Missed Payments – What Can I Do?
National Housing Crisis
The nationwide credit crisis has turned the “American Dream” into a nightmare for many home buyers and sellers.
Banks and mortgage companies have seriously tightened up their lending requirements. People who were ready to buy the home of their dreams no longer qualify for a mortgage.
Record foreclosures, rising unemployment, losses in the financial markets and the current credit crunch have not only reduced the number of buyers who can buy, but have also increased the number of houses that sellers need to sell.
Prices are under pressure as home sellers lower their asking price to attract a buyer, and as lenders resell their foreclosed homes below market value.
It’s turning into a vicious cycle. Many buyers need to sell their current home first. Many sellers (unless they plan to rent for a while) need new financing to get into their next home. As a result many real estate agents, mortgage brokers and home builders are going out of business. These professionals are in the business of serving buyers and sellers. Their services are no longer needed with the credit crisis blocking the buying and selling of many homes.
President Obama says today’s economy is the worst since the Great Depression and it may take many years to recover.
What options are there?
If you really need to sell your home, it is possible that this difficult economy makes it impossible to sell your house for enough money to both pay off the mortgage amount and cover Realtor and closing costs. Consider these options.
1. Keep paying the mortgage until the amount owed is low enough to sell your house and pay off the mortgage and all selling fees.
2. Refinance to pay off the old mortgage and get new terms on a new mortgage. Refinancing might be a way to improve the situation and adjust your cash flow.
3. Currently unable to refinance? You might talk with your bank and make arrangements to change the terms of your existing mortgage. This process, called loan modification, can help to adjust your monthly expenses and bring your mortgage in line with the current value of your home.
4. If you can no longer afford your mortgage and are behind on your payments the following section discusses some choices available.
When you just can’t pay.
You just can’t pay your mortgage. You have lost your income or it was severely reduced. Life has thrown you a bump and you don’t know what to do. Here are several things you should consider.
1. Foreclosure – If you stop making your mortgage payments and do nothing, the bank will foreclose on your mortgage and take your house. On a scale of 1-10, the amount of pain and damage to your credit is 9.5. It takes many years to rebuild your credit after a foreclosure. You can never again say, “I have never had a foreclosure.” The final outcome will be a visit from a law enforcement officer who will physically remove you from the property and lock you out. End Result: 1. Loss of Credit. 2. Loss of Home. 3. Police Eviction.
2. Deed in Lieu (sometimes called cash for keys) – You give the bank your keys and walk away from your house. On a scale of 1-10, the amount of pain and damage to your credit is 8. You still have serious damage to your credit and it takes several years to reestablish your good credit.
3. Settled Account – Another option to consider is selling your house for less than you owe the bank. This requires negotiation with the bank to get their approval for the sale. On a scale of 1-10, the amount of pain and damage to your credit is 3. Clearly some damage to your credit, but much less than a foreclosure. Many houses on the market are in this position and require bank approval to complete the sale.
Waiting for the bank.
Many people including some Realtors are confused by the complex and time consuming process of negotiating with the bank to sell a house for less than the mortgage amount. Many Realtors refuse to deal with this kind of transaction. The process involves several specialized documents and sometimes long periods of time waiting for a response from the bank.
One of the most frustrating parts of negotiating with the bank is waiting for their approval on an offer. Many buyers are not interested in making an offer and waiting several months to find out if their offer is accepted. They make an offer to the bank in a traditional transaction and get tired of waiting. They let their offer expire and move on to a house that does not require bank approval. There are enough houses for sale right now to choose from.
Solution: settled account.
I work with homeowners who are behind on their payments with no equity who can’t sell their house for enough to pay off the mortgage and Realtor fees. I don’t charge them anything. No commissions. No fees. I make money when I can buy the house and later sell it for a conservative profit. I do all of the negotiation with banks to make the transaction as convenient and pain free as possible.
I always work with competent Realtors to get houses listed in MLS and SOLD SOLD SOLD!
The homeowner WINS! There is no foreclosure on their credit. They no longer have to deal with a house they cannot afford to keep. They can also move on with their life.
The bank WINS! They do not take the house back into their inventory. The amount they lose in a full foreclosure is higher than the settled amount in almost every case.
The Realtor WINS! The house is for sale and the negotiation is being taken care of. The Realtor focuses on their area of expertise and markets and sells property instead of being distracted with bank details. As the bank approval is received, MLS is updated and the property becomes more marketable.
The buyer WINS! They no longer have to wait and wonder if their offer is acceptable to the bank. The process of buying the house is greatly improved.
Do you qualify?
Will the bank accept less than the mortgage amount for anyone who asks? Probably not. If you have millions of dollars in your retirement fund the bank will be very unlikely to approve a settlement. The bank needs to see a hardship situation.
Maybe you lost your job and can’t find another one. Perhaps you have more than one house and the extra payments have eaten up your savings. Sometimes there is a death, divorce or other loss of significant income that changed the financial structure of the family.
If you know anyone who will benefit from more information about their options in this tough market contact me. I offer a free and confidential review of your situation to see how I can help you.
Realtors who don’t like to negotiate with banks; contact me. I will help you focus on what you do best; selling houses.
Byron Watts is a Real Estate Investor living in Southeast Minnesota helping people who are behind on their house payments. Contact him at 507-319-5788, email: help@AvoidForeclosureStress.com or www.AvoidForeclosureStress.com
