Forbearance: under a forbearance agreement, your lender may permit you to reduce or suspend your mortgage payments for a short period of time. Then, typically, at the end of the forbearace period, you will beging making your regular payments PLUS an additional amount as negotiated between you and your lender until you are 'caught up'. A forbearance agreement will only work for you if you expect your current financial difficulties to last a short time.
Loan Modification: If you are behind on your mortgage payment and can not afford to bring them current and a forbearance agreement will not work with your situation a loan modification is an option. In a loan mod, your lender permanently alters the terms and conditions of your loan in an effort to make your payment more affordable. You have, no doubt, heard or read about the failure of the govt promoted loan mod program, HAMP. Loan mods are very difficult to get approved for a number of reasons and work out for only a very small percentage of homeowners.
Deed-in-lieu of foreclosure: If you are unable to do eother of the 2 prior options, your lender may agree to a voluntary transfer of your property back to them. Some people feel that this is a better option than an actual foreclosure...but a short sale is almost always a better option than a deed-in-lieu.
Short Sale: If you can no longer afford your mortgage payments and your home is worth less than your mortgage balance a short sale may be your best option. In a short sale you negotiate generally three things with your lender; 1) The approval of your hardship and thier willingness to entertain a short payoff, 2) how the short sale will be reported to the credit bureaus, and , most importantly 3) the treatment of how the defeciency will be handled.
With a short sale, you will be able to become a homeowner again well before you could with a foreclosure or deed-in-lieu on your credit report. And the impact on your credit score has been reported to be much less.
Also, if your lender forgives any deficiency under the terms of your negotiated short sale, the Mortgage Forgivness Debt Relief Act of 2007 may relieve you of any tax libilities for the forgiven debt....check with your tax advisor on this.
Showing posts with label deed-in-lieu. Show all posts
Showing posts with label deed-in-lieu. Show all posts
3/3/10
Foreclosures seen to be flooding the market in the near future...
Here's an excerpt from an article written by a sharp guy that negotiates short sales and invests in real estate, Bob LaChance:
Despite some recently positive housing reports, the housing market is facing continued distress. Of major concern is a recent report from S&P that puts foreclosure “shadow inventory” at a minimum 3 year supply. (Delinquent loans and REO properties that have not yet reached the market were considered). Amherst securities estimated the number of “shadow inventory” properties to be as high as 7 million.
Due to lender and court delays to in processing foreclosures, political pressure, and the stressed and inefficient loan modification and short sale departments at most lenders, foreclosure inventory has been slow to hit the market. Many borrowers who have not paid their mortgage for months have simply not received a foreclosure notice. Then there are stories across the web of homeowners who have been in the loan modification process for 10-18 months. Should they not qualify, their next steps will be short sale, Deed-In-Lieu, or foreclosure.
I expect to see a shift in the number of homeowners that are denied a loan modification. This shift will mean that servicers will dedicate more effort to short sales as a means of loan liquidation. There are over $400 billion just in delinquent loans that will need to be removed from the banks books at some point. This does not include the billions in property that banks already have foreclosed on.
The amount of foreclosure inventory in the pipeline and the wildly unsuccessful HAMP program will most likely result in a continued reduction in housing prices over the next year or more.
According to S&P, only $14-15 billion in loans or REO property liquidate monthly. To eat through the coming REO inventory at that rate, the market should stay flush with short sale and REO property sales for a minimum of 3 years.
Despite some recently positive housing reports, the housing market is facing continued distress. Of major concern is a recent report from S&P that puts foreclosure “shadow inventory” at a minimum 3 year supply. (Delinquent loans and REO properties that have not yet reached the market were considered). Amherst securities estimated the number of “shadow inventory” properties to be as high as 7 million.
Due to lender and court delays to in processing foreclosures, political pressure, and the stressed and inefficient loan modification and short sale departments at most lenders, foreclosure inventory has been slow to hit the market. Many borrowers who have not paid their mortgage for months have simply not received a foreclosure notice. Then there are stories across the web of homeowners who have been in the loan modification process for 10-18 months. Should they not qualify, their next steps will be short sale, Deed-In-Lieu, or foreclosure.
I expect to see a shift in the number of homeowners that are denied a loan modification. This shift will mean that servicers will dedicate more effort to short sales as a means of loan liquidation. There are over $400 billion just in delinquent loans that will need to be removed from the banks books at some point. This does not include the billions in property that banks already have foreclosed on.
The amount of foreclosure inventory in the pipeline and the wildly unsuccessful HAMP program will most likely result in a continued reduction in housing prices over the next year or more.
According to S&P, only $14-15 billion in loans or REO property liquidate monthly. To eat through the coming REO inventory at that rate, the market should stay flush with short sale and REO property sales for a minimum of 3 years.
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