agent, I will invest my time, money, and effort.
What Is A Certified Distressed Property Expert?
Eighty-five percent of homeowners experiencing financial distress say their first contact will be to a licensed agent. Yet, fewer than 1 percent of agents consider themselves foreclosure or distressed property experts. Kinga Korpacz have taken the time and money to invest in the education necessary to allow her to help people in this most difficult and stressful situation.
The developers of the Certified Distressed Property Expert Designation(CDPE) believe that in almost all cases the best person for a homeowner in distress to speak with is a well-informed, licensed Realtor® that has the tools needed to help that homeowner find the best solution for their situation.
Foreclosure is a devastating financial and emotional process for a homeowner to go through, and in many cases they do so alone and without guidance of any kind, and therefore never recover financially.
Through extensive and ongoing education, Kinga have earned the CDPE Designation, and have dedicated her time and effort to understanding the issues distressed homeowners are dealing with. She understands the full range of solutions and are ready to help.
While experiencing financial distress is difficult for any family, the process of finding a real estate professional shouldn't be. Selecting a CDPE agent ensures you are dealing with a professional ready to address your needs.
Foreclosure VS. Short Sale - Homeowner Consequences
Future Fannie Mae Loan- Primary Residence (effective May 21, 2008)
Foreclosure - a homeowner who loses a home to Foreclosure is ineligible for a Fannie Mae backed mortgage for a period of 5 years
Successful Short Sale - a homeowner who successfully negotates and closes a short sale will be eligible for a Fannie Mae backed mortgage after only 2 years
Future Fannie Mae Loan- Non Primary (effective May 21, 2008)
Foreclosure - an investor who allows a property to go to Foreclosure is ineligible for a Fannie Mae backed investment mortgage for a period of 7 Years
Successful Short Sale - an investor who successfully negotiates and closes a short sale will be eligible for a Fannie Mae backed investment mortgage after only 2 years
Future Loan with any Mortgage Company
Foreclosure - on any future 1003 application a prospective borrower will have to answer YES to question C in Section VIII of the standard 1003 that asks "Have you had property foreclosed upon or given title or deed in lieu thereof in the lat 7 years?" this will affect future rates
Successful Short Sale - there is no similar declaration or question regarding a short sale.
Foreclosure - score may be lowered anywhere from 250 to over 300 points. Typically will affect score for over 3 years.
Successful Short Sale - only late payments on mortgage will show and after sale mortgage will be reported as paid or negotiated. This will lower the score as little as 50 points if all other payments are being made. A short sale's affect can be a bries as 12 to 18 months.
Foreclosure - Foreclosure will remain as a public record on a person's credit history of 10 years or more.
Successful Short Sale - short sale is not reported on a credit history. There is no specific reporting item for 'short sale'. The loan is typically reported 'paid in full, settled'.
Foreclosure - Foreclosure is the most challenging issue against a security clearance outside of a conviction of a serious misdemeanor or felony. If a client has a foreclosure and is a police officer, in the military, in the CIA, Security, or any other position that requires a security clearance in almost all cases clearance will be revoked and position will be terminated.
Successful Short Sale - a short sale on its own does not challenge most security clearances.
Foreclosure - Employers have the right and are actively checking the credit regularly of all employees who are in sensitive positions. A foreclosure in many cases is ground for immediate reassignment or termination
Successful Short Sale - a short sale is not reported on a credit report and is therefore not a challenge to employment.
Foreclosure - many employers are requiring credit checks on all job applicants. A foreclosure is one of the most detrimental credit items an applicant can have and in most cases will challenge emplyment.
Successful Short Sale - a short sale is not reported on a credit eport and is therefore not a challenge to employment.
Foreclosure - In 100% of foreclosures (except in those states where there is no deficiency) the bank has the right to pursue a deficiency judgement.
Sucessful Short Sale - in some successful short sales it is possible to convince the lender to give up the right to pursuit a deficiency judgement against the homeowner.
