What is a Mortgage?
A mortgage is a process by which a homeowner, or owner of a property,
can make payments on said property without having to pay the full
price upfront. When a person prepares to buy a new home, a payment
schedule for the mortgage is set up, some lasting as long as 40
years. When the mortgage is paid, the homeowner owns the property
free and clear.
What is a HUD 1 Closing Statement?
A form used at closing that gives an account of the funds received
and paid at closing, including the escrow deposits for taxes, hazard
insurance, and mortgage insurance.
What is a Deed?
The legal document conveying title to a real property.
What is a Deed of Trust?
A deed of trust is an instrument used in many states in place
of a mortgage. Property is transferred to a trustee by the borrower
(trustor), in favor of the lender (beneficiary) and re-conveyed
upon payment in full.
What is Depreciation?
A loss of value in a real property brought about by age, physical
deterioration, functional or economic obsolescence.
What is Loss Mitigation?
Loss Mitigation is a process to avoid foreclosure; the lender tries
to help a borrower who has been unable to make loan payments and
is in danger of defaulting on his or her loan. The lender will may
try to re-negotiate the terms of your loan with us. Your lender
does not want to take your home. The average foreclosure costs the
lender about $80,000 so they want to work with you. If contacted
in time, most foreclosures can be halted by contacting your lender's
Loss Mitigation Department.
What is a Loan Modification?
A mortgage modification is a loss mitigation option that allows
a borrower to refinance and/or extend the term of the mortgage loan
and reduce the monthly payments.
What is a Forbearance Plan?
A forbearance plan is a loss mitigation option where your lender
arranges a revised repayment plan for the borrower that may include
a temporary reduction or suspension of monthly loan payments. It
will normally include two primary elements: (1) a promise by the
borrower to remain current on the mortgage going forward, and (2)
some plan for making up the delinquent interest and other charges.
This may include making additional payments to the mortgage company
or the delinquent amount could be added to the loan to be paid later.
What is an Offer on a property?
An offer is an indication by a potential buyer of a willingness
to purchase a home at a specific price; generally put forth in writing.
What is a Deed-in-Lieu of Foreclosure?
A deed in lieu of foreclosure is the transfer of the ownership of
a property from a borrower who is in default back to the lender
to whom the property was mortgaged. A deed in lieu will still show
up on your credit report, but it is not quite as damaging as an
What is Foreclosure?
When homeowners fall behind on mortgage payments, a foreclosure
may occur. A foreclosure is a process in which a financial institution
repossesses or sells a piece of property because of a loan default.
Mortgage lenders usually consider a mortgage to be in default when
payments haven't been made in three months. When a mortgage loan
is in default, the mortgage lender can start the foreclosure proceedings
on the property. There are basically two types of foreclosures:
judicial foreclosure and non-judicial foreclosure. About a third
of the states in the nation use judicial foreclosure. This type
of foreclosure involves issuing a lawsuit against the homeowner.
If the homeowner does not respond to the lawsuit, the mortgage lender
wins the case and the home is put up for sale in an auction. A court
official presides over this auction and sells the seized house to
the highest bidder. The mortgage lender also puts in a bid during
the auction. This bid amount can go up to the amount owed on the
home loan. If no bidder beats the mortgage lender's bid, the mortgage
lender gets the title to the home. If the bidding goes higher than
this bid amount, then the winning bidder is issued the deed to the
house.A non-judicial foreclosure is a foreclosure that does not
involve a lawsuit. The mortgage lender issues the homeowner a notice
of default and a notice of its intent to sell the homeowner's property.
The homeowner has a chance to stop the sale by paying the default
amount owed or by coming to an agreement with the mortgage lender.
This agreement may include setting up a repayment plan and being
allowed the option of delayed payments for a specified amount of
time. The homeowner can also stop foreclosure by filing for Chapter
13 bankruptcy. If the homeowner fails to stop the foreclosure, the
house is auctioned off in the same manner as a judicial foreclosure.
A foreclosure can also occur without a sale. In a strict foreclosure,
the title of the house goes directly back to the mortgage lender
without the need to go through an auction. Once the mortgage lender
has the title to the house, it can sell the house through a real
estate agent. Proceeds from the sale of the house would go towards
paying off the default amount of the former homeowner's mortgage
loan. However, if the proceeds of the sale are not enough to cover
the owed amount, a deficiency judgment is issued to the former homeowner.
