Editor’s note: This is the latest installment in a series highlighting ways real estate agents can successfully navigate the distressed property market.
There is good news — previously reported, but little understood — for homeowners who are at high risk of losing their home.
Lenders do not want to foreclose if it’s possible the homeowners can be helped.
If homeowners are willing to cooperate with your mortgage servicer, there is practically no reason to be foreclosed on in today’s market if your loan is with a national lender. Short-sale help is the lenders’ antidote.
According to a Chase spokesman, the lender not only does not want to foreclose, but the lender doesn’t want the homeowner to move if the lender can help the owner stay in the home. And there may be a good chance the owner can stay.
A bank’s first preference, I’m told, is to modify a homeowner’s mortgage — lowering the monthly payment and keeping the owner in the home.
If that doesn’t work, the bank doesn’t want to foreclose. Instead, the bank wants you to be able to leave your home with your pride, your financial situation and the home itself in as good a shape as possible. Often, they want you to short-sell if you cannot stay.
But homeowners must take the first step: They must ask for help.
Real estate professionals, if you are serving as a resource for homeowners in distress, remind that they may not be fully up to speed on all of the many programs that could offer assistance. Remind them, "This is not the time to act on what you heard at the water cooler. Do your own homework."
Making Home Affordable, an official program of the U.S. departments of Treasury and Housing and Urban Development, is one valuable program available to distressed owners.
It is the job of the real estate agent to help sell homes in the minimum amount of time possible and at the maximum possible price, with as little inconvenience to the owner as possible. The agent’s job is not to sell your home because you think you need to move — you may not need to move. Your lender can help you make that decision.
I know of one family, and you probably do, too, who received not one but two formal foreclosure notices, yet ended up with a loan modification that took their interest rate from 6.75 percent to 2 percent fixed for five years, with a maximum rate of 4.5 percent over the life of the mortgage.
The family was told they were being foreclosed upon twice. It turns out the lender had made a mistake on the wife’s income, and caught it before the foreclosure sale.
Homeowners certainly can and should have input on what happens to their home. First, they must obtain the right information to help them understand whether they would be able to refinance or get a mortgage modification and stay put. Or they could try to sell the home for less than they owe on it, sign over the deed-in-lieu of foreclosure, and face a full-bore foreclosure.
There is plenty of help available through your lender and your real estate agent, per the first two columns in this series. (See Part 1: "Real estate professionals, housing distress, and helpful advice"; and Part 2, "A new business model for real estate agents, brokers: free help.")
Real estate professionals, if you know homeowners struggling with monthly mortgage payments or who have already missed a payment, now is the time for them to take action. They can start today by learning more about the options available by clicking the website addresses below that address their situation:
- Homeowners trying to avoid mortgage troubles who see storm clouds rolling in during the months ahead.
- Homeowners struggling with mortgage payments who could stay if the interest rate and monthly payment were smaller. Homeowners have been able to lower their mortgage payments more than $500 each month — a significant savings for families.
- Unemployed homeowners facing foreclosure who can get temporary help from their state, but who ultimately may have to make a graceful and financially supportive exit.
FHA refinance for borrowers with negative equity (FHA Short Refinance)
If homeowners are current on their mortgage but owe more than their home is worth, Federal Housing Administration Short Refinance may be an option that their mortgage servicer will consider.
FHA Short Refinance was designed to help homeowners refinance into a more affordable, more stable FHA-insured mortgage. If their current lender agrees to participate in this refinance, they will be required to reduce the amount owed on the first mortgage to no more than 97.75 percent of the home’s current value.
Participation of mortgage servicers is voluntary; homeowners can contact the servicer — the company to which they send the mortgage payments — to determine whether the servicer is participating.
For more information
For questions about FHA Short Refinance, contact the FHA National Servicing Center at 877-622-8525or 877-622-8525, or visit this website: HUD.gov/offices/hsg/sfh/nsc/nschome.cfm.
The bottom line: The lender doesn’t want the homeowner’s house and is highly motivated to help the owner refinance or sell via short sale.