Home Mortgage Foreclosures
January 24, 2010 by · Leave a Comment
Sadly many are experiencing Home Mortgage Foreclosures. A legal process in which mortgaged property is sold to pay the loan of the defaulting borrower.
A foreclosure on your credit history does not have to stop you from getting the financing you seek. There are still investors in the non-conforming arena that will consider doing a new purchase or refinance (called a foreclosure bail-out loan) even one day out of foreclosure (or in foreclosure proceedings in the case of a refinance). You will have to keep in mind that these types of lenders will charge higher interest rates and fees, as well as expect there to be generally at least 30% equity in the home depending how your credit history works out.
Before a Foreclosure proceeding, a Notice of Default (NOD) must be sent out to the homeowner. It notifies the homeowner that unless back payments are brought current within a time frame (at least 30 days), the bank would initiate a Foreclosure process.
Foreclosure begins with the filing of the Notice of Trustee Sale (NTS), which states when and where the property is to be sold. By law, the foreclosure sale must be advertised on newspapers several times before the scheduled sale. The NTS is sent to the homeowner, alerting him that the property is now in foreclosure. The NTS also itemizes the amount owed, plus attorney fees and other charges.
Foreclosure is legal procedure whereby property used as security for a debt is sold to satisfy the debt in the event of default in payment of the mortgage note or default of other terms and conditions in the mortgage contract. The foreclosure procedure brings the rights and obligations of all parties to a final conclusion and passes the title in the mortgaged property to either the holder of the mortgage or a third party who has the option to purchase the property at the foreclosure sale. At this point the property is free of all the past encumbrances affecting the property subsequent to the mortgage.
When a Notice of Foreclosure is served, a homeowner has basically three options.
Bankruptcy- Filing bankruptcy delays the mortgage repayment. It does not eliminate the debt. Therefore, it is only a temporary measure.
Sell the property- While selling the home and pay off the mortgage effectively eliminates the debt, in a soft real estate market, the homeowner may have to sell the property at a distressed price to keep within the time frame of the foreclosure proceeding.
Refinance- The homeowner can also refinance and pay off the current mortgage. As long as the homeowner has enough equity built in the home, many lenders are willing to finance the property to help the owner out of foreclosure.
The last two methods would save the homeowner’s credit ratings. After the homeowner has a chance to attend to his financial matters, he can purchase another home when he feels ready.
Many lenders will count 120 day lates on your credit a foreclosure, even if a NOD was never received.
Depending on the state the property is in and thereby the types of security instruments, Mortgage or Deeds of Trusts, the lender may or may not have to go to court to foreclose upon the property. In state where trust deeds are used, because titles to properties are held by the lenders, lenders do not have to go through court proceedings to foreclose on properties. In states where mortgages are used as security instruments, banks must go through court proceedings.
When you are 90 days late the lender will file a notice of default onto the title of your house to start the foreclosure proceedings on your house. At this time you have a short amount of time to bring your mortgage current on all the late payments otherwise your house will be sold.
The foreclosure process is not immediate. If your house is in foreclosure, you do have options.
Normally when a home goes into foreclosure there are many legal fees that are associated. Keep this in mind if you plan to try and sell the home or if you try to refinance out of the foreclosure. You should obtain a payoff statement to check and see how much is owed to payoff the mortgage completely.
A legal process to enforce a lien, by the selling of property, to satisfy the debt.
It is important to know that foreclosure is not automatic. Due to the high cost of foreclosure to lenders some of them will try to work with you to find other options especially if they feel you can provide a valid solution to the problem.
This will usually happen when you are three or more months late on your mortgage
The most important part of having a home in foreclosure is to do something, anything. Sitting still will not make the problem go away. Call your lender and speak with their homeowner’s assistance department. This will at least give you the chance to save your home. Many times you will be surprised by what the lender is willing to do.
A borrower facing foreclosure may seek a foreclosure bailout. This is a loan from a lender that specializes in stopping the foreclosure process. These loans can be expensive, with a rate of 11.99 to 13.99% and two or three points in origination fees. The foreclosure bailout will allow the borrower to rebuild their credit history, and refinance in the future at a much lower rate.
An increasing cause of foreclosure is the violation of the due on sale clause. This results from selling the property and not having the lender’s approval to do so. For example if you did a contract for deed and did not get approval from the lender. Foreclosures in this case is rare but investors that do a lot of these types of transactions are running into this. Also a lease option is considered a sale.
Not only does your mortgage company holding the note on your property have the right to foreclose but also your taxing authority may do the same. If you do not pay your property taxes then the taxing authority can foreclose. If this happens there is usually a redemption period which allows your to pay the debt along with fees and interest. Different states will have different methods for this process. One way is to sell what they call a tax certificate then after a set time period the investor who bought the certificate will get the deed to the property. The other way is where the investor acquires the deed at the auction but will not be able to sell the property until after the redemption period.
