Foreclosure Advice
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  1. #1
    Registered User mamamia's Avatar
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    Unhappy Foreclosure Advice

    Someone in my immediate family is newly laid off and most likely will face foreclosure. She is so scared right now! Are there any ways to get her help? What's the 1st thing she should do? Jobs are scarce, and there's no EF whatsoever. Has anybody had any success on getting helped? Any leads at all right now would be appreciated very, very much!

    Theresa

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    Registered User Holding Pattern's Avatar
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    Work with the bank, talk to them, stay in communication. Let them know your situation and that you are willing to work with them. (Them not you, not gonna retype all that) My BIL just went through the whole gambit of financial black hole. When he & wife sort-of-split (a year later no one knows what's up and I won't even begin to describe the situation, that's a different forum, lol) he quit paying the mortgage, the second loan they took out for down payment, and quit talking to the bank. He made the baffling decision to go through bankruptcy but not include the house and let it go to auction. There were stacks of letters from the bank asking him to short sell it, they were really willing to deal on payments, refinance, new terms.
    The bank wanted to work out something but he did not. The house he paid $150k for sold at auction for $60k

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    Registered User mamamia's Avatar
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    I will be passing that info along. Roght now any advice is appreciated. Ny heart just goes out for them. They are good people just falling thru the financial crisis. So again I thank you!

    Theresa

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    What bank is the mortgage servicer? I am deep into the short sale process with BOA for a friend right now. Do you know if they put down 20% at closing?

    With BOA, I got the short sale process started by calling their Loss Mitigation department (when the loan was still current). I asked them to send a letter with what they needed in the short sale package, and they told me to have a realtor put it on the market for current value, and send the package in as soon as we got an offer.

    I took some vacation time, purchased a storage space, and helped get the house cleaned up for showing (touch up paint, new toilet seats, fixed the ice maker, removed alot of extra furniture to make he rooms look bigger, worked on the yard, carpet shampoo, fixed a dryer vent, new blinds, calking, and a super cleaning of everything). As soon as I was done, I had it listed. My neighbor is the realtor, an he walked through the property with me before I started working on it, to give me a list of things to get done for it to show better. I think there were something like 60 things to do, but most of it was cleaning, and fixing a couple of things. Went over there 5 days straight and got through it all with the help of a couple of friends that were good at touch up painting.

    Short sales are hard work, and patience is needed, but they can be done. Many people get frustrated and only about 10% see it through to a successful completion. It has been just over 3 month since we listed the property, 4 months since I took vacation to get the place in shape, and I may have the final negotiations done this week if I am lucky. The investor and BOA has already approved it, need to negotiate with the PMI company and get the terms of the short sale letter worked out before a closing is set.

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    Registered User NikoSan999's Avatar
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    Quote Originally Posted by scottp999 View Post
    What bank is the mortgage servicer? I am deep into the short sale process with BOA for a friend right now. Do you know if they put down 20% at closing?

    With BOA, I got the short sale process started by calling their Loss Mitigation department (when the loan was still current). I asked them to send a letter with what they needed in the short sale package, and they told me to have a realtor put it on the market for current value, and send the package in as soon as we got an offer.

    I took some vacation time, purchased a storage space, and helped get the house cleaned up for showing (touch up paint, new toilet seats, fixed the ice maker, removed alot of extra furniture to make he rooms look bigger, worked on the yard, carpet shampoo, fixed a dryer vent, new blinds, calking, and a super cleaning of everything). As soon as I was done, I had it listed. My neighbor is the realtor, an he walked through the property with me before I started working on it, to give me a list of things to get done for it to show better. I think there were something like 60 things to do, but most of it was cleaning, and fixing a couple of things. Went over there 5 days straight and got through it all with the help of a couple of friends that were good at touch up painting.

    Short sales are hard work, and patience is needed, but they can be done. Many people get frustrated and only about 10% see it through to a successful completion. It has been just over 3 month since we listed the property, 4 months since I took vacation to get the place in shape, and I may have the final negotiations done this week if I am lucky. The investor and BOA has already approved it, need to negotiate with the PMI company and get the terms of the short sale letter worked out before a closing is set.
    The investor and BOA has already approved it, need to negotiate with the PMI company and get the terms of the short sale letter worked out before a closing is set
    What terms with the PMI? Are they separate from the bank? I know what the PMI is...but can you explain what they have to do with the short sale or a foreclosure for instance.
    In a foreclosure what rights to the homeowner do they have if they are just an insurance agent so to speak.. Thanks
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    Are they getting unemployment?
    Can they make the house payment and power bill and water bill with the amount they (might) get from unemployment.

    I say that only because if they can make the absolute basic bills and get food from food banks etc. maybe they can save the house.

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    Halt all payments on unsecured debt (credit cards, personal loans).

