The housing market is still a sensitive topic for homeowners that are in danger of losing their homes to foreclosure. Although, the number of homes sold over the past few months has increased by 95.5% from last year in the Sacramento area, the number of foreclosure filings is up compared to last year.
The federal government has stepped in with a historical $700 Billion “Emergency Economic Stabilization Act of 2008”, which is more commonly known as a “bailout” of the U.S. financial system. This is a law that authorizes the U.S. Treasury to purchase distressed mortgage-backed securities and to restore confidence in the credit markets.
The short and long term effects of this “bailout” are still unknown, as well as how it will directly effect the individual homeowner currently in a distressed situation.
Many homeowners that are already behind on their mortgages or homeowners whose adjustable mortgages have increased simply do not understand how the foreclosure process works and what options they may have. When a homeowner becomes sixty days late on their mortgage, their bank can file a NOD ( Notice of Default. ) The NOD simply states that if the borrower does not become current with their mortgage the bank can file an NOT ( Notice of Trustee Sale ) three months after the NOD is filed. Once the NOT is filed the borrower must pay all past due payments within twenty-two days or the bank will foreclose on the property and the borrower will no longer own the property.
Homeowners do have options. The first step is to notify your lender and explain your situation.The worst thing to do is to ignore the lenders calls and letters.
Most banks will try to work out some type of a payment plan to get the borrower caught up. This will work for some homeowners but not for all. Lenders may offer to modify the loan by offering a lower interest rate, thus lowering the borrower’s mortgage payment. Many homeowners owe more on their loan than what their home will sell for. One option is to attempt a “Short Sale”. A Short Sale is when the homeowner’s lender accepts a lesser amount than what is still owed on the loan. The homeowner lists his property for sale and offers are submitted to the lender. The lender will decide whether or not to accept, reject or counter the offer. The process can take more time than a traditional purchase but it can benefit the seller by avoiding a foreclosure on the credit. Sellers will be able to repair their credit by making their other payments on time and will not have the stigma associated with having a foreclosure on their record. The buyer can benefit by purchasing a property at a great value. The lender benefits by avoiding the high costs associated with foreclosures. A short sale will decrease the lender’ s loss which is a good business decision for them. Lenders can and often will postpone foreclosing on a property to give the homeowner more time to either re-negotiate their loan or to allow more time to successfully negotiate the short sale.
It is ALWAYS best to consult with someone who is experienced and knowledgeable with the local, current housing market. Professional tax consultants can advise homeowners of what liability, if any, they may have if they Short Sale their home or if their home goes to foreclosure . Not all realtors have the experience or training that is needed to best serve distressed homeowners needs. Choosing a knowledgeable Realtor is key to a successful Short Sale. Make sure that the Realtor you choose has a track record of “closed” Short Sales. Homeowners should learn as much as they can about what their options are so that they can make the best decision for them.