For example, if a home sells for $80,000 and the balance on the
mortgage loan was $100,000, the former homeowner is still liable
for the $20,000 difference. Deficiency judgments, as well as the
foreclosure itself, could do severe damage to the homeowner's credit.
In other words, a homeowner will lose his home if it is foreclosed
on by the lender.
What is the difference between a Satisfaction
of a Lien vs. a Release?
A satisfaction is a total release from the debt owed. A release
is when the lender releases the lien from the property to allow
the home to be sold. (The borrower may still be required to repay
the balance of the debt.)
Should I consider a Refinance?
Being able to refinance your loan depends on several things. If
you are already delinquent on your present mortgage, your credit
rating will be adversely affected. This could prevent you from getting
a new mortgage at a reasonable interest rate. In addition, you may
not be able to afford the fees and points that most lenders charge,
especially if you have little or no equity in your home. If you
do want to refinance, shop around for the best rate and terms possible
and beware of predatory lenders. Also ask your lender about the
Federal Home Loan Bank's refinancing assistance program, which is
helping to fund banks to refinance existing mortgages.
What can Loss Mitigation do?
The goal of loss mitigation is to work out an agreement between
the borrower and the lender that will stop foreclosure proceedings
permanently. This allows the borrower to stay in their home and
protects their credit history.
How long does it take to complete the Loss
Mitigation, if I fill out all of the paperwork and pay the retainer
at one time?
Cases can be resolved in as short a period of time as a week or
two, if you have already been assigned your own loss mitigation
person from your lender, or it can take up 3 to 6 months, depending
on your lender. Time is working against you, and the sooner you
contact us and provide us with all the documentation required the
better chance you have getting a loan modifcation. Typically it
takes several weeks to complete a work out agreement and stop foreclosure
What should I do if I get behind in my mortgage
As soon as you know you won't be able to make your payment, CALL
US so we can start the loan modification process. Be honest with
us about your situation so we can help you choose the best option.
How long do I have to act?
Time is of the essence when you are behind on house payments. Each
day that passes makes it that much harder to get an agreement worked
out with your lender that you can live with. The home foreclosure
process can take anywhere from a few weeks to months, depending
on your state law and the method of foreclosure your lender chooses
My income problem was temporary. Do I need to sell my home?
You have a chance of keeping your home but first we must convince
your mortgage company of two things: (1) the problem that caused
the mortgage payment disruption was beyond your control, such
as illness, injury, temporary disability or forced job etc., and
(2) you are now solidly in a position to stay current on your
mortgage payments and show that you can make some progress towards
making up the delinquent amount.
When is it too late to save my home?
It is never too late until you give up. You can save your home
even if it is set to be auctioned the next day, but you take a huge
risk by waiting. Even after the home has been sold there are options,
but they involve buying your own house back from the bank and these
options are expensive.
I'm currently in bankruptcy. Can you still
work out something?
Yes. But, your mortgage has to be discharged or dismissed (gotten
relief from Stay) from the bankruptcy proceedings. We will need
to work with your bankruptcy trustee to save your home. One of our
attorneys will need to carefully review your situation to determine
I've already talked with my lender and they
just want all their money. What do I do?
Yes. Many homeowners experience this kind of inflexibility from
their lenders. Saving your home is not magic. No one can make your
obligation disappear, but it can be made manageable. It has a lot
to do with earning trust, understanding people and knowing the regulatory
guidelines that govern mortgage servicing. This is a very serious
matter; do not expect anything less. We work with the lender so
they can help us help you. Your lender does not have an obligation
to negotiate with us or with you. The lender does not want your
house, but they do not to let you keep it, if you can not afford
to pay for it. They want a solution that works for everyone.
Should I file for bankruptcy to save my house?
Chapter 13 is one of the options, but it has many disadvantages.
Statistics show that more often than not homeowners who declare
bankruptcy end up losing their home to foreclosure anyway. If you
declare bankruptcy, you will likely end up with BOTH a bankruptcy
and a foreclosure on your credit report. We recommend you consult
a reputable bankruptcy attorney should you think you need it. Bankruptcy
should be the last resort anybody should take, and often a bankruptcy
attorney is not going to know about or have full understanding of
other options to save your home.
