Avoid Foreclosure and Foreclosure Scams
March 26th, 2009 Categories: Buyer's Corner, REO and HUD Talk, Trends
Did you know that foreclosure is not the only option to help homeowners struggling to make payments. The Federal Trade Commission outlines the following options:
- Reinstatement – the borrower pays the entire past due balance plus late fees and penalties by an agreed upon date.
- Repayment Plan – the lender gives the borrower a fixed amount of time to repay past due payments by adding a portion to the regular payments.
- Forbearance – mortgage payments are reduced or suspended for an agreed upon period of time. At the end of that time, the borrower resumes regular payments plus a lump sum or partial payments for a number of months to bring the loan current.
- Loan Modification – the borrower and lender agree to permanently change one or more terms of the mortgage contract to make payments more manageable. Modifications could include lowering the interest rate, extending the term of the loan, or adding missed payments to the principal. Some lenders may forgive a portion of the debt under the Mortgage Forgiveness Debt Relief Act of 2007. Check with a tax expert regarding reporting or excluding the income.
- Sale - the homeowner sells the property and pays off the debt. Some lenders may postpone foreclosure if there’s a pending sales contract or if they know the home is being listed for sale.
- Short Sale – the lender allows a property to be sold for less than the existing loan balance. A short sale is really a form of pre-foreclosure and occurs when the lien holder agrees to accept less than the loan amount to avoid the foreclosure process.
- Deed-in-Lieu – with the lenders agreement the homeowner voluntarily transfers property title to the lender in exchange for cancellation of the remainder of the debt. Although the homeowner loses the home and equity, this process is less damaging to the borrower’s credit than a foreclosure.
- Bankruptcy – personal bankruptcy is the last resort because the consequences are far reaching and long lasting. A bankruptcy stays on a credit report for 10 years, making it difficult to get credit, buy another home, purchase life insurance, even get a job. To some this method offers a fresh start to someone who cannot pay their debts. If a homeowner has regular income, filing chapter 13 may allow them to keep their house.
- FHA and VA Alternatives – homeowners that have FHA or VA mortgages should contact either, www.fha.gov or www.homeloans.va.gov
BEWARE OF SCAMS
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The Foreclosure Prevention Specialist - a phone counselor charges high fees to make phone calls or complete paperwork that the homeowner can do themselves. Some of these companies use the words HOPE or HOPE NOW in their names in order to confuse borrowers who are looking for the FREE hotline 888-895-HOPE. Buyers interested in this program go to www.coloradoforeclosurehotline.org. The Colorado hotline is 877-601-HOPE.
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The Lease/Buy Back – homeowners are deceived into signing over the deed to their home to a scam artist who tells them they can stay in the house as a renter and eventually buy it back. Usually the terms make the buy back impossible, the homeowner gets evicted and the purchaser walks away with the equity.
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The Bait and Switch – homeowners think they are signing papers to bring their loan current. Instead, when it’s too late, they discover they have signed over the deed and are being evicted.
Homeowners facing the possibility of foreclosure should be proactive in contacting their lender, accountant and/or attorney to discuss options. I hope you found this information helpful and I hope I have saved someone from being scammed. This information was furnished by Land Title Guarantee Company.
[...] Avoid foreclosure and foreclosure Scams Did you know that foreclosure is not the only option to help homeowners struggling to make payments. The Federal Trade Commission outlines the following options: Reinstatement – the borrower pays the entire past due balance plus late fees and penalties by an agreed upon date. Repayment Plan – the lender gives the borrower a fixed amount of time to repay past due payments by adding a portion to the regular payments. Forbearance – mortgage payments are reduced or suspended for [...]
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