Wednesday, June 18, 2008

The Straight Talk on Preventing Your Home Foreclosure

Before I begin my entry, let me point out that I have no control over the google ads that appear on this site. Because I'll be talking about "loss mitigation" and "home foreclosure," you may very well see advertisements for loss mitigation companies pop up if you visit this article from a "discrete" link. And if you see them...my advice to you would be not to click on them.


Home foreclosures have been spiralling gradually out of control since 2006, thanks to sub-prime loans, Adjustable rate mortgages, and a variety of other factors. People needed to talk to their lenders in order to get a "loan workout" - some kind of an arrangment where their mortgage could be refinanced so that they could somehow afford their house and keep it. And because lenders are swamped, they're not reacting as quickly as they should be...and so lots of homes are falling by the wayside.

"If only there were some magical solution," the desperate homeowner cries...

And with every arise of desperation...people will come along to try to make money out of the situation.

The current business that is popping up like mushrooms after a rainstorm is the "loss mitigation" business. Businessmen have seen the profits that can be gained by charging homeowners money to talk to their lenders on their behalf. And if they're unable to obtain a loan workout...they still get to keep that money.

But who are these businessmen? Take a look at their websites. They will undoubtedly claim to have 20 years in the "loss mitigation" business, but .... most of them don't. Most of these companies were founded in the last 2 years, and consist of an army of sales people who will take phone calls and persuade people to use their company's services, and pay for it up front...and a handful of people who've attended a seminar or two on loss mitigation and who will call up your lender and try to get you a loan workout.... doing nothing that you couldn't do for yourself, and charging you a month or two's mortgage payment into the bargain.

(I've got to admit this puzzles me. If you can afford to pay some company the equivalent of two month's mortgage money up front...why not just pay that money to your lender and do a little bit to help yourself, instead?)

I'm not saying these companies are criminal enterprises (although there are scam artists out there). All I'm saying is that they aren't doing anything that you can't do yourself. If you simply don't have time to make phonecalls or talk to your lender, then I suppose you will want to deal with a third party who can handle that for you -- but if you do, at least make sure that they've been in business for at least two years - and demand to talk in person to people they've helped! Don't believe "testimonials" on their website.

How to find out how long a company has been in business? Again, don't trust their website. Check with your local better business bureau. Check with your local HUD or FHA office.

If you want to save your home from foreclosure, the thing to do is to tackle it in a logical and dispassionate manner.

1. If you get a loan workout, will you still be able to make your payments?

2. If you've got the equivalent of two months of mortgage payments, dont' give it to some total stranger. Visit your local lender and say, "Hey, pal. THis is incentive money. Get my deal done today." Okay, that's probably bribery, but it makes more sense to me than giving your much needed mortgage money to someone else who's only going to be making a couple of phone calls for you!

So, okay, don't bribe. Threaten with a lawsuit. There is lots of legislation coming down from the guv'mint designed to help lenders offer distressed homebuyers programs to help them. Demand that you be given time on your home payments until that legislation comes through, or you and a whole lot of other people being displaced from your homes will file a class-action lawsuit.

3. As a matter of fact, instead of giving that money to a loss mitigation person...find out if there's a real estate lawyer in your home town, and find out if they will take your case.... a lawyer walking into the bank is a lot more galvanizing to a lender than a phonecall from someone in a state way cross the country.

4. Grassroots organizations - for example in your church - are springing up also to help the home owner. Deal with them first, too.

EDUCATE YOURSELF

Some of you got into a mess because you had a catastrophic illness adn fell behind in your payments, and it's legitimately not your fault. Others of you just overspent your income, and you are to blame for your problems.

But there's no reason why you can't educate yourself, fix the problem now, LEARN FROM YOUR MISTAKES, and keep your home.

So go out and buy some books on the subject - you know they're going to be published like hotcakes now too... in fact - don't buy them, just check them out from the library, or check out the web.

Indeed, good ol' Youtube is full of videos of people either selling their services to save your property, or selling their services to help people with money by your property. Learn all the angles.

Here's an example:



I'm not recommending this person, this is just an example of what's on Youtube. Go to Youtube and do a search on "loss mitigation," and you'll find lots of stuff like this.

So, the decision is up to you.

1) Talk to your lender yourself, bringing all your financial documents with you, and get the problem solved yourself - and CONTINUE to make payments while you're waiting for a loan workout so you don't fall even further behind.

2) Find a legitimate loss mitigation company to help you. I'd suggest you find one in your own local area, so that you can visit their offices, and get the addresses of people whom they've actually helped save their homes. Make sure they have a Money back guarantee clause - and find out exactly how much of your money they'll give back if they fail to help you. (READ THE FINE PRINT ON THE CONTRACT, IT'LL PROBABLY SAY THEY GET TO KEEP A PERCENTAGE OF YOUR MONEY REGARDLESS.)

3) Try renting out a room to somebody...or indeed, renting out the whole home and using that rent money to pay your mortgage... You'll need to talk to a lawyer, and treat that rental like a business...but it's a possiblity (especially now when people who've had to leave their own homes now need a place to stay!) Of course lingering feelings of bitterness or anger might place your home in jeopary so you'll want to vet any renters and get damage deposits, but I'm just throwing it out there as an option....

3) Know your own capabilities. If you cannot afford to keep your home...then there's no point in hiring a loss mitigation company to help you, because they won't be able to help you - but that still won't stop them taking your money and "trying" to help you.

Indeed - don't deal with any loss mitigation company that doesn't "pre-qualify" you over the phone to make sure they at least have a chance of getting a loan workout for you. If they charge you money to "pre-qualify" you - go somewhere else!

I appreciate that the home foreclosure problem is going to get worse before it gets better... and I know the emotional toll this is placing on you. But if you educate yourself as to your options, persuade a non-working spouse who is able to work to get a job, etc. etc. you will be able to keep your home .... and reap the benefits that home ownership has....

1 comment:

charis said...

Hey!

Your blog is lovely! Thanks for sharing.

Home foreclosure