What if I can no longer afford my home?
If you provide us with the information we need and we both decide
that you cannot afford your home, we will advise you of your other
options. The bank’s loss mitigation person will make certain
that you cannot afford your home any longer and transfer us to the
short sale department. You will need to contact a professional realtor
with experience in short sales to assist you. We may also be able
to provide you with names of professional realtors in your area.
We may also want to discuss a deed-in lieu of foreclosure with your
lender, if you are unable to sell your home in a reasonable amount
What sort of hardship would my lender consider legitimate?
It really depends on your mortgage company. In general, as long
as there is a real hardship and the mortgage company believes the
loan is very likely to become delinquent, the request will be processed
by the Loss Mitigation Department. To get the Loss Mitigation Department
to accept a hardship, you will need to write a very strong hardship
letter. It is this letter that will set the stage for the history
of your whole loan. The following are “hardships” that
are accepted by mortgage lenders: family illness or injury, divorce
or split of domestic partners, job loss or significant income loss,
death, illness or injury in the extended family – particularly
if it forces relocation, adjustment in mortgage payment or unforeseen
increase in living expenses, and job relocation when the property
is equity deficient
What is a Short Sale?
A Short Sale is the sale of a home for a price that is below what
is owed to the lender on the property. The lender(s) accept and
approve the sale of the home at a discounted price to fully satisfy
the loan. The good news for you, the existing lender pays commissions,
escrow, title fees, and repair costs (if any). Your home gets sold,
the loan(s) paid off, you avoid being foreclosed on, and your credit
is less damaged.
I am current on my mortgage, will my
lender consider a Short Sale?
Depends. Some lenders will not accept the file until the loan is
delinquent. Still others may accept a Short Sale file for approval
on loans that are not delinquent.The best way to determine whether
or not a lender will accept a file for approval on a loan that is
current is to submit one for approval. Obviously, you will have
to show that you cannot make the payments any longer and the value
of the property is less than the amount owed on the property.
Is a Short Sale for me?
With current market conditions lenders are becoming more open and
willing to work with borrowers that face financial hardship and
accept a discounted payoff on a mortgage. If you are facing a hardship
that makes it likely you may not meet your obligation of paying
your mortgage, the lender may prefer to settle the matter with you
instead of taking the property through foreclosure. When considering
the option of a Short Sale, remember that your lender is looking
to limit any potential loss on your loan. With a Short Sale the
lender may prefer this to foreclosure. In short, your lender wants
to work with you.
If I do a Short Sale, how much will I
have to pay to sell my home?
Nothing. There are no out-of-pocket costs since the mortgage holder
pays all sales costs. Nothing. It’s true, in most cases you
will pay literally no sales costs if your lender approves the Short
Sale. All commissions, title and escrow fees, and even most repair
expenses are paid by the lender as part of the Short Sale approval.
We will always include the following clause in your contract. “Seller’s
agreement to sell is subject to approval by existing lender of a
Short Sale at no cost to Seller. Seller shall not be required to
deposit funds to close escrow.” Remember, lenders approve
Short Sales and accept the resulting loss in an effort to avoid
bigger losses through foreclosure. There has to be a reason for
the lender to approval a Short Sale.
Why would a mortgage company agree to accept
a Short Sale?
For several reasons which include:· Reserve Requirement-
Delinquent and non-performing loans place a burden on mortgage lenders.
Lenders must set aside funds in reserve to deal with potential losses
from all delinquent and non-performing loans. These funds cannot
be put to work generating new loan fees until the bad loans are
resolved. A successful Short Sale lets the lender put more money
to work.· Legal Concerns – Pressure has been put on
mortgage lenders to work with borrowers to equitably resolve situations
where borrowers are unable to meet their mortgage obligation, particularly
when the borrower makes an effort to arrive at a compromise solution.·
Wall Street is Watching – Mortgage lenders rely heavily on
their ability to package and sell bundles of loans on the secondary
mortgage market. They need to sell these bundles of loans in order
to put the funds back to work by loaning the money again and collect
loan fees along the way. If mortgages perform poorly after they
are sold it could impact the lender’s ability to sell their
loans on the secondary market. A successful Short Sale gets the
loan payoff resolved quickly.· Asset Management Expenses-
If a lender acquires a property through foreclosure, the property
will be managed until it is repaired and resold. It is expensive
to manage real property assets - homes – spread throughout
the region, the state and possibly even the nation. Keeping properties
maintained, keeping utilities on, making repairs and the administrative
costs attached to these activities are all costs the lender would
prefer to avoid. A successful Short Sale eliminates most of these
I have two loans, can I still do a Short Sale?
