What options do I have if my house is being foreclosed? There are several options a person facing foreclosure might take. It mostly depends on what the person wants. For example, when I meet with clients for the first time, I usually inquire whether they are occupying the home, or whether they are renting the home. In Miami-Dade County, if a house is a homestead, the parties will be referred to mediation to review loss mitigation solutions. If the person is not occupying the home, mediation is not a requirement; however, the court may on its own discretion order mediation to see if there are any repayment plans which can be taken advantage of, to enable the person to keep the property, even for investment purposes. There are several loss mitigation solutions among them: short sales, deed in lieu, “cash for keys”, and loan modifications. All of these options can be offered by banks depending on several factors, like income, expenses, amount owed, use of the property and even the length of default. Before making a decision as to what approach you plan using, consult an attorney that specializes in real estate law
Ray Garcia, Esq.
Board Certified in Real Estate Law
By the Florida Bar
With the way the economy is on it’s major down fall, who wouldn’t enjoy less expenses? I mean, I know I would! And I’m sure you guys have heard your neighbors say the words “Loan Modification” at least once or twice then wondered what those two words meant. Well, don’t wonder any longer! Here’s how those two words may benefit YOU!
What are some benefits from filing a chapter 7 bankruptcy? Chapter 7 bankruptcy is one of the top forms of bankruptcy in Miami, Florida. A person may be considering bankruptcy because of harassing creditors, garnishment, repossession, foreclosure, lawsuits, illness or disability, loss of job/income, or divorce. Financial situations have changed all throughout the world and many people are unable to keep up with bills and payments they were once able to afford. Rather than being stressed with major bills piling up and marital problems arising, many find the best option being to file bankruptcy under this chapter, where the debtor can start new and receive a discharge of all owed debts.
A chapter 7 bankruptcy is generally filed by a person with a large amount of medical and credit card debts, does not have very much income, and does not own much property. The individual who would qualify for a chapter 7 bankruptcy would be a person with little or no assets, if you were to have many valuables, creditors could try and take those goods away. A bankruptcy allows you to discharge debts and bring families freedom from the stress they may be going through. After a couple of years of filing a bankruptcy you could be eligible for new loans, to start fresh. You could now realize what you are able to afford and not get stuck in a stressful situation. You can learn how to correctly manage money and not find yourself in a stressful financial situation again. You will be able to build your credit back up, and you will not hear the endless phone calls from creditors harassing you. If you are facing any wage garnishments, a chapter 7 bankruptcy would put an end to that, along with stopping any scheduled sale dates on a foreclosed home you may be losing. When you are finding it close to impossible to get by your day by day living expenses, and the situation you are finding yourself in may seem unbearable; a chapter 7 bankruptcy could be something you may want to consider.
The Palm Beach Post in Florida had a very interesting article about the future loan modification plans of Ocwen Financial Corp. We quote the article as follows:
Lenders have long resisted cutting loan amounts for struggling homeowners, fearing it would entice more borrowers to default.
But one locally based servicer, Ocwen Financial Corp., believes it has found a solution.
The company is rolling out a new loan modification plan for underwater borrowers that lowers the amount owed on the loan – thus reducing the monthly payment – but asks for a share in the appreciated value when the house is either sold or refinanced.
The kickback to the lender may deter people who can afford to make their payments from defaulting, while giving an incentive to either the lender or investor to modify the loan.
“We think this answers some of the critics who say that by reducing principal, you are rewarding imprudent borrowing behavior,” said Ocwen Executive Vice President Paul Koches. “What we see is unprecedented delinquencies, and we’re doing our best to resolve them
1. Payment Increase
Your mortgage payment has increased substantially from one month to the other. It was a shock to realize that your payments would adjust to the amount that they have reached, or, if you did realize they would, you could not reasonably foresee the catastrophic economic effects of the mortgage crisis on the economy. Another devastating reality is that your home value has fallen so drastically, it has diminished your options, such as refinancing the loan. Ramifications from this situation have caused severe economic depression in your business community, and due to the real estate collapse and its far reaching effects on lending, it has left you financially unable to recover.
2. Job Loss/Layoffs/Pay Reductions
Be sure to include your spouse and/or any person who normally contributes to your monthly household income. Review your pay stubs and hours worked. Gather any and all memos or notices received from your employer detailing your layoff or reduction in pay. Carefully note income declines over the last 1-2 years, and note the events which caused it, and the effects this has had on your economic situation and family.
Recently obtained employment pays you significantly less than your recent job. The economic down turn has had a serious impact on the current salary your new employer is willing to pay you. If you owned your own business, and suffered a significant loss of revenue, or lost your business all together, make certain you explain the situation to the Bank in great detail and have documentation readily available in case they request it. It is important that you reassure the bank that although you have lost a substantial amount of revenue or lost your business, you have the ability to reasonably sustain a regular monthly payment of a lower dollar amount.
4. Declining Business or Revenue
Sales are down. If you own your own business, are self employed, work for commissions, bonuses or tips, or earn income in any way other than as a company employee receiving a regular paycheck, and your income has decreased. A detailed profit and loss report prepared by a certified accountant will help you detail your economic losses to the Bank.
There are undisclosed yet obvious stress related effects of financial stress: clinical depression, marital estrangement, and increased alcohol and drug dependency and abuse. People can’t cope, so they start checking out. Subtly, these problems wipe out the very tools they need to survive financially. The physical, emotional, and psychological strain on people due to the financial crisis has worsened under the mortgage crisis. This has also contributed to higher medical expenses, attributing to the inability to pay their mortgages. A sick loved one, a death in the family, or a child with special needs can also take a financial tool on the family. Note that the Bank will take all of these circumstances into consideration, but ultimately your Lender wants a sense of security that you have a steady income to support a loan modification despite your obstacles.
Divorce is a financial wipeout. Most married couples experience financial strain – rich or poor – it is common. In these times, two heads are definitely better than one. If there is any way you can postpone divorce, swallow your pride and hang in there. Couples in divorce nowadays are faced with a rude awakening – their homes are worth less than their mortgages. For many, if not most , divorce now is a splitting of debts – not of assets. Financial survival dictates that couples stay together if possible. Divorce can mean financial suicide. Two incomes can mean having a home vs. not having a home. Nevertheless, if you have been divorces or separated, you have a definite financial hardship. Be prepared to provide the Bank a copy of your divorce settlement.
Fires, auto accidents, floods – any act of God, whether insured, uninsured, or partially insured. Setbacks to your cash-flow, or ability to generate cash flow are valid hardships.