32 Ways to Stop Foreclosure - Online Text -Final

―32 Ways To Quickly Stop Foreclosure‖ © Homeowners United 2011

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32 Ways to Quickly Stop Foreclosure – a Complete Course

for Homeowners by Dave Dinkel

“Discover What Banks Won’t Tell You and Investors Don’t Want

You to Know!”

“How To Gain Back Control Of Your Personal Finances By Putting The Brakes On All Those People And Institutions Who Want To Take Your Home And Make Money

Off Your Personal Financial