Facing Foreclosure

Discover Why Short Sales Are Becoming Popular Choice To Stop Foreclosure

Homeowners who are facing foreclosure will use the short sale method to stop it from occurring and ruining their credit entirely. This especially true of homeowners where interest rates on their loans skyrocket, either doubling and/or tripling their house payment with them unable to afford the home any longer. Real estate investors also like short sales because of the deep discounts they receive from them.

Sellers will negotiate a short sale with their lender, who may require the seller to explain why they are unable to make the normal monthly payments. Not too long ago, home foreclosures rose because the 2004-2005 adjustable rate mortgages that were written were resetting. The problem with short sales is that they are complicated and are likely to stay complicated with lenders having to deal with them. Those homeowners who used the equity in their home while the real estate prices were inflated are now feeling the pain.

How Lenders Work In Short Sales

Lenders understand that home repossession is costly; after all, they have to spend tens of thousands of dollars to deal with the home including the maintenance, refurbishing, marketing and selling the home. The only issue is that there are no guarantees that they’ll be able to recoup their losses, not like they can from a short sale.

Lenders want physical proof that the homeowner is unable to pay their monthly bills and actually needs relief from the home payment. Homeowners and lenders see short sales as the last resort before the foreclosure or bankruptcy processes.

While lenders don’t want to hold onto problem properties, they certainly don’t want to lose the home for very low prices.

How Sellers See Short Sales

What seller wouldn’t want to get the most out of their house? They certainly don’t desire to sell their home for a lot less than the home’s market value or less than what they initially purchased it for. This situation could turn dire if an unforeseen event takes place that generates a financial hardship for the homeowner. For instance, they lost a job, are diagnosed with long-term illness or have a sudden rise in living expenses. These are just three of the reasons that homeowners see themselves in a cash-strapped situation.

Some sellers are lucky enough to convince the lender to do a short sale as the best way to handle the problem but there is a downside they must understand. That is… some lenders may claim the forgiven debt as a loss on the company’s taxes and give the seller a 1099 form for that amount.

A Look At Foreclosures

Remember that in 2004-2005, there were millions of loans written for adjustable rate mortgages, many of them resetting in 2007,2008 & 2009. As a direct result, short sales also rose. Lenders have differing views on how to handle foreclosures and short sales workouts.

More and more short sales are taking place and anybody who has completed short sales understands, it’s rough ride for the sellers who are already feeling topsy turvy. However, if you understand what short sales are all about, you can opt to go this route to avoid foreclosure.

About The Author:

EJ Harris is one Managing Partners at Community HomeSolver, which is a home buying company for “Sell House”.  Harris has many interesting articles written on this very topic. People expect to find all kinds of interesting data when they are trying to find out how to sell their home or sell their house. Yet, it’s not always what they are searching for even when they type in “How To Sell Your Home”, “Privately Sell Your Home” or “Sell Homes Online”.  You may not get everything you want from this article but you’ll be surprised by what you do learn about “Sell House”, “Sale Home” even if you made a mistake in spelling while searching for a particular topic such as “hpw to sale your hom fast” or “seling yur home quicly”.

Community HomeSolvers buy homes and houses in and around areas of Williamsburg, VA. We Buy Houses in Newport News, Hampton, Norfolk, Virginia Beach, Portsmouth and Chesapeake! We are also now seeking homes in and around Richmond, Henrico, Chester, Chesterfield,  Highland Springs, Colonial Heights

Facing Foreclosure

Foreclosure MIGHT be the better option for you.

For most homeowners, bankruptcy is often the last resort to prevent foreclosure. If you are facing foreclosure, consider the other options before thinking of bankruptcy. Filing for bankruptcy can have a disastrous affect on your credit. In fact foreclosure might be the lesser of the two evils.

When you file for bankruptcy, you loose all control over your finances. A court appointed bankruptcy will administer all your financial activities. The bankruptcy trustee will take over all your non-exempt assets and sell them to pay off your creditors. Bankruptcy will discharge most of your debts. But some debts are non-dischargeable. The most common types of non-dischargeable debts are

• Certain types of tax claims,
• Debts not set forth by the debtor on the lists and schedules the debtor must file with the court,
• Debts for spousal or child support or alimony,
• Debts for willful and malicious injuries to person or property,
• Debts to governmental units for fines and penalties,
• Debts for most government funded or guaranteed educational loans or benefit overpayments,
• Debts for personal injury caused by the debtor’s operation of a motor vehicle while intoxicated,
• Debts owed to certain tax-advantaged retirement plans, and
• Debts for certain condominium or cooperative housing fees.

When you file for bankruptcy, all your assets except the exempt properties become the property of the bankruptcy trustee. The Bankruptcy Code defines “property” very broadly as all legal and equitable interests of the debtor and any property that is community property of the debtor and his spouse.  Even the property that you select as exempt property is property of the estate until the exemption claims are confirmed. The exempt properties are necessary for your fresh start. The exemption claims are confirmed before the creditors are allowed to participate in the distribution of the non-exempt property.

