Homes in Foreclosure Information

The volume of homes in foreclosure has nearly surpassed the number of homes sold in the U.S. The foreclosure crisis has left close to 13 million people without a home and there is no end in sight. While no one wants to have their home repossessed, there are instances when there is no other option. Those who want to prevent foreclosure must become extremely proactive the instant they can no longer afford loan installments.

The abundance of homes in foreclosure has affected nearly every facet of life. When banks repossess homes the property owner loses their house and all the money they paid to buy it. Mortgage lenders lose money from loan default and initiating the foreclosure process. Neighbors lose home equity because property values decline. Communities lose out on property taxes and have less money available for schools, emergency services, and infrastructure.

A decline in property value often causes homeowners to owe more than their property is worth. When homeowners have underwater mortgages they can't enter into mortgage refinance or loan modification. If they can't qualify for options that reduce mortgage payments they might be forced into personal bankruptcy or lose their property to foreclosure.

Many homeowners are considering strategic foreclosure as a way to force their lender to authorize real estate short sales or deed in lieu of foreclosure. Essentially, they elect to stop making loan installments even if they can afford the payments.

While there are instances when strategic foreclosure is beneficial, for the most part it only leads to further problems. Banks do not have to reduce principal amounts just because property values have declined. Nor, do they have to allow property owners to short sell their home for less than is owed on the mortgage note.

The primary reason people engage in strategic foreclosure is because their lender is unwilling to work with them while they are current with their account. The problem with this method is that banks can commence with foreclosure action that ends up costing homeowners even more money.

Even if the bank lets borrowers short sell their home or return it using deed in lieu they can pursue them for monetary deficiencies. For example, a homeowner owes $150,000 on his loan and returns the property to the bank using deed in lieu. The bank later sells the house for $125,000. To collect the $25,000 difference lenders issue a deficiency judgment that is reflected on borrowers' credit reports until fully repaid.

Many foreclosure prevention methods are available, but property owners have to be relentless in working with their lender. Once borrowers fall behind with loan installments their account is handed over to a bank loss mitigator.

The primary role of loss mitigators is to work with property owners to create a plan to prevent foreclosure. The earlier communication starts the better chance of obtaining a positive outcome.

It's important to realize that loss mitigators work with countless cases and act as mediators between borrowers and banks. It is crucial to provide requested documents and be organized and prepared when talking with loss mitigators.

Mortgage lenders can initiate foreclosure when payments are 31 days delinquent. Most banks would rather work with borrowers to help them overcome financial problems than move forward with the foreclosure process.

If property owners can cure past due amounts quickly, banks usually accept the funds and take no further action. If owners cannot pay the full amount, banks can offer deferred payments, real estate forbearance, loan modification, or mortgage refinance.

Deferred payments can be a good option for people experiencing short term financial problems. Essentially, banks let borrowers skip one or two payments. Some banks require borrowers to repay skipped payments in full with the next payable installment, while others roll the payments to the end of the note.

Real estate forbearance can reduce or suspend principal payments and interest rates for up to 6 months. These payments have to be paid in full when the agreement expires.

Loan modification alters the terms by reducing principal amounts and interest rates. One program that has been beneficial to thousands of homeowners is Making Home Affordable. This government sponsored program was established by the Obama Administration and offers a multitude of programs. Details are available at MakingHomeAffordable.gov.

Mortgage refinance is available to borrowers that can qualify for a new loan. This method should only be used when borrowers can shave at least 2 percent off interest rates.

Individuals that can no longer afford house payments should investigate the options of real estate short sale and deed in lieu of foreclosure. While these don't let homeowners keep their property they can lessen the sting of foreclosure.

As mentioned earlier, these methods can result in deficiency judgments, so it is imperative to obtain a 'Payment in Full' agreement when working with lenders.

Homeowners that obtain either of the above through Making Home Affordable are exempt from deficiency judgments. Therefore, borrowers should determine if their bank is enrolled in the program.

Real estate short sale is a lengthy and complicated and can take several months to complete. Acquiring short sale approval is no easy feat. Most people find it advantageous to hire a real estate attorney or short sale specialist to help them throughout the process.

Deed in lieu of foreclosure involves returning the property to the bank and vacating the premises. This method can take place quickly, so homeowners need to be ready to move out of their home as soon as the agreement is signed.

Anyone who is facing foreclosure may find it helpful to obtain HUD housing counseling. Counselors can help homeowners determine if they qualify for foreclosure prevention strategies and help them fill out applications to apply for help. A complete list of housing counselors is provided at HUD.gov.