Yes. Working with both lenders is not a problem. Even if what your
home is worth is below the balance of the 1st mortgage, normally,
we can get the two lenders to cooperate. After all, neither lender
wants to own another home through foreclosure. However, generally
the second mortgage holder will also want to receive some type of
repayment for accepting the short sale.
My property is in rough shape and needs work, can I still do a Short
Lenders are more apt to do a Short Sale on a property that needs
work than on a property that doesn’t. Why? Lenders understand
the risk of loss goes up when they foreclose on a property that
needs work. They’re in the business of making loans not fixing
Why would my Lender want to allow a Short
Sale to help me?
The reason is simple; a short sale often has a better return on
investment to the lender than a foreclosure. The average savings
a lender sees from a short sale property compared with a foreclosure
property is $14,000. Not only does the lender receive this savings,
they are also paid on the loan 6 months earlier than in the foreclosure
process. This allows them to collect and cash-out earlier than they
would in a foreclosure. Plus, lenders spend a great deal of money
with attorneys to complete the foreclosure process. Lenders created
the short sale process as a foreclosure alternative for those reasons.
The incentives to perform a short sale on your property are in place
to motivate them to participate.
When should I start my Short Sale?
It is best to begin a short sale when you realize you can no longer
afford the mortgage, so that your property can be marketed properly
and you can receive a higher offer. The earlier you start, the higher
our likelihood of success. Contact us to see if you have enough
time. A professional realtor will need to provide us with a Comparative
Market Analysis and Property Listing Agreement for the Lender. When
the professional realtor receives a Purchase Agreement, the Lender
will want copies of all the documentation. This includes information
from the purchaser such as proof of down payment and loan approval.
The Lender will then schedule an appraisal to confirm that the listing
price is appropriate before considering approving the Short Sale.
At that time, the Lender will provide specific closing instructions
to the realtor and the purchase will need to close with several
How long is a Short Sale process?
Depending on the mortgage company and the state in which the home
is located, a short sale process can take between 2-5 months or
longer depending on the real estate market in your area.
What liability do I have when doing a short
In a short sale, it is possible the bank could 1099 you for the
difference in what you sell your property for and what you owed.
This means the IRS could consider the difference as income, and
you could be taxed on that income. The bank might also ask you to
pay a portion of the difference back in the form of an unsecured
note, which is similar to an I.O.U. It is a negotiation, and we
employ tactics to have the bank consider the debt settled.
In a foreclosure, your house is sold at an auction, which typically
causes the difference of the total amount you owe and the foreclosure
sale price to be much greater. This means you have a higher potential
tax liability. Additionally, the bank may come after you for a Deficiency
Although there are no guarantees, a successful short sale should
eliminate a deficiency judgment, minimize your tax liability, and
keep the foreclosure off your credit.
Recently, according to an MSNBC news article, President Bush announced
plans to do away with this tax penalty on short sales. The IRS Publication
908 also addresses this issue. In some cases, where the seller is
insolvent, the 1099 penalty can be avoided all together. For more
information on deficiency judgments and the tax liability you always
consult your tax advisor.
What is a Deficiency Judgment?
A Deficiency Judgment can arise when the bank sells the house at
foreclosure auction. The bank can sell the house at auction for
any amount less than the total amount owing of the debt plus fees.
A deficiency judgment can arise if the bank sells the house for
less than the mortgage debt. The lender then holds you responsible
for the unpaid portion of the loan. For instance, if you owe $100,000
to the mortgage servicer and they see proceeds after the auction
of $55,000, the remaining difference of $45,000 can be moved into
a judgment against you. This will also appear on your credit report
along with the foreclosure. The lender may be allowed to take further
legal action such as garnishing wages to pursue payment based on
the laws of your state. Some states have restrictions and regulations
on deficiency judgments, but unfortunately the majorities do not.
