Short Sales and Foreclosure Properties are hot topics these days in the real estate industry. They are also prominent among investors looking for bargains. These buyers focus on distressed properties thinking there is a deal to be made at the expense of the defaulting homeowner. Some real estate professionals work with these investors. Others strive to help homeowners facing loan delinquency and possible default.
During recent training sessions for REALTORS® in the St. George and Cedar City areas, information has been provided dealing with this subject matter. It has been this writer's privilege as an instructor for the NAR to help these practitioners to achieve the SFR Certification. One of the important elements of the program includes a presentation for agents to help homeowners who find themselves in this distressed and delinquent situation.
The material to which I make reference is that of trying to work with the lender for a "Workout" or restructuring of the existing loan to bring relief to the homeowner and prevent a foreclosure occurrence. Lenders may work with distressed homeowners to help them keep their homes by reducing or rolling back interest rates, forgiving back
payments, adding back payments to the loan amount, or possibly redoing the entire loan and wrapping all fees into a fixed rate mortgage.
The following is a review of some of the terminology and possible lender loan workout options contained in the course and outlines procedures and steps to be considered and applied in this process.
" * Forbearance. Lenders may let you make a partial payment, or skip payments, if you have a reasonable plan to catch up. Tell your lender if you expect a tax refund, a bonus, or a new job.
*Reinstatement. Reinstatement refers to making a payment that covers all your late payments, usually at the end of a forbearance period.
*Repayment Plan. If you can't afford reinstatement, but can start making payments to catch up, the lender may let you pay an additional amount each month until you are caught up.
* Loan Modification. Your lender may agree to amend your mortgage to help you
prevent foreclosure. The options include:
1. Adding all the missed payments to the loan amount and increasing the monthly payment to cover the larger loan.
2. Giving you more years to pay off the loan, lowering the interest rate, and/or forgiving part of the loan, to lower your monthly payment.
3. Switching from an adjustable rate mortgage to a fixed rate mortgage, so you aren't exposed to increases in your monthly payment.
4. Requiring amounts for taxes and insurance to be included with your monthly mortgage payment so you avoid big bills in addition to your mortgage.
* Sign Over the Property to the Lender in Exchange for Debt Forgiveness. This can
hurt your credit, but is better than having a foreclosure in your credit history.
Source: Reprinted with permission from the National Association of REALTORS® and the Center for Responsible Lending. Are You Having Problems Paying Your Mortgage? Learn How to Avoid Foreclosure and Keep Your Home. Available at: www.Realtor.org.
St. George REALTOR® Jim Coleman is Associate Broker and Partner/Owner of ERA Brokers Consolidated. He Specializes in Residential, Investment and Commercial Real Estate, holding National Designations of Accredited Buyers Representative (ABR), Certified Residential Specialist (CRS), Resort and Second Home Property Specialist (RSPS), Seniors Real Estate Specialist (SRES), Certified International Property Specialist (CIPS), GREEN Property Specialist, and Certified Short Sale and Foreclosure Resource Specialist (SFR). You can contact him by e-mail at Jim@JimColeman4Homes.com. Call: (435) 674-0600; or write: Jim Coleman, 201 East St. George Boulevard, St. George, Utah 84770. This and other columns are available at www.WinningTalk.com/articles.