When refinancing is no longer an option.
When the amount you owe your lender is greater than the value of your home, the option of a refinance is gone unless you have huge amounts of cash to pay off your lender in the refinance process. I haven’t talked to anybody who wants to pay their lender to refinance.
Most distressed homeowners who can’t refinance are seeking a loan modification. I have yet to speak to a person who is happy with their loan modification. Most of the people I talk to complain that the process is taking way too long and that the banks just aren’t working with them. RISMedia reported that Bank of America believes that half of their delinquent customers will not qualify for the government’s Home Affordable Modification Program (HAMP). Wells Fargo says 80 percent of their customers won’t qualify. Together, Bank of America and Wells Fargo hold 40% of U.S. mortgages. In the last few weeks I’ve talked with many people who were promised by their bank that they would work out a plan, only to have the bank start to foreclose on them. I’m working with a homeowner right now who was told by a bank representative to stop making their payments in order to get a permanent loan mod, only to get a notice pinned to the door that stated their home was scheduled to be foreclosed upon (they ended up filing for bankruptcy to stop the foreclosure proceedings). Loan modifications are frustrating and not working like promised.
A second option is a short sale. This is when a home is sold for less than the loan balance. This process has become more popular this year as banks realize that most delinquent homeowners will not qualify for the government loan modification programs. The Orange County Register reported that 25% of all closed sales in OC are short sales. Even this process, however, is stressful and long and does not always work. I’ve talked with homeowners who have been in the middle of short sale escrows when their banks have foreclosed on them instead of letting the home sale go through. If successful, however, a successful short sale is better than a foreclosure.
A third option is to work with a foreclosure prevention company that will negotiate the sale of the loan note at a discount to the prevention company. This is similar to a short sale, but not the same. You still lose your house but you avoid some of the pitfalls that short sales bring.
A fourth option is filing for bankruptcy. There are many bankruptcy attorneys that can handle these and explain how this will affect your credit. The laws for bankruptcy recently changed and a good attorney can help you.
The fifth option is to let the home go into foreclosure. This simply means letting the bank take back the home. If this happens, a homeowner will be notified of the date and time of the scheduled trustee sale or auction. After the trustee sale, the homeowner will be contacted by the bank, or a bank representative, who will tell them know when they need to vacate the home. In most cases the bank will offer cash incentives to leave the home quickly and without damage.
None of the options are painless or easy. Fortunately, I have surrounded myself with a team of experts who can assist you with many of these situations. I also have a credit counselor that I recommend to help someone repair their credit once they have made it through these difficult times.
Here’s a word of caution: Do not pay anybody upfront fees to help you! Most who charge fees upfront have horrible results.
If you or someone you know is facing a difficult time, please have them contact me today. The burdens that people carry are heavy, and they need to know that they don’t have to go through this alone and that there are options to consider. Don’t wait, call me today.