HOPE Failure

The original HOPE plan had asked lenders to voluntarily refinance delinquent borrowers’ mortgages by reducing their principal balance on loans to 90% of a home’s current market value. The plan was supposed to then have the new 30-year fixed-rate loans backed by FHA. Under the new Affordability and Stabilization Plan, lenders would only have to write down to 93%.

The key reason why lenders refused to use the plan is that they don’t favor writing down mortgage balances.  Instead they would rather lower interest rates and extend loan terms. However, this strategy did not work because 50% of the mortgages that were modified the last six months, the borrowers have defaulted again.  Under the old plan, borrowers would have had to agree to pay back the government 50% of any future profits received on the home as well.

Hope for the New Plan
Under the new plan, borrowers do not have to pay back any profits if they remain in the home for 36 months.   Also, there are incentive payments to loan servicers in the sum of $1,000 for participating in the plan.  The new plan is more favorable to both homeowners and servicers because it not only reduces mortgage payments by lowering interest rates and/or extending terms, it also provides for lowering the mortgage balance. It is hoped that it will do much more good than the old HOPE plan.  One key element of the new plan is that borrowers are only allowed to modify their mortgage one time.

So if you do not have sufficient income to pay the new monthly mortgage payment, you will not qualify for the new plan, and need to find other options to save your home from foreclosure.

Other Options Available
Such options may include a deed in lieu of foreclosure, short sale, selling the home if there is equity, refinancing, and as last resorts letting the home go to foreclosure or filing bankruptcy.  It is recommended that you work with a mortgage modification company or an attorney who can assist you in choosing the best option for you.

As always, thanks for reading this post and if you enjoyed it be sure to comment below. Also, check out our FREE 2009 Loan Modification Guide: Saving Your Home From Foreclosure.

The Beginning
The lender will send out written notices letting the homeowner know how much they owe and how far behind they are on their mortgage payment. At this point, the homeowner should contact the lender if they have not done so already and see if they can work out a payment plan such as a mortgage modification or refinance, reinstatement, etc. to catch up on the payments, or sign back the home to the lender with a deed in lieu of foreclosure. In some instances, the homeowner will decide to sell their home in a short sale, asking the lender to take a reduced amount on the mortgage balance. If the homeowner does have equity, then they will be able to sell the home and pay off the mortgage.

Where none of the above solutions can be negotiated, the lender will start foreclosure proceedings by either filing a notice of lis pendens with the court (judicial proceedings), or filing a notice of default (non-judicial proceedings), serving all parties, and publishing the required notices in the newspaper of general circulation in the county where the property is located.

Keep in mind though that lenders would rather resolve the default with the borrower then institute foreclosure proceedings because the average foreclosure costs the lender approximately $50,000.00.

Middle
During the time the proceeding is instituted, the borrower has a statutory period of time to respond and defend themselves against the foreclosure, and/or to redeem the property prior to the sale or reinstate the loan by paying the arrearages and any fees and costs. The redemption periods are based upon state statutory law.

In a judicial proceeding, the court will issue an order for the sale of the property. In a non-judicial proceeding, the trustee will record a notice of sale with the county recorder’s office. The notice of sale in both proceedings will be published in a newspaper of general circulation in the county where the property is located. A notice of the sale will also be posted at the courthouse and at the property with the information about the date of the sale and the contact person or if the sale has been postponed.

End
The last stage of the foreclosure process is the foreclosure auction sale, which is typically conducted at the courthouse steps or some other place designated by the sheriff or trustee. This again depends upon what type of foreclosure action is instituted and the laws of each state.

The highest bidder will be awarded the property. Generally the bidder is required to bring a cashier’s checking representing 10% of the purchase price in order to bid. Some states require the entire amount of the bid to be paid at the end of the auction. Title will then be transferred to the new buyer. The new buyer takes the property in an as is condition and will have to clear any title issues, evict any tenants or owners still remaining on the property, and will not be able to obtain title insurance.

Some states also allow the lender to file a deficiency judgment against the former homeowner/borrower for the difference in the amount the borrower owed on their mortgage and what the property sold for at the foreclosure auction.

If there are no successful bidders at the foreclosure sale auction then the bank acquires the property back and it becomes a bank owned property or real estate owned (REO). At this point, the title and back taxes and liens will be paid off by the bank. The time period between the sale and actually listing the property could be as long as a few months or more until the property is ready to be marketed. Sometimes the bank will make repairs to put the property in a condition that it can be sold, such as repainting and replacing carpet.

The property will then be listed with a Realtor who will market it through the local MLS and other resources to attract buyers to sell the bank owned property. Title insurance will be able to be obtained by the new buyer, and the buyer will be able to conduct an inspection of the property. REO properties are sold in an “as is” condition. Bank owned properties are usually priced at or slightly below market value.

As always, thanks for reading this post and if you enjoyed it be sure to comment below. Also, check out our FREE 2009 Loan Modification Guide: Saving Your Home From Foreclosure.

Mortgage Modification Company
A mortgage modification company negotiates mortgage modifications and refinances on a daily basis. If fact, many of the people who work for the companies are former mortgage brokers and Realtors. Since they are experienced and knowledgeable about the mortgage industry, it is natural that they will be able to help you with your negotiations because they understand how the process works.

This is their business and they do it well. They have established relationships with lenders, loan services and loss mitigation departments. Many of them are former employees of lending institutions. There is something to be said about hiring someone that has been down in the trenches issuing mortgages and doing refinancing on a daily basis.

Real Estate Foreclosure Defense Attorney
While a real estate foreclosure defense attorney is knowledgeable about the real estate and foreclosure laws, up until a couple years ago they were not negotiating mortgage modifications because no one was even requesting them. A foreclosure defense attorney is the best person to use if you are in a litigation foreclosure matter or your lender is initiating a foreclosure procedure against you because the attorney is the only qualified person that can legally defend you in this regard. Attorneys do not get involve with mortgage refinancing other than to review the documents normally.

Also, you would want to use an attorney to do a forensic audit or review of your mortgage documents to help you defend your legal rights in case you were a victim of predatory loan practices.

While both are qualified to negotiate a mortgage modification, the mortgage modification companies specialize in this type of work and their rates are usually less than what an attorney would charge. In fact you may need to hire both if you are in a litigation foreclosure action and your lender has already instituted proceedings against you. The attorney can defend you in the court or litigation action, and the mortgage company can be negotiating a refinance and or modification at the same time to help stop the process.

Check around and get referrals for both the mortgage modification company and the attorney. Choosing the wrong person or company can be devastating to you if you waste time and money trying to get help from the wrong person.