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By Bill, November 22, 2008 7:19 pm

You might feel as if most lenders are big, bad bossies that breathe the foreclosure word down your neck every time you even look like missing a payment, but this is not so. Many people feel this way because when they try to do the right thing and contact the lender due to payment struggles, they either get a pay-up-or-else attitude, or find someone who tells them to ring back after it happens, not before. This causes a great deal of frustration.

 

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If you are trying to contact someone about your payment problems before you’ve missed a payment, ask for the loss mitigation department. They are the ones who will know what you are talking about and can advise you. Meanwhile, remember that the lender does not really want to be saddled with a home. What he wants is for his money to be earning him interest, free and clear of any other hassles.

If he has to foreclose, then he is in for a lot of hassles. His payment and his profit from the loan have stopped coming in. Filing for foreclosure is costing him money and so will all the rest of the procedures. He has to insure the house, maintain it and then market it. All this will make a big dent in the money he loaned. And he cannot be sure of getting back the amount he loaned out, let alone the interest on it. In fact, the only thing he can be sure about is that he will be saddled with a house he doesn’t want, that will cost him money.

Lenders frequently make a loan and then sell it, along with a lot of others to an investor. The servicer takes a part of the payment as his share of the investment and the rest is pooled and goes to the investors as dividends. Many times the lender you work with is not the actual lender, but the servicer. He makes the loan on behalf of another organization and is paid to collect the money, or ‘service’ the debt. When he has to foreclose, his income stream is dried up.

Even when the original lender holds the loan, foreclosure is a bad outcome for him. He is simply not likely to get all the money he would have made had the mortgage continued successfully over the years. Even when they sell the house to someone else, they don’t get anything that’s left over after their debt is paid. Anything left over has to go back to the borrower.

Finally as the problem of foreclosure has increased, lenders have been leaned on to make other provisions wherever possible. This pressure from FHA, and those two other bigwigs, Fannie Mae and Freddie Mac, has helped to turn the tide in the favor of homeowners – about time, too.

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By Bill, November 20, 2008 7:16 pm

If things have gone from bad to worse and your bank has decided to foreclose, don’t give up hope of keeping your home; there may still be some way to save it. For foreclosure to become a fact of life, you need to have missed more than one payment on your mortgage. Most often you will be at least three payments behind.

 

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The first payment you missed, the bank will send you a late notice. If you do nothing and miss the second payment, the bank will usually try to contact you. At this stage, they still want to help you resolve the situation. If no conclusion is reached, or if they cannot contact you then things go from bad to worse. They may allow another late payment, or they may invoke your acceleration clause instead.

An acceleration clause is when the whole of your mortgage comes due all at once. In other words the bank wants all their money right now. No waiting for thirty years to pay it off. You must pay the whole lot, including all the interest, costs and fees, immediately. This procedure is known as “calling the loan”. It is also the point of no return.

When the bank calls the loan, you need to get a good attorney – because you need legal help. You need an attorney who knows all about foreclosure law and can protect your rights. Strangely enough, it may still be possible to save your house.

But if you do nothing, then the bank will continue with the foreclosure and you will find an eviction notice in your mail within 6 to 12 months, depending on how aggressively the bank pursues their course of action. By the time you get that, your home will have been sold to the highest bidder.

However, with the right attorney to advise and work with you, you can file a Chapter 13 bankruptcy claim and stop the foreclosure in its tracks. This doesn’t mean that you’ll get away with not paying any more debt. It simply gives you time to breathe – and prepare other plans.

If you are delinquent on your mortgage payments, then you could well have other creditors hounding you. Once you’ve put in place the legal foreclosure prevention it also applies to other creditors. All must stop trying to collect moneys owed. Secured debt must still be repaid in full, but unsecured will have to be satisfied with a ten cents in the dollar amount.

The new payment plan that you get under a Chapter 13 will last for up to 5 years, giving you ample time to get back on your feet.

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By Bill, November 18, 2008 7:12 pm

Myths are a bit like gossip, the more they are repeated the worse they become. And in most cases they are not true to start with. All bad things bring their own spate of myths and gossip and foreclosure is no exception. One of the most common myths in foreclosure is the one that banks want your house so they can resell it at a profit.

 

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This is just not true; banks are in the business of lending money, not real estate. True, when they are forced to repossess a home they do resell it to try and get their money back, but they don’t make anywhere near as much as they would have, had the loan continued. That is why you should be quick to seek help from the bank as soon as you know there could be difficulty paying up.

Some people think that the bank won’t accept their payments and there is nothing they can do. This myth may have sprung from people trying to make a partial payment without contacting the bank first. A bank – or any lender – wants the full payment agreed upon at settlement, not a portion of it.