    If there is debt on the cars, sell em, buy beaters, finance the difference. Better to owe 2k more unsecured and have a car than 12k secured on a car you just saw drive away on the back of the repo man's truck.

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    Quote Originally Posted by NikoSan999 View Post
    The investor and BOA has already approved it, need to negotiate with the PMI company and get the terms of the short sale letter worked out before a closing is set
    What terms with the PMI? Are they separate from the bank? I know what the PMI is...but can you explain what they have to do with the short sale or a foreclosure for instance.
    In a foreclosure what rights to the homeowner do they have if they are just an insurance agent so to speak.. Thanks
    In my case:
    Mortgage Servicer = BOA, Investor/Owner = Freddie Mac, PMI company is an unknown private insurance company. BOA purchased the MI in order for the loan to qualify for sale to Freddie Mac. Freddie Mac when it bought the loan required MI as a term of accepting the loan, and in the transaction becomes the entity that is insured against losses. In the case of "lender paid PMI" the borrower never sees any mention of MI at closing. On the settlement statement (HUD1) there is no MI case number or MI company name. Chances are if you put down less than 20% and were told you did not have to pay PMI, lender paid PMI was purchased after closing. "Lender Paid" is a deception because the borrow really does pay it through a slightly higher interest rate or points.

    See: http://www.mtgprofessor.com/A%20-%20...ite_knight.htm

    The mortgage insurance is against default resulting in foreclosure. The borrower is not a party to the insurance contract (even says this in most notes or deed of trusts), even though they pay for it, either through a line item in their payment amount, or through it being hidden in the interest rate or points (Lender paid mi).

    The owner of the mortgage, in this case, Freddie Mac, goes to the MI compay and asks them to pay the loss claim early for the short sale. The MI company looks at the case and agrees because it is destined for foreclosure, and the loss they will have to pay later will be greater if they don't pay the claim now.

    Now this is where it gets cloudy, and many people get shocked, because they had no idea that the MI company would ask them for anything. The MI company can use subrogation in this case, meaning they can assume the rights of the owner (Freddie Mac) because they insured the owner and took the loss, and come directly after the borrower (the third party that caused the loss).

    The PMI companies best time to exert leverage against the borrower is by claiming their rights at the time the short sale is being negotiated, and asking for full reimbursement of losses as a condition of the Short Sale approval letter.

    Somewhere is a back room the banks that service the loans have made a decision to consider the MI's rights to subrogation at the time of the short sale approval process. I personally think they should come after people once the deal is closed, but it is obvious that they have more leverage by holding up the closing in order to recover more from the borrower, and now it has become a standard practice.

    From what I have read, they initially ask for the full deficiency. About 1 out of every 10 pays it and those people help bring the total recovery % average way up. Why pay it? Well, they offer 0% terms for up to 25 years and you are going from a secured note to and unsecured note. Even if you agree to it, to get the short sale to close, you can always default a couple of months later and be in a good position to re-negotiate the balance because it is unsecured and can get settled for a lesser amount in most cases, especially where bankruptcy is a possibility.

    In most cases people agree to a much lesser note, after some negotiations, maybe 1/3 of what is initially asked for. Others agree to an even smaller percentage due as an immediate payment at closing. The only people that seem to get away with paying noting are those that are in non-recourse states like CA, and they only get to that result after long negotitiations.

    If you look at the presidents Home Affordable program there is no option to write down principal balances of the loans. Bankruptcy judges also do not have that option ("cramdown"). The short sale is the only case where it seems to be possible. It is possible because the borrower is giving up the property in the transaction and the MI or investors deficiency amount becomes unsecured debt. Right now most borrowers who are dealing with a primary residence are also getting relief from congress on paying taxes on the forgiven debt amount.

    What I described above is just from my personal research of listening to people's dealings with the short sale process with some of the biggest banks. Their experiences have matched mine with BOA. The short sale process made it to where it went to the investor for a decision (took about 3 months to get there) and it came back approved by the investor, because the MI company agreed to pay the loss. The MI company told BOA they wanted the full loss repaid in a promissory note as a term of the Short Sale approval letter. I am still dealing with that issue as of today.

    Why are the MI companies being so agressive? 1) They have a right to make a claim against the borrower. 2) Many of these defaults are happening very early in the loan life, meaning they have not made enough on premiums to pay all these losses. The losses have a potential to put them out of business they are so large. They did not ever see this size of a problem coming.

    You can see in the public MI company, the FHA, there was a story just a day or two ago that they fell below the capital requirements that congress mandates for the first time in history because they are paying so many losses out. For the FHA they can go borrow from the Treasury. Most of these MI contracts are with private companies that do not and will not have a line of credit with the Treasury unless the congress and executive branches decide to also bail them out for their poor business decisions.
    Last edited by scottp999; 09-22-2009 at 10:56 AM.

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