Deficiency Judgement (amount)
Foreclosure - in a foreclosure the home will have to go through an REO process if it does not sell at auction. In most cases this will result in a lower sales price and longer time to sale in a declining market. This will result in a higher possible deficiency judgement.
Successful Short Sale - in a properly managed short sale the home is sold at a price that should be close to market value and in almost all cases will be better than a REO sale resulting in a lower deficiency.
Frequently Asked Questions About Short Sales
"Short Sale" is a relatively new expression to many homeowners, yet this type of sale has been part of the real estate market for many years. Unfortunately, most Realtors aren't familiar with the process, which has caused a lot of confusion in the community, with homeowners and even other Realtors. Because I am Certified Distressed Property Expert, I thought it would be prudent to explain and dispel some of the misunderstandings.
What Is A Short Sale?
A Short Sale is when:
A homeowner is authorized, by the bank, to sell for less than what is owed on the mortgage.
The lender authorizes or accepts the sales price as a payoff.
The seller avoids a credit-destroying foreclosure, and sometimes they can also avoid a deficiency judgment.
The seller won't get any money at closing, yet they will avoid the financial and emotional damage that a foreclosure can cause. During our negotiations with the bank, I work to include a favorable wording for the forgiven debt of the mortgage, which can help the recovery of the homeowner. And I am able to do so in many circumstances.
Why Would A Lender Agree To Lose Money?
A lender loses significantly more money if they have to incur the additional expenses of a foreclosure, as opposed to accepting a short sale.
Lenders are in the business of lending money, not owning homes. The more money they have tied up with a property that they own, the less they have to lend out.
How Does A Short Sale Help Me?
It helps you avoid a credit-destroying, and an emotionally draining foreclosure process.
Avoiding a foreclosure will help save your credit. Typically a foreclosure will drop your credit score up to 300 points per loan.
You avoid having a foreclosure on your credit report anywhere from 10 to 15 years, which affects your future purchasing power and interest rates.
It could help you avoid a deficiency judgment from the lender after the foreclosure, as they try to recover their loses.
I've Already Received My Foreclosure Notice.
Is It Too Late For A Short Sale?
The short answer is no. There are a few variables, though, that can affect the foreclosure timeline.
A qualified Realtor, or better yet, a Certified Distressed Property Expert, can help you extend the foreclosure timeline up to 6 months, and in many circumstances up to 7 or 8 months.
A home sale can be done and approved, up to the day of the bank sale, or auction of the home.
I Haven't Missed Any Mortgage Payments. Can I Still Do A Short Sale?
Oftentimes, the lender will not consider a short sale if there have not been any missed payments. That issue can be overcome if we can show a compelling reason (hardship) why the payments have been made, and why the payments are going to stop in the near future.
I would need to show how the payments were made, and where the money came from. If the payments were made with your credit cards, by borrowing from family members, or even if the money came from retirement accounts, as an example, it would help build the case. This will not guarantee that the lender will accept the short sale, however, there are instances where they have done so.
How Do I Pay The Realtor Commissions, Taxes And Other Expenses Associated With A Home Sale?
The homeowner doesn't pay any of the expenses associated with the sale of the home, such as commissions and other closing costs. Those expenses are paid by the lender. They are, however, included as part of the total shortfall that the owner would be responsible for, if the bank is successful with a deficiency judgment or promissory note.
The bank may ask the homeowner to reduce the lender's loss by making a payment, if the homeowner has any "extra" money in savings accounts, etc., or by signing a promissory note.
In December 2007, President Bush signed into law, the Mortgage Forgiveness Debt Relief Act, which eliminates the capital gain income tax that used to be levied on the forgiven portion of the primary residence's sale. The tax is still in effect for second homes, and investment properties.
To speak confidentially with Kinga about your options, simply call 773-484-6006.
What are my options??
1. REINSTATEMENT—If you can prove to a lender that you will be receiving the amount of money that will allow you to bring your loan account current they will allow you to plan reinstatement or cure of the loan. You must be able to pay off the entire balance of the unpaid payments by a specific future date which includes and is not limited to all missed payments, late fees, legal fees, foreclosure fees, and principal and interest.