Another myth that is current is that you have to move out on the same day you receive the foreclosure notice. Nothing could be further from the truth. The wheels turn slowly and you could have up to 12 months before you need to move out.

Some people also believe the myth that if they file for bankruptcy it will save their house. It won’t. Filing for Chapter 13 bankruptcy will delay foreclosure proceedings, but you still need to do something else to save the house…like pay for it.

People may also believe that once the bank has their house, that is the end of all their debt. This is not necessarily true. The bank is legally able to file a deficiency notice on you if they don’t get enough from the sale of the house to cover their debt. This option is not always taken up, but it is sometimes.

And if you’ve heard that once foreclosure has started it cannot be stopped even if you somehow pay all you owe them, then that is a myth too. Banks are legally obliged to accept the money and stop foreclosure.

Another myth is that when the bank takes your house, they can also take all your goods. That is not true. If it can be carried, it can be taken with you when you go. If it is attached to the house, then it should be left. There is also a myth flying around about the legal fees. Just because the bank started the process does not mean that they are responsible for the legal fees. You are and if that doesn’t seem fair, remember that it was not the bank that started it at all; it was your late or missing payments.

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By Bill, November 16, 2008 7:09 pm

Foreclosure is more common these days than ever before. This has come about by unscrupulous lenders offering ‘easy money’ mortgages to those who want a home but really cannot afford the repayments. These people do not understand that once the time low interest rates is up, they will then have to pay a great deal more as their interest will soar. All they look at is what they have to pay back right at the present time. They may not understand either, that there is more to pay in fees, taxes and other costs associated with the loan.

 

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Some people do not understand that an adjustable rate mortgage will have very high interest after the ‘teaser’ period is up. They may think that there is as much chance of the interest rates falling as there is of them rising, but this rarely happens. If you want to be able to depend on your payments staying at the same amount for the life of the loan, a fixed rate is what you should opt for.

The lenders simply want to have a great many mortgages that they then bundle up and sell to another company. The second company is not personally associated with those who have taken out a mortgage. They just assume that these people can pay and if they cannot, wham! They hit them with a foreclosure notice.

Foreclosure often happens because life happens. No life is perfect and ideal. Costs rise; accidents happen; cars get trashed; teeth need fixing; people get cancer or are injured. The borrower may lose his job through no fault of his own. Sometimes simply having children unexpectedly can put a big dent in your budget. So these things happen and it takes more money than you expected. Some of the fault may lie with the lender, who pressed more money on you than you could really afford.

All he thought about was the interest he could make. You didn’t think it through because all you could see was that enticing vision of your dream home – one that had four bedrooms and a swimming pool. Suddenly you don’t have the money for the mortgage payment. If you don’t do something about it quickly, the next thing you know there is a foreclosure notice in your mailbox.

We all need to think about what we are taking on and make sure we can afford it for the thirty or so years that paying it off will take. It’s much better to buy a cheap home and be able to keep it, than buy an expensive one and lose it in a year or two.

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By Bill, November 14, 2008 7:09 pm

There are several ways to stop a foreclosure, but the best way is to prevent it from happening in the first place. To do this, you must act before your lender files that notice of default. If you call your lender as soon as you know that your payment will be late – or that it will remain unpaid, then you may be able to work out a solution together. Calling early will give you a lot more options.

 

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A lender may agree to forbearance, which is agreeing to wait for a specific time period before starting foreclosure proceedings. This can give you some breathing space to come up with the payment. Or if you have already missed payments, he may allow you to repay them by spreading them out over several months and adding them to the monthly payment. This is called a partial payment plan.

Your lender may agree to refinance the loan so that the payments are more affordable. He may also agree to reduce the interest, extend the low interest period or change the loan to a fixed rate, rather than an adjustable rate. The lender may also agree to add the missed payments onto the loan balance, so that you don’t actually have to pay extra each month to make them up. This is all known as refinancing.

If the Notice of Default has already been filed, you can stop foreclosure by selling your home. You may need to drop the price to get it sold quickly, though, so be sure that you still get enough to pay your other costs. In some cases your lender may agree to a short sale, but mostly they don’t like this option, as it does not cover the full debt owed. A deed in lieu is another option discussed elsewhere in this ebook.

If foreclosure proceedings have been started, you can stop them if you file for Chapter 13 bankruptcy in the approved manner. This should always be a last resort. You still have to make the payments under the Chapter 13 bankruptcy plan, and failure to do so will restart the foreclosure proceedings.

Another way to stop foreclosure before it starts is to keep on making payments regularly, even though you have missed one, or even two payments. While you may not be able to afford the extra payments that are now due, you will at least not be in arrears for the current payments. This will make your lender more amenable to helping you.

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