Some lenders will choose the deficiency judgment while others may
pursue a path to write off the loan. If they choose to write off
the loan, the lender may issue a 1099 form which you will have to
pay taxes on for the calendar year.
How do a foreclosure and a short sale show
up on my credit?
Foreclosures show up as FORECLOSURE, and can stay on your record
for seven to ten years. Anytime you apply for a new loan or have
your credit run, the foreclosure will show up and is usually a
required disclosure you must make on most credit and job applications.
A short sale is listed as SETTLED DEBT, or a debt settled for
a lesser amount and is much less harmful to your credit. Please
consult a credit company for more information.
Can I simply deed my property to someone else and avoid
It is usually a bad idea to deed your property without paying
off the loan. First off, you will still be considered primarily
responsible for payment of the loan. Should the loan payments
do not get paid, or the home forecloses, it will show up on your
credit! The other thing is that when you deed your property to
someone else, you no longer have control of the property. No deed,
no control of the property.
How Does Foreclosure Happen?
There are a number of reasons why foreclosure happens, all of which
are related to a homeowner's inability to make payments on the mortgage
loan. These reasons may include: Loss of job, divorce or separation,
unplanned home or car repairs or filing for bankruptcy
How do you stop foreclosure?
We contact your Lender and the Trustee immediately to see your
options. We assist you in performing a detailed financial analysis
for your Lender to determine your best alternatives. We need to
review your lender's loss mitigation policy so we can tailor a resolution
to meet your specific criteria and financial circumstance. You will
generally need funds available to reinstate your loan.
What are the Effects of Foreclosure?
Foreclosure means more than just losing a home. It can haunt a
person for years down the road. Other problems that may result from
foreclosure include: Loss of equity earned in your home. The value
of your home may increase each year. In many cases the combination
of the equity and the increased value of your home can translate
into losing thousands of dollars because of foreclosure. Increased
taxes. A lender who loses money from the sale of a foreclosed home
must report the loss to the IRS. Subsequently, the IRS may require
you to report the lender's loss as income on your next tax return
and you may be required to pay taxes on it. Inability to borrow
money in the future. A foreclosure can destroy your credit profile
almost overnight. This derogatory mark on your credit report will
label you as a bad credit risk for seven to ten years. This can
result in declined applications for credit, the inability to rent
an apartment, limited employment opportunities, and a host of other
implications that can follow you for a long time. Lawsuits. The
mortgage company can go after you for any damages they incurred
as a result of having to foreclose on your home. Loss of employment.
Some employers require their employees to maintain good credit histories.
Notification of a foreclosure may be grounds for dismissal or loss
of a chance for advancement and better pay. Loss of self-esteem
and self-worth. Emotionally the stress of foreclosure can have serious
effects on your well-being. The stress that foreclosure brings can
lead to depression, feelings of worthlessness, lack of motivation,
embarrassment around family and friends, and the list goes on.
What should I do if I get a foreclosure notice?
You have a specific number of days from the date you receive the
foreclosure complaint to file an answer with the court and with
your lender's attorney. An answer may be styled in a legal format
or in letter form. This is an important step to protecting your
legal interests. Each state has specific regulations on foreclosure.
California has just passed additional legislation to deal with the
foreclosure crisis. We will call your lender right away to discuss
alternatives to foreclosure. Keep in mind that you will have to
pay the lender's legal expenses as well as your past due mortgage
payments and penalties.
How long does a foreclosure take?
The legal proceedings may take anywhere from 4 months to 1 year
or more depending on the state in which your property is located.
Can I retain my house after it goes to Sheriff's
You may retain ownership of your home (and continue to live in
it) up until the time that the confirmation of sale has been filed
with the court.
When do I actually have to leave the house?
You should be prepared to vacate the property once the foreclosure
sale has been confirmed - usually 30 to 60 days after the foreclosure
sale. If you choose not to vacate the property, an eviction notice
will be placed on your door informing you of the date you will be
evicted by the Sheriff. Your personal belongings will be placed
outside your home and eventually removed. If you have not made alternative
living arrangements, a HUD-approved nonprofit housing counseling
agency can refer you to community services in your area