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Foreclosure PreveSlide show: What you need to know about foreclosure prevention

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A detailed explanation of the foreclosure process with examples of the short–term and long-term options available to avoid foreclosure.

A detailed explanation of the foreclosure process with examples of the short–term and long-term options available to avoid foreclosure.

Published in: Economy & Finance, Business

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Transcript

  • 1. Project Sentinel HUD Housing Counseling Services Presents: Copyright  Project Sentinel
  • 2. This Program
    • Overview of the foreclosure process
    • Short-term and long-term workout options
    • Resources for more information and counseling help
  • 3. DELINQUENCY
  • 4. What to do when your payment is late:
    • Contact your lender immediately
        • New Requirements under SB 1137
    • Do not avoid phone calls or ignore correspondence
    • Provide complete disclosure of the circumstances
    • Maintain HO insurance and property taxes
  • 5. Whatever you do:
    • Do not make promises you can’t keep!
    • Do not sign anything you do not understand!
  • 6. Beware of Foreclosure Rescue Scams
    • Offers to buy your house – equity skimming/stripping
    • Phony counseling agencies that require upfront fees for promised modifications or credit repair
  • 7. DEFAULT
  • 8. Formal Foreclosure Process
      • Notice of Intent to Foreclose – After it’s filed, the homeowner has 30 days to negotiate alternative arrangements with the lender
        • SB 1137 Requirements
      • Notice of Default – Once filed, the homeowner has 90 days to bring loan current or come to an agreement with a lender to avoid the next notice
      • Notice of Sale – Homeowner has a final 20 days to bring loan current or negotiate an agreement
  • 9. SHORT TERM WORKOUT OPTIONS
  • 10. Reinstatement
      • A lump sum payment of the amount owed, paid by a specific date your mortgage lender agrees to.
  • 11. Forbearance Agreement
    • A formal written repayment agreement between the borrower and the mortgage lender.
  • 12.
    • Under the terms of a Forbearance Agreement, monthly payments are reduced or suspended for a specific period of time.
    • In order to qualify, the borrower must show that they have the financial ability to make the repayment installments
    Forbearance Agreement (cont.)
  • 13. Repayment Plan
    • Is a temporary increase in monthly payments until the loan is brought current.
  • 14.
    • The lender calculates the additional payment required and determines the number of months needed to cure the delinquency
    • A down payment of between 25% and 50% will typically be required by the lender, in order to qualify for a repayment plan
    Repayment Plan (cont.)
  • 15. LONG TERM WORKOUT OPTIONS
  • 16. Loan Modification
    • One or more terms of the loan may be permanently changed to bring the loan current.
  • 17. A Loan Modification May Include:
        • Extending the term of the loan
        • Adding the missed payment to the loan balance
        • Converting from ARM to fixed
        • Changing the interest rate
  • 18. New Modification Programs
        • New Programs
            • FHA Secure
            • Help for Homeowners (H4H)
            • Settlements
        • Sources of Information
            • Housing Counseling Agencies
            • www.hud.gov
  • 19. Re-financing With a New Lender
    • Will require that you financially qualify, with:
    • Positive equity
    • Acceptable FICO score and debt to income ratio with backup documentation
    • New loan fees
  • 20. Reverse Mortgage
      • Also known as a “HECM”
      • A loan against the equity in a home that provides tax-free cash advances
      • Seniors 62 and older can convert the equity in their home to cash, while retaining homeownership
      • No repayment is required while the homeowner lives in the home
  • 21. Pre-foreclosure Sale
    • The lender may agree to allow the borrower a specific period of time to sell the home and save the accumulated equity.
  • 22. Short Sale
    • The borrower sells the property for less than the balance owed on the loan.
  • 23.
    • The lender agrees to accept the proceeds of the sales as a full settlement of the loan
    • The lender must approve the proposed sale amount
    • The borrower may face tax consequences
    • The lender may require the borrower to make a cash contribution or sign an interest-free promissory note for all or part of the shortage
    Short Sale (cont.)
  • 24. Assumption
    • The property is transferred to a new buyer who assumes the loan and takes responsibility for the mortgage.
        • The new buyer must meet lender’s credit requirements
        • The current homeowner should make sure the offer is genuine, and not an equity stripping scam
  • 25. Deed-in-lieu of Foreclosure
    • The borrower agrees to deed the property to the lender in exchange for a release from all mortgage obligations.
  • 26.
    • The property must be vacant at the time the deed is executed
    • No additional loans or liens on the property are typically allowed
    • The borrower may face income tax consequences
    Deed-in-lieu (cont.)
  • 27. Bankruptcy
    • Law requires pre-filing counseling
    • Homeowner should consult an attorney about the consequences
    • Usually worthwhile only if you have other debts to include
    • May not be a long-term solution to foreclosure
  • 28. Be Proactive
    • Consider your options
    • Discuss with your family
    • Be prepared to consider the components relevant to the decision
  • 29. Borrowers Must Consider:
    • Their ability to make future loan payments, along with other payments like taxes and insurance
    • The potential impact on their credit
    • The affect on their long term goals/needs
    • The importance of keeping the home – is it worth the stress and financial drain?
  • 30. Borrower Should Consider:
    • Eliminating unnecessary expenses or selling assets
    • Looking into additional sources of income
      • Cashing in retirement accounts
      • Borrowing from family or friends
    • Seeking legal advice – at the right stage
  • 31. How Should You Approach a Workout?
    • Contact your lender’s Loss Mitigation Department directly
    • or
    • Chose to have Project Sentinel or another HUD counseling agency contact the lender’s Loss Mitigation Department on your behalf
  • 32. Regardless of who contacts the lender, you will need:
    • Hardship Letter
    • Financial Statement
    • Current Pay Stub or other proof of income
    • Current Bank Statement
    • Most recent Tax Return
  • 33. Project Sentinel Housing Counseling and Mediation Services
    • 1055 Sunnyvale-Saratoga Road Suite 3
    • Sunnyvale, CA 94087
    • (408)720-9888
    • www.housing.org
  • 34. Other Resources
    • www.hud.gov : Lists other HUD counseling agencies and a wide range of information on foreclosure programs
    • www.fha.gov: Information on loans and links to Hope for Homeowners (H4H)
    • http://www.foreclosureinfoca.org : Public Interest Clearinghouse website which provides legal Information  
  • 35. In Cases of Predatory Lending or Fraud
    • Department of Fair Employment & Housing – 800-233-3212
    • US Dept of Housing & Urban Development – 800-669-9777
    • Fair Housing Law Project – 408-280-2435
    • San Mateo or Santa Clara District Attorney, Real Estate Fraud Units – 650-363-4636 [SM]; 408-792-2639 [SC]
  • 36. Conclusion
    • Thank you for listening to our introductory presentation
    • For further information:
        • Contact Project Sentinel
        • Visit www.hud.gov

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