Darewin Ocampo asked:


The current global financial crisis has kept bombarding and still continues to bombard the economy with predicaments massive enough to shake the foundations society, moreover the mortgage industry. Massive inflation and rising commodity prices as well as interest rates have kept flooding the people and have made payment of mortgage barely possible for ordinary homeowners. Such situation has caused an overwhelmingly huge increase in the number of houses being repossessed through foreclosure.

Many solutions as well as thousands of companies offering foreclosure solutions have popped out but prevention is still better than cure. Avoiding foreclosure is always better than getting foreclosure solutions. And to avoid foreclosure, one needs to know everything possible about foreclosure.

In the current situation of the economy, no one is safe from foreclosure. Even the people who never thought that their house can be at risk due to foreclosure can suddenly find themselves in out of their homes. Foreclosure can claim the home of anybody, regardless of financial income bracket. It never chooses and never forgives. And the worst mistake a homeowner could make is hiding or running away from foreclosure, because foreclosure when left unattended is simply devastating. Foreclosure can be avoided but a homeowner must act, and act boldly to do so, keeping in mind that time as well as the crashing economy, is against him.

Foreclosure is one of the legal resorts and safeguards a lending institution can take to mitigate losses. It is the act of repossessing a home when payments are not being made. One day of delinquent or late payment is enough for a lender to start foreclosure proceedings against a homeowner. But the official foreclosure proceedings normally begin after three months of delinquency. Most lenders usually threaten homeowners who are late in their payments with notices of foreclosure proceedings but only after they have actually hired or assigned attorneys to the case and filed the necessary foreclosure paperwork in the court are the homeowners under official foreclosure. The whole foreclosure process can last from three weeks to a whole year depending primarily on state foreclosure laws and it is greatly advised that homeowners check and gain understanding of them.

Once a homeowner is already 30 days delinquent on his payments lenders usually only accept the payment if it is made together with the one currently due. In other words, the whole payment for two months is needed to be cleared of delinquency. It is of wide practice for financial institutions to accept only whole payments and send back partial ones. This means once a homeowner gets a month of delinquency the late payments are likely to pile up and accumulate and will soon pull the homeowner down to default and ultimately foreclosure. Many months of past dew payments is like a powerful black hole in which one cannot get out.

But, different from what many homeowners believe, getting homeowners back on making regular payments and not repossessing homes serves the best interest for lenders. This is because cash is the most liquid asset and it is vital to sustaining a business’ day to day operations. The loss mitigation department of banks will usually keep trying to work things out to make a homeowner make regular payments again. And the best solution for both lender and homeowner is loan modification.

Loan modification is the process of changing the terms of a loan to ones more favorable to the homeowner in order that the said homeowner can afford to make regular payments again.

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Category Loans | Tags: Tags: Foundations, Lenders, Lending Institution, Three Months,

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Brenda Cote asked:


Foreclosure is a process in which a piece of real estate becomes the property of a lending institution due to the legal owner’s inability to make scheduled payments on the mortgage or deed of trust.

Typically, the lender files a notice of default after a homeowner fails to make his or her mortgage payments for several months. If the loan is not reinstated, the lender moves to foreclose. As a result, the lender becomes the new legal owner of the property and has the right to resell the property and recover any outstanding loan balances in addition to foreclosure expenses.

The foreclosure process consists of three stages: pre-foreclosure, which begins the redemption period; foreclosure, which is when the home is sold at a public auction; and post-foreclosure, which is when the property reverts back to the lender if it fails to sell at the public auction. Although each stage offers bargain-buying opportunities, the pre-foreclosure stage is considered by many real estate investors to be the most promising time to purchase during the foreclosure process.

Investing in pre-foreclosures means you will be acquiring property any time before the scheduled public auction. As the investor, you will be buying the property directly from the owner. The earlier you contact a homeowner in pre-foreclosure, the more time you will have to make a connection, structure a deal and purchase the property.

There is a common misconception that real estate investors purchasing homes from owners facing foreclosure are taking advantage of the homeowner’s misfortune. This is simply not true. A Notice of Default is filed only when a borrower (property owner) has broken the terms agreed upon with lender at the inception of the loan in default. This breech gives the lender every right to protect its financial interests. Therefore, an experienced real estate investor becomes the problem solver by finding a win-win solution that will help the homeowner get out of default.

Property owners facing foreclosure are typically scared or in denial. Many of them hope some miracle will happen that will make their ordeal simply go away. Doing nothing will certainly ensure a homeowner’s foreclosure, loss of home, loss of equity and credit rating damage for an entire decade.

When dealing with an owner in pre-foreclosure, talk to them as soon as possible. It is vital to explain the following three benefits of avoiding foreclosure:

1. Protects their credit

By working with an investor, homeowners may be able to avoid foreclosure and begin rebuilding credit. Even if a homeowner endures the process of losing his or her home, the repercussions of a foreclosure on a credit report are far reaching. A poor credit rating affects everything from buying a car to renting a home. With certain businesses, credit is even a factor in employment. Investors often help homeowners protect credit.

2. Make a profit

While it is true that real estate investors purchase at a discount, a homeowner facing default may still be able to recover some of their equity and walk away with profit.

3. Get a fresh start

Stopping the foreclosure allows homeowners to breathe a sigh of relief. As the pain and pressure of the foreclosure lifts, they find it easier to move on and begin rebuilding their life.

Buying in the pre-foreclosure stage can be the most lucrative slice of a real estate investor’s business. Once rapport and trust have been established, a professional real estate investor can determine whether the sale of a property would truly benefit everybody involved.

There are various ways to profit while helping people find viable solutions for their defaults. The following three are most common:

1. Purchase at a discount

Real estate investors are not likely to make a profit by purchasing at full market value. As an investor, it is essential to inform potential sellers that you earn your living from your profits. Therefore, you must buy for less than retail price while taking into account acquisition, sales and holding costs and any necessary repairs. A discount of twenty to thirty percent of full market value is common practice among real estate investors.

2. Buy property “subject to” the existing loan

There are widely spread rumors that it is illegal to purchase property that involves taking over an existing mortgage. This is completely false. While assumable loans are practically extinct, it is perfectly legal to purchase property subject to an existing loan. It is important to be aware of the “due on sale” clause stating the existing lender can call the loan due upon the transfer of title. In other words, the lender has the right to demand full payment of the outstanding loan balance at the time of transfer. In practice, lenders would rather receive their monthly payments than call the loan. Purchasing property subject to the existing financing means a smaller out-of-pocket investment for the real estate investor.

3. Create instant equity utilizing a Short Sale

Structuring a Short Sale can prove profitable when dealing with a homeowner facing foreclosure whose property is equity deficient. In this market, troubled lenders would rather discount their mortgages than increase their already mounting inventory of foreclosed properties. The type of discount you create will largely depend on the quality of your Short Sale package combined with the quality of your negotiating skills.

Real estate investors prevent a large number of foreclosures every year across the country. There are many ways for investors to make a profit while helping people move on with their lives.

Undoubtedly, the money is there to be made. Pre-foreclosures are a fabulous way to make it.

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Category Finance | Tags: Tags: Lending Institution, Property Owner, Real Estate Investor, Redemption Period,

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