Many people are predicting that 2009 will be even worse than 2008 in terms of foreclosures. The real issue is not how many people end up facing foreclosure, but how many work out their issues and are able to stay in their homes.
While the headlines continue to highlight the volume of foreclosure filings and substantial price declines in many markets, Hope Now released a fascinating report outlining how many people they have helped stay in their homes.
Hope Now, an alliance of mortgage servicers, counselors and investors whose mission is to prevent foreclosures, said in a December report that alliance members were on pace to engage in 2.2 million loan workouts and modifications in 2008, based on data for the first 11 months of the year.
Looking ahead to 2009, Hope Now expects to double the number of modifications due to streamlining their processes with Fannie Mae, Freddie Mac and FHA, as well being able to work with consumers who have secondary financing.
During September, October and November of 2008, Hope Now reported that members engaged in 651,000 workouts and loan modifications, the highest three-month total since alliance members began compiling data in July 2007.
By comparison, during that same three-month period foreclosure data company RealtyTrac reported a total of 804,614 foreclosure-related filings, including default notices, auction sale notices and bank repossessions. The data suggests that a substantial proportion of those facing foreclosure are having success in obtaining loan modifications that allow them to at least forestall the foreclosure process.
What’s particularly disturbing, however, is a recent report from the Comptroller of the Currency that showed 55 percent of the mortgages that were modified during the first quarter of 2008 were delinquent by 30 days or more after six months, and 37 percent were 60 or more days delinquent after six months. Those rates continue to climb as more mortgages return to default.
What does all of this mean for your business in 2009? First, many agents have experienced great success by helping those in foreclosure to stay in their homes.
A simple way to begin this process is to send out a mailing piece that asks, "Do you know someone who is facing foreclosure? If so, please contact me about options available that may stop the foreclosure process and allow the homeowner to stay in the home." Be sure to identify yourself as a Realtor and not someone trying to sell them a mortgage product.
When you receive a response, the first step is to determine whether they will qualify for a loan modification or other assistance from Hope Now.
When borrowers have tried to work with their lender and have had no success, another approach is to contact a loss mitigation company. Most borrowers attempt to work out their mortgage difficulties through normal customer service channels. The result is that they often have a hard time reaching the appropriate decision makers. In contrast, loss mitigation companies typically have direct access to the decision makers and can often expedite the process.
A different approach is to see if the owners qualify for one of the equity-sharing programs offered through FHA or other lending institutions. In this model, the lending institution reappraises the property and issues a new loan at 80 to 90 percent of the appraised valuation. In the case where there is a $300,000 loan and the property is now worth $200,000, they would issue a new loan of $160,000 to $180,000. The borrowers must agree, however, to share 50 percent of their equity when they sell.
A more aggressive approach is to contact a consumer attorney (not a real estate attorney) through an organization such as NACA.net. Virtually all loan documents have errors or other provisions that will make it extremely difficult for the lender to foreclose. For example, if a loan has been sold several times, the company servicing the loan may not be legally eligible to conduct the foreclosure. A consumer attorney who specializes in foreclosures can assist borrowers in gaining leverage to renegotiate or modify their loan.
Ultimately, our goal as real estate professionals must first be to assist people in staying in their homes. When that is not possible, then our role is to assist our clients in going through the process as easily and as painlessly as possible. The goodwill you will create by helping people stay in their homes is one of the best ways to improve your business reputation and to attract grateful clients for years to come.
Bernice Ross, CEO of RealEstateCoach.com, is a national speaker, trainer and author of "Real Estate Dough: Your Recipe for Real Estate Success" and other books. You can reach her at Bernice@RealEstateCoach.com.
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