A Homeowner’s guide: Short Sales and preventing Foreclosure Pt1 (the reality of a foreclosure)

The dream

It’s the year 2005, for others 2006, and for others 2007, and you are happy because you finally realized the American dream of owning a home.

You finally have a home where can build a future for yourself and your family. According to your agent and your mortgage broker, they promised you could refinance in a year or two and take some money out for a big vacation or they promised you could move up to a bigger and better home and make money by renting the home you just bought and become a millionaire just like that.

The nightmare

Now fast forward to 2007 and you are hit in the faced with the reality. What happened to your dreams? Dreams eagerly over-inflated by your agent and mortgage broker and may be your own greed as well or may be by your own misinformation. These dreams you had quickly deflated and turned into nightmares.

It’s coming to the end of 2007 and your adjustable rate mortgage (ARM), is due to adjust soon and you don’t know what to do.

If you bought your home with no money down, the monthly payment you qualified for is already stretching your income, your agent told you “don’t worry you have thousands of dollars in instant equity if you buy this home” when you actually did not, your credit is the same or worst as when you bought your home, you bought your home with a 2 or 3 year Adjustable rate mortgage (ARM), you bought your home with a negative amortization loan (also known as Option ARM loan), YOU MAY BE AT RISK OF LOOSING YOUR HOME!!

What do you do? What CAN you do?

The reality

What you need to do is understand the situation you are in and understand why and how you got there.

What will happen to my home?

Disclosure: (This information is meant for general informational purposes only and it is NOT to be construed as tax, legal or investment advice. Although the information has been complied from several sources deemed reliable and from my professional knowledge, please note that individual situations can vary. Please consult with your attorney for specific advice and legal counsel)

The answer to this question will have to be generalized because each lender works differently.
Technically if you miss your first mortgage payment you are in default, but in practical terms your lender will probably not begin the foreclosure process until you have missed 2-3 payments. California, like many other western states is a little different than eastern states because here we use what is called a non-judicial foreclosure process. A non-judicial foreclosure helps the lender avoid cost, expense and hassle of having to go to court for a judicial foreclose therefore saving them time. The non-judicial foreclosure, assuming there are no delays, takes approximately four months to complete from the 1’st day a notice of default was recorded on the property.

Be aware of foreclosure, short sale, equity assistance scams

As mentioned on my previous post, beware of any agency that promises to stop the foreclosure process or promises to help you catch up on your payments or pressures you to do a short sale or charges you a fee to negotiate with your lender and stop the foreclosure process. If you need counseling contact a HUD-approved housing counseling agency near you by calling 1800-569-4287 or TDD 1800-887-8339. These agencies frequently have information about Government, private and community agencies that could help you.

Some scams that may be offered to you if you are facing foreclosure are:

Equity Skimming: In this scam, a “buyer” approaches the seller offering to pay off the seller’s mortgage or give the seller a sum of money when the property is sold. The “buyer” may suggest the seller move out and deed the property to the “buyer”. The “buyer” will then rent out the property and collect those profits but will not make any mortgage payments and allow the lender to foreclose. The foreclosure is allowed because signing over the deed to someone else does not necessarily relieve the seller of their obligation on the loan.
Phony counseling agencies: In this type of scam, “counseling agencies” will approach the seller offering services for a fee, services that the seller could do on for themselves. Services such as negotiating a new payment plan with the lender or pursuing a pre-foreclosure sale or completely stop the foreclosure process.

Another scam which you could be offered is an illegal flipping scheme. Here is a short video briefly explaining how it works.

Visit my YouTube Channel

On the following short video you will get a list of phone numbers where you can get counseling and may be some help.

Visit my YouTube Channel

The US Department of Housing and Urban Development also has a page with tips for avoiding foreclosure.

Before making an important decision as a short sale or foreclosure you must read these other articles from the “Homeowner’s guide to preventing foreclosure”:

Homeowner’s guide: Short Sales and Preventing Foreclosure Pt2 (Alternatives to selling)

Comments

5 Responses to “A Homeowner’s guide: Short Sales and preventing Foreclosure Pt1 (the reality of a foreclosure)”

A Homeowner’s guide: Short Sales and preventing Foreclosure Pt2 (Alternatives to selling) : My Home is My Investment on September 17th, 2007 7:46 PM

[...] you are in similar situations as stated above, the first thing you should is (*if you have enough time*) repair your credit (beware of credit [...]
Over the Top Incentives for Buyers in Today’s Real Estate Market on November 2nd, 2007 5:34 PM

[...] area, others desperate to sell before their ARM loan adjusts and others because they are about to loose their home in foreclosure and are trying to sell it as a short [...]
FHA Modernization Act 2007, FHASecure loan program, San Jose California on December 14th, 2007 8:51 PM

[...] homeowners who acquired subprime ARMs when they purchased their home or refinanced it and are now facing foreclosure. FHASecure allows homeowners to refinance if they are now in default because of higher mortgage [...]
Project Lifeline Aims to Help SOME Homeowners Facing Foreclosure : San Jose-Santa Clara County Real Estate UNCENSORED on September 4th, 2008 10:01 AM

[...] looks to offer homeowners who are 90 or more days late on payments a 30-day freeze in the foreclosure process in order to give these homeowners a chance to work out a repayment schedule. The extra time may [...]
A Homeowner’s guide: Short Sales and preventing Foreclosure Pt3 (Selling your home) : San Jose-Santa Clara County Real Estate UNCENSORED on September 12th, 2008 3:16 PM

[...] Homeowner’s guide: Short Sales and Preventing Foreclosure Pt1 (The reality of a foreclosure) [...]