http://www.articletrader.com/ Articles at ArticleTrader en-us http://www.articletrader.com/finance/mortgage/foreclosure-by-walking-away.html http://www.articletrader.com/finance/mortgage/foreclosure-by-walking-away.html Sat, 08 Mar 2008 00:00:00 -0600
Have you ever failed a test? I’ve failed a test. I’m sure we all have at some point. Whether academic, work-related, personal, etc. we’ve all failed a test; but does it stop there? Do we throw the proverbial baby out with the bath water? Wouldn’t we be failing another test in so doing?

I’ll argue that at this point the test for homeowners is ongoing. But what are the rules? The rules and the goals are what defines your next coarse of action. Ultimately, what matters is where you will be in the future and not where you are today. The game is halfway done and the test is not over until the end of the game.

Lenders have failed the test too. Mortgage loans are upside down. The Federal Reserve Chairman Ben Bernanke in a March 4, 2008 speech suggested: “In my view, we could also reduce preventable foreclosures if investors acting in their own self interests were to permit services to write down the mortgage liabilities of borrowers by accepting a short payoff in appropriate circumstances.” This is a profound suggestion and one that could provide a passing grade for millions.

Your mortgage loan can be written down to a lower balance and forgiven. This is something that I personally am seeing being done every day. A mortgage loan that is $100,000 higher than the value of the home is written down by $100,000 and that $100,000 is forgiven. Poof! An instantaneous passing grade is achieved in real estate.

With a reduce mortgage balance a homeowner can refinance the mortgage to an FHA mortgage loan with a 5.5% fixed rate of interest. With a reduce mortgage balance a homeowner can sell the home on a short sale to a new buyer. With a reduced mortgage balance a homeowner can avoid foreclosure. With a reduce mortgage balance a homeowner can pass the test!

In any of the above scenarios where the mortgage lender reduces the principal balance of the loan for the homeowner to facilitate a short payoff for a refinance or a short sale, the homeowner is able to preserve his or her credit standing. This has the effect of controlling the damage done to that homeowner’s reputation in functioning in business and in life. About half of the state foreclose through judicial process and the foreclosing lender can then pursue a deficiency judgment against the homeowner immediately or can bring a suit under common loan years later based on the defaulted note. This article is not to be considered legal advice. It’s just some of the issues that one needs to investigate with an attorney.

Yet, some say walk away. This is insane; walk away and leave the test. Walk out of the school and leave the test. Holding your head low forever. This is not responsible. This is not a solution. This, my friends, is simply failing the test.

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Paul Jerome brings together mortgage lenders involved in loss mitigation and negotiating reduced short payoffs for homeowners on short refinances and short sales. www.SellerHelpsBuyer.com makes this loss mitigation work available for free to enable distressed homeowners who are upside down on a mortgage loan to successfully refinance with the short payoff to an affordable mortgage balance and low FHA rate. The short payoff also enables distressed homeowners to sell through a short sale to a new buyer at a discounted price.

http://www.sellerhelpsbuyer.com

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Banks lose money in foreclosure. There are attorney fees involved with foreclosure, as well as carrying costs. Additionally, there is the danger that the distressed homeowner may “turn the home inside out”. In other words, purposely damage the home. Recent findings indicate that 20% of foreclosure borrowers strip the home’s interior.

A short sale saves the bank the expenses outlined above. These savings are then passed on to the new home purchaser in the form of reduced payoff also called a ‘short payoff’. Nowhere else are the benefits of a short sale more clearly visible that in the Department of Housing and Urban Development’s website. The Dept. of HUD’s site clearly states that HUD accepts an 18% reduction off the value of the home in determining its net on a short payoff.

A short sale is also a win for the homeowner. The homeowner’s credit can be spared the damage that a foreclosure causes through a successful short sale. In the case of judicial foreclosure, the homeowner can avoid a summary judgment as a matter of public record on his or her credit report. Homeowners are encouraged to talk to their accountant about the benefits of the Mortgage Forgiveness Debt Relief Act of 2007, which may also provide a means for many homeowners to escape tax liability for cancellation of debt income.

Finally and perhaps the greatest benefit is for the new homebuyer. The buyer is able to purchase a home through a short sale at a price that turns back the real estate clock to more affordable times. The short sale makes the monthly payment comfortably in line with a homeowner’s budget. This is the greatest benefit that a short sale can provide.

So, where do you find a short sale? Short sales can be located in any neighborhood and any subdivision. Realtors often advertise properties on the Multiple Listing Service (MLS) as ‘short sales or ‘subject to lender approval’. You can also find short sales that are for sale by owner (FSBO). The general requirement for a short sale is that the homeowner is either in default or in imminent danger of default. Sadly, there are many homeowners in this situation today. Someone needs to get the word out that short sales are an option for these homeowners. My hope is that this article has succeeded in doing just that.

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Paul Jerome is a credit expert dedicated to serving buyers and sellers through their short sale goals. Seller Helps Buyer is a real estate website where short sale listings may be posted free of charge by sellers and buyers can locate short sales at discounted prices at no charge. Sponsoring lenders oversee the short sale process at www.SellerHelpsBuyer.com

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