2. FORBEARANCE OR RE-PAYMENT PLAN—When you make arrangements with your lender to set up a specific plan to repay the mortgage on the home. This will include provisions for all of the missed backpayments and fees associated with the foreclosure. How is Repayment structured? That will be up to you and your lender. The plan may require higher payments for quite a while. This is usually an agreed-upon amount that is added to your normal mortgage payments until you have caught up.
3. SELL THE PROPERTY—If you have equity in the property you can sell it and cure the foreclosure.
4. RENT THE PROPERTY—If your mortgage payments are low enough, you can rent your property and keep up your mortgage payments. Be sure you have enough money to cover taxes and insurance.
5. REFINANCE—If you have sufficient equity, income and your credit has not been too badly damaged you may be able to refinance. Contact your trusted lender to find out if you can.
6. MORTGAGE MODIFICATION—A Modification is a permanent change in one or more of the terms of a mortgagor's loan, allows the loan to be reinstated, and results in a payment the mortgagor can afford.
7. SHORT-REFI—This process involves the refinance of a home with a reduction in the principal balance and often the interest rate as well. The borrower will have to qualify for this process both in showing a hardship as well as showing the ability to pay the new mortgage often through a fully documented qualification process.
8. DEED-IN-LIEU OF FORECLOSURE.—A Deed in Lieu of foreclosure (DIL) is sometimes referred to as a friendly foreclosure since the homeowner essentially gives the deed back to the bank. In definition DIL is a disposition option in which a mortgagor voluntarily deeds collateral property in exchange for a release from all obligations under the mortgage. A DIL of foreclosure may not be accepted from mortgagors who can financially make their mortgage payments. A DIL of foreclosure must be completed within 90 days of initiation of the process. This may prevent the banks from having to go through foreclosure process and in exchange they will sometimes forego their rights to a deficiency judgment.
9. BANKRUPTCY—A bankruptcy may stop a foreclosure and allow a homeowner to reorganize his debt and keep his property. The reality however is that most of the time this is not the case and the bankruptcy only stalls the foreclosure. If you are not able to make the payments after bankruptcy the house will foreclose anyway. The other major drawback to bankruptcy is that it makes it very difficult for the homeowner to sell his property once he enters the process. It makes it near impossible to negotiate a short sale. The only possibility is if the trustee for the bankruptcy agrees to release the property from the proceedings and allow it to be sold.
10. SERVICEMEMBERS CIVIL RELIEF ACT (SCRA)—The SCRA is a bill that was signed into law (Public Law 108-189_ on December 19th, 2003. This law provides certain protection to military personnel that are in foreclosure in specific situations, the law also provides Servicemembers other protections. This relief is only temporary and in many cases the most prudent course of action for a Servicemember, is to sell the property. This a personal decision based on your specific financial situation. http://www.uscg.mil/legal/la/topics/sscra/about_the_sscra.htm
Rules Released on Military Home Owners Relief
Military personnel who bought their primary home before July 1, 2006, and were ordered at least 50 miles away on permanent reassignment between Feb. 1, 2006, and Sept. 30, 2012, and sell at a loss are eligible for assistance under rules just released by the federal government. The assistance was authorized under the economic stimulus act passed earlier this year.
11. SHORT SALE—Short Sale is the sale of real estate in which the market value falls short of the balance on the mortgage. A lender may accept a short sale offer and forgive the rest of what is owed on the mortgage when the owner cannot make the mortgage payments and is facing foreclosure. By accepting a short sale, the lender can avoid the lengthy and costly foreclosure process, and the owner is able to sell for less than what he owes, thereby avoiding foreclosure altogether.
Disclosure: This form is provided for informational purposes only. Plus Real Estate Services nor Kinga Korpacz are engaged in the practice of law nor give legal advice. We assume no responsibility nor guarantees the accuracy of the information. It is strongly recommended that you consult with legal counsel or license accountant, investigate the specific items necessary to your situation, local and regional laws.