There are different options to get out of foreclosure. Refinance your mortgage or a lease buyback program. Typically you will need at least 25% equity to refinance out of foreclosure and sometimes more depending on your credit scores. Or a private investor can buy your home from you and lease it back to you for a set period of time. In that time you are to get your credit to the point where you can purchase the home back from the investor.
If for any reason you are having difficulties or problems making your monthly mortgage payments, call, write or otherwise contact your mortgage company as soon as possible. Your lender wants to help you avoid foreclosure, so explain your situation clearly and honestly. Have your key and actual financial information ready, such as your income and expenses as well, as this information may be necessary for the lender to offer you assistance.
When faced with letters from your lender, it is important not to ignore letters notifying you of late payments, default, or otherwise describing delinquency on your mortgage payments.
Investing In Foreclosures
January 24, 2010 by · Leave a Comment
Not all foreclosed properties are available at discount.
Do your research and do your home work when looking at foreclosures. Know the are you are buying in, find out what is a reasonable price for a similar home. Look at the property and bring some one else with you to be an objective observer. Write out lists of possible repairs, if you see anything suspicious have a specialist do an inspection.
The laws that dictate how foreclosed homes are seized and sold on the market again vary from State to State. Make sure to check your State’s laws to get a full understanding of the process before you assume its the right move for you to make.
Because timing is often of the essence in pre-foreclosure sales, you may feel pressured to enter into contract or put cash on the barrel while waiving inspection. Try not to waive inspection on a property which is being foreclosed, no matter how good the deal, or if you do insist on the maintenance of an escrow account funded by the seller to cover any major zoning, environmental or building code infractions that you may uncover upon detailed examination, and a contract indemnifying you and holding you harmless from any liabilities that may arise. Thee types of problems dramatically limit the marketability of the home when you attempt to resell, and depending on your local jurisdiction, may even force you into demolishing the property or engaging in expensive cleanup. In a worst case scenario, in the event of ground water contamination etc, you may be subject to fine or even expensive litigation from municipalities and individuals, and a fresh homeowners policy would not cover it.
The best time to buy foreclosure properties is before they get to foreclosure. If you subscribe to a notification service get involved at the default level. Offer the owners in default an equity sharing deal, you bail them out for a share of equity. This is usually a win-win situation and you can make a lot of money just bailing out people in default, its usually and easier deal to make and you still win regardless what happens because you will be imposition to foreclose yourself if the owner finally can’t make the deal work.
Another good way to handle foreclosures is to look for notices of default and see if the owner is interested in an equity sharing arrangement. In equity sharing you bail them out for the equity of the property at a certain point. I like to do a 5 year equity sharing agreement with homeowners where you agree to bail them out in exchange for a portion of their equity and the return of your investment plus interest in 5 years while they continue to reside in the home and make the payments. Sometimes you do 50% of the equity at sale depends on what works for everyone. One of the risks is that during that same period the homeowner will default again and you would have to foreclose and wind up owning the property, of course you may not see that as a risk depending on your situation.
Even though there has been a high amount of foreclosures in the nation, they have been touted as “easy money” by real estate investors trying to sell seminars more than real estate. Regardless of where the hype came from the demand is still perhaps more than the supply. For this reason banks have been able to sell their homes more and more at “market value.” For instance, Freddie Mac through HomeSteps will actually renovate the homes themselves in order to make them available for full market value. Their goal is to sell them to “end users,” or people who plan on buying them as primary residences. In fact, HUD will only sell their homes to end users first, and then open the auction up to investors. Because of this, HUD auctions are flooded with investors, getting a bid in only after end users get a shot at them.
In most of the country’s “hot” real estate markets, competition for foreclosures and stagnation of pricing has made the spreads on foreclosure rehabs and flips significantly lower than before, thereby increasing the risks associated with buying foreclosures. Consider targeting a market which may be slightly off the beaten path where demand is increasing as part of your strategy, to help you diversify the risks of buying foreclosures in hot markets.
Sometimes, you can negotiate a “short sale” with the lender. This is where the lender agrees to take a lower amount to pay off the loan, in lieu of going through the foreclosure process.
Doing your “due diligence” is key. It’s important to have a prelim title report done on the subject property(either by you or a 3rd party) to make sure there are no clouds on title.
The key to investing in foreclosures is to start early. Contact you local title company and have lists of NOD’s emailed to you. This will give you a starter list of homes that are facing foreclosure. If you have issues getting the list then contact a Real Estate professional you trust. They can get one for you.
Typically, competition for foreclosures is very high. Be sure to act quickly if you see a good opportunity.
As mentioned previously its often best to identify future foreclosures and work with the homeowners prior to the actual foreclosure. If your going to be working in the foreclosure market its best to get your financing in place so you can move quickly.
Also check the banks for REO or Real estate owned properties some like to sell their portfolio at a discount towards the end of the year. Especially smaller banks.
