There are many actions borrowers can take before facing foreclosure. Many find solutions to their difficult situations by short-selling their homes or simply walking away, an option the Obama administration’s Making Home Affordable program makes slightly easier by paying $3,000 to borrowers for relocation costs.
Those looking to avoid foreclosure have ample and growing resources, including:
- The HUD website, which lists various options for different types of homeowners facing foreclosure.
- The Federal Housing Authority (part of HUD).
- The Obama administration’s Making Home Affordable program, which includes HAMP, Home Affordable Refinance Program (HARP) and Home Affordable Foreclosure Alternatives Program (HAFA).
Bank of America, among other banks, offers advice on its website for consumers seeking to avoid foreclosure.
If homeowners want to stay in their home, there are a variety of options, including: refinancing directly with the bank or with a program like HAMP, the Federal Housing Authority, or the Department of Housing and Urban Development (HUD); and payment forbearance; among several other options.
If homeowners are open to leaving their home and avoiding foreclosure, homeowners can: participate in a short-sale program or a "deed in lieu," which affects a borrower’s credit score but less drastically than a foreclosure likely would, notes the Bank of America site.
Then, there is the more off-the-books approach. Tanya Dennis, who reoccupied her South Berkeley, Calif., home in January 2011 and worked with the bank to modify her loan terms (see related article), is writing a handbook to assist those homeowners who need a loan modification and who are running out of time and options. She shared some of the strategy’s key points with Inman News.
First of all, she said, homeowners facing foreclosure have to evaluate their circumstances and decide whether they want to make a stand.
It’s grueling and takes a lot of energy to stand up to the banks in a strong way, said Dennis. For that reason, it’s critical that homeowners who decide to do so should have a supportive network of family and friends and organizations behind them with knowledge of the process.
Dennis said the negotiation process begins by speaking directly with bank representatives and attempting to negotiate a loan modification that works for you and the bank.
Be proactive when negotiating with banks, she said. Homeowners should draft a presentment letter that states clearly:
- Who you are.
- What went wrong.
- What you want.
It’s also crucial, said Dennis, to belong to a public grassroots organization, such as ACCE, which can keep the homeowner in the news and mobilize people to the cause with phone calls, emails and even a physical presence when imminent action is called for.
Tanya Dennis rallies support for a homeowner outside a San Francisco Bay Area Bank of America branch. Photo courtesy of Brooke Anderson. Copyright 2012
Also, it’s a good idea to have a forensic loan audit performed on your loan, said Dennis, which can show missed protocol, improper actions, deceptive practices, and in some cases even bank fraud.
For example, noted Dennis, in mid-February San Francisco Assessor-Recorder Phil Ting released the results of a study that audited 382 residential home loans in San Francisco County made between January 2009 and October 2011 — about 16 percent of all loans from that time period.
The report found that 84 percent of the loans "had at least one clear violation of California’s foreclosure laws."
The report, which also noted "irregularities" in 99 percent of the loans audited, prompted House Minority Leader Nancy Pelosi, D-Calif., to send a note to U.S. Attorney General Eric Holder asking him to take the report into account when negotiating the multistate settlement.
Next, it’s important for the homeowner to have the guts to stick it out, she said, because it’s not easy standing up to banks and their lawyers.
It’s a fluid process, said Dennis. At different stages of the game, there are different tactics to use, which become more drastic, like flooding a bank with calls, emails and involving the press, and, if necessary, bringing in a group of friends, family and even strangers to a home to resist eviction as an eviction date approaches.