Bankruptcy filing includes costs payable to the government in the form of bankruptcy fees. Besides bankruptcy fees, you may also have to pay attorneys fees if you hire an attorney. While the overall bankruptcy process is simple, it may get complex at times and it is best to hire an attorney to do the work for you. Bankruptcy proceedings must be filed in a federal court having jurisdiction over your place of residence. State courts cannot hear bankruptcy petitions. Bankruptcy is governed by federal laws.

Bankruptcy is a legal procedure for dealing with the debt problems of individuals and businesses and discharges financial obligations. This procedure is covered under Title 11 of the United States Code (the Bankruptcy Code). The vast majority of cases are filed under the two main chapters of the Bankruptcy Code, which are Chapter 7 and Chapter 13.

Chapter 7 is the more common form of bankruptcy filing. A filing under chapter 7 is called liquidation. It is a kind of liquidation proceeding in which the debtor is allowed to keep aside exempt property whereas a trustee appointed by the court collects his non-exempt assets, sells them and pays off the creditors through the sale proceeds.

Chapter 13 bankruptcy proceeding allows the individual debtor to pay down his debts, either the entire amount or a part of it, with the help of a payment plan under the supervision of the court. Debtors filing this chapter can keep their assets with them while they follow the plan or after they have paid off the required portion of debt. It involves the rehabilitation of the debtor to allow him or her to use future earnings to pay off creditors.

Chapter 7 bankruptcy dissolves all debt and absolves you of the responsibility to pay it. Chapter 13 bankruptcy will reorganize your debt and creates a payment plan.

Choice of these plans is never easy. In fact it is not easy to decide whether foreclosure is worse than bankruptcy! It is always advisable to consult an attorney with your specific problems.

Facing Foreclosure

Foreclosures hit record highs

Real Estate News & Commentary by Chris McLaughlin

According to the Mortgage Bankers Association’s (MBA) National Delinquency Survey, the delinquency rate for mortgage loans on one-to-four-unit residential properties rose to a seasonally adjusted rate of 9.64% of all loans outstanding as of the end of the third quarter of 2009, up 40 basis points from the second quarter of 2009, and up 265 basis points from one year ago.  The non-seasonally adjusted delinquency rate increased 108 basis points from 8.86% in the second quarter of 2009 to 9.94% this quarter.   The delinquency rate includes loans that are at least one payment past due but does not include loans somewhere in the process of foreclosure.  The percentage of loans in the foreclosure process at the end of the third quarter was 4.47%, an increase of 17 basis points from the second quarter of 2009 and 150 basis points from one year ago. The combined percentage of loans in foreclosure or at least one payment past due was 14.41% on a non-seasonally adjusted basis, the highest ever recorded in the MBA delinquency survey.  The percentage of loans on which foreclosure actions were started during the third quarter was 1.42%, up six basis points from last quarter and up 35 basis points from one year ago.  The percentages of loans 90 days or more past due, loans in foreclosure, and foreclosures started all set new record highs.  The percentage of loans 30 days past due is still below the record set in the second quarter of 1985. 

Why are foreclosures up?

Jay Brinkmann, MBA’s Chief Economist, says it’s jobs.  “Despite the recession ending in mid-summer, the decline in mortgage performance continues.  Job losses continue to increase and drive up delinquencies and foreclosures because mortgages are paid with paychecks, not percentage point increases in GDP.  Over the last year, we have seen the ranks of the unemployed increase by about 5.5 million people, increasing the number of seriously delinquent loans by almost 2 million loans and increasing the rate of new foreclosures from 1.07% to 1.42%.”  Brinkmann says it’s prime and FHA mortgages that are taking the worst beating.  “Prime fixed-rate loans continue to represent the largest share of foreclosures started and the biggest driver of the increase in foreclosures.  33% of foreclosures started in the third quarter were on prime fixed-rate and loans and those loans were 44% of the quarterly increase in foreclosures.  The foreclosure numbers for prime fixed-rate loans will get worse because those loans represented 54% of the quarterly increase in loans 90 days or more past due but not yet in foreclosure.  The performance of prime adjustable rate loans, which include pay-option ARMs in the MBA survey, continue to deteriorate with the foreclosure rate on those loans for the first time exceeding the rate for subprime fixed-rate loans.  In contrast, both subprime fixed-rate and subprime adjustable rate loans saw decreases in foreclosures.”

Taxes anyone?

More than half of the $9 trillion in debt that Uncle Sam is expected to build up over the next decade will be interest. Charles Konigsberg, chief budget counsel of the Concord Coalition, a deficit watchdog group, puts it another way:  in 2015 alone, the estimated interest due – $533 billion – is equal to a third of the federal income taxes expected to be paid that year.  The money was borrowed at very low rates, but interest rates will rise when the economy improves, and at that point the country’s interest payments could jack up very fast.  “When interest rates rise even a small amount, the interest payments go up a lot because of the size of the debt,” Konigsberg said.  To help mitigate the potential risk of rising rates, the Treasury has said it would start increasing the average maturity of the new debt it issues so the debt it refinances in the next couple of years will be locked in at lower rates for longer periods of time.  And the Obama administration has promised to produce a deficit-reduction plan that would aim to bring down annual deficits to roughly 3% of GDP over the next several years, below the 4% to 5% currently projected.  If that happens, the $4.8 trillion in interest payments that CBO estimates for the next decade could go down if interest rates don’t increase as much as CBO expects.  The trouble is that this administration and Congress are showing no signs of slowing down the spending…shoveling billions into the maw of increasingly unpopular healthcare “reform.”  That could mean the president’s 2011 budget proposals would have to make a lot of unpopular changes like tax hikes to get closer to the 3% goal.

Credit availability the big question in commercial real estate

According to the National Association of Realtors (NAR), credit availability is the big unknown that will determine how soon commercial markets recover.  The Commercial Leading Indicator for Brokerage Activity rose 0.9% to an index of 102.4 in the third quarter from 101.5 in the second quarter, but is 11.1% below a reading of 115.3 in the third quarter of 2008. The index in the second quarter was at the lowest level since the first quarter of 1994; NAR’s track of the commercial leading indicator dates back to 1990.  Lawrence Yun, NAR chief economist, said some initial movements earlier this week in commercial mortgage-backed securities are encouraging. “The first commercial mortgage bond deal in over a year shows the Federal Reserve’s efforts to sell securities through the TALF program can be fruitful, but the level of activity is well below what is required to resuscitate the commercial market. Credit availability needs to significantly rebound for any hope of a meaningful commercial recovery in 2010.”  Yun said the modest index recovery follows steep declines in the past several quarters. “Gains in industrial production, durable goods shipments and retail sales; a rebound in the NAREIT price index; and improving figures on first-time unemployment claims were stabilizing factors,” he said. “Negative impacts include falling private sector income and fewer jobs involving commercial real estate. The office and industrial markets are the sectors most negatively impacted by the economic downturn.”

The real jobless rate

The real number dwarfs the statistic most people pay attention to—the U-3 rate—which most recently showed unemployment at 10.2% for October.  According to the government’s broadest measure of unemployment, some 17.5% are either without a job entirely or underemployed. The so-called U-6 number is at the highest rate since becoming an official labor statistic in 1994, and means that 1 in 5 Americans is either out of work or under-employed.  With such a large portion of Americans experiencing employment struggles, economists worry that an extended period of slow or flat growth lies ahead.  “To me there’s no easy solution here,” says Michael Pento, chief economist at Delta Global Advisors. “Unless you create another bubble in which the economy can create jobs, then you’re not going to have growth. That’s the sad truth.”  Pento warns that forecasts of a double-dip (“W”) or a straight up (“V”) recovery both could be too optimistic given the jobs situation.  Instead, he believes the economy could flatline (or “L”) for an extended period as small businesses struggle to grow and consequently rehire the workers that have been furloughed as the U-3 unemployment rate has doubled since March 2008.  As that trend has happened, the U-6 rate has expanded at an even more dramatic pace. Economists cite several reasons for the phenomenon, including  the collapse of real estate and associated jobs, and expanded unemployment benefits (which make it easier to be unemployed).   ”If full employment is 4 percent, people are wondering how we’re going to get from 10 (percent) to 4. Well, try getting from 17 to 4. We may not get back to full employment for a decade,” Mahn says. “As an investor, that causes me to look for different places now. Maybe you can’t just put money in US large caps and ride out this recovery.”

Mortgage rates at record lows

Freddie Mac’s weekly survey of average interest rates put the 30-year fixed-rate mortgage (FRM) at 4.83% with an average 0.7 points for the week ending Nov. 12, down from the average rate of 4.91% the previous week. That’s a mere 5 basis points shy of Freddie Mac’s record low of 30-year FRM rates, reached twice in April this year. Last year, the rate was 6.04%.  Freddie Mac put the 15-year FRM at 4.32% with an average 0.6 points, down from last week’s 4.4% and the lowest rate for the product since Freddie Mac began its 15-year FRM survey in 1991. A year ago, the average rate for the loan was 5.73%.  Bankrate.com’s survey of large US banks and thrifts put the 30-year FRM at 5.06%, the lowest in the survey’s 24-year history and down 13 basis points from the previous week. The previous low on the Bankrate survey was 5.13% in April. Bankrate.com put the average rate for a 15-year FRM at 4.48%, down 13 basis points from the previous week.  “Low fixed rates throughout the third quarter prompted an estimated $1.1 trillion in refinancing activity, saving homeowners about $10 billion in aggregate monthly payments over the first 12 months of their new loan,” said Freddie Mac vice president and chief economist Frank Nothaft. “Moreover, for the fourth consecutive quarter, more than 95% of prime borrowers who originally had an ARM selected a conventional fixed-rate mortgage in the third quarter of this year.”