Very often, when a property is sold at a foreclosure sale, it is not in the best condition. Make sure you see the house before placing a binding bid on the property.
Also important to note, is that when you are bidding on a foreclosure sale at the county or municipal court, you need to have certified funds or cash, usually in the amount of 5-10% of the final bid price, to be given to the court as an “earnest money deposit” upon acceptance of your bid.
You then sign a contract and have generally 30-60 days to close. This time allows you to arrange for the financing, if any, on the property.
Make sure to check with the court for their specific requirements before showing up and bidding on a foreclosure sale.
There are high risks and hard work involved with buying foreclosure homes. A foreclosure property buyer needs to spend a great deal of time to find homes that are in foreclosure and to go through public records to make sure that the foreclosed properties do not have unexpected liens, such as tax liens, which could drive up the purchase price. Beginners should consider buying bank owned properties, which are often free from the usual risks associated with foreclosure homes.
When looking at foreclosure properties, failure to do the proper research can easily lead to as great a chance of disappointment as of the excitement that comes with a great find. A. If you don’t want your purchase to be an unpleasant experience there are some due diligence checks that you should make before you bid or make an offer on a foreclosed property.
While foreclosure listings may sound like increasable deals at first, one must be sure to do plenty of research before snapping up a foreclosed property. All too often, individuals purchase foreclosed property with one idea in mind only to find out that the property really isn’t what they thought it would be. That cute one bedroom condo in a trendy area coudl actually turn out to be a basement studio in a not so close to re-development zone. To avoid this kind of mistaken identity, be sure to take the necessary steps to properly research foreclosure properties.
Without a doubt to be successful in investing in foreclosures the investor must get to the homeowner early. Many serious foreclosure investors drive through otherwise well kept neighborhoods looking for homes in an unkept condition. This can often (but of course not always) be a clue that the property is close to going into foreclosure.
You can use a simple formula to make sure that you have some cash flow or make money if buying a rehab project. You can take your after repaired value times 70% less repairs. (ARV x .70)-R = maximum offer. Obviously you can sway a bit from this depending on the area but this rule of thumb is used by professional real estate investors across the nation. You may want to contact remodeling contractors in your area to gain an understanding of what repairs costs. This formula takes into consideration your holding cost until you find a renter or buyer.
Is A Foreclosure Bailout Loan Right For You
January 24, 2010 by · Leave a Comment
A foreclosure bailout loan is synonymous with a refinance loan. If you are in jeopardy of having your home foreclosed on by the bank, you can obtain a mortgage that will allow you to pay off the loan you presently have in order for the foreclosure fear to go away.
If you are in dire financial circumstances and you believe that a foreclosure bailout loan is your only option then it is in your best interests to contact a mortgage specialist at your bank as soon as possible. Time is of the essence. At the first sign of danger seek out financial advice. Your situation can worsen quickly so do not delay.
What do you need to know in order to qualify for a foreclosure bailout loan? The majority of loans of this kind are such that they require a minimum of 25 percent equity in your home and a credit score that is over 500. For this reason not everyone will qualify for this type of loan. Take the time to find out if you do as this can be a viable option to losing your home.
If you qualify for a foreclosure bailout loan then it is wise if you pay the points in order to get rid of the prepayment penalty that accompanies the loan. If you do this then you can repair your credit faster and put yourself in an improved financial state.
Most mortgages are considered to be in default after 120 days. While a foreclosure bailout loan does come with a higher interest rate than other types of loans, it is better than the risk of losing your home and all that you have worked for. The reason for the high interest rate is because as a homeowner facing foreclosure, you have fallen into a high risk category as far as the bank is concerned. Bear in mind that a bailout loan will make it possible for you to continue to own your home. You are refinancing your home as opposed to leasing it.
If a foreclosure bailout loan seems to be your best option for holding onto your home then make sure that you find an experienced and qualified mortgage specialist to work with who has your best interests at heart. This is not the time for mistakes to be made so you need to work with the best to guarantee that everything goes smoothly. Living in the shadow of foreclosure is a time sensitive matter and you cannot afford any mishaps to take place.
Be wary of companies who make empty promises. In the mortgage business there are scam artists who will try to take advantage of hapless victims who are terrified of losing their homes. The old adage, “if it is too good to be true it probably is” is very fitting in this instance. Don’t fall victim!
Seek out an equity lender for a foreclosure bailout loan. This is an individual whose lending requirements are contingent upon the equity you have built; more so than on your credit history or present credit score. In this way the equity lender is protected because the equity in your home stands for more.
A bailout loan in most cases is a short term loan as opposed to a long term loan. The purpose of this loan is to ensure that foreclosure is kept at bay. As a homeowner once you have obtained the bailout loan you can then do one of two things- you can improve upon your financial situation and refinance your home or you can put your home up for sale. Those with considerable equity in their home might be able to take some of the money from the bailout loan and use it to pay off other debts. This might be the incentive you need to get your finances working for you as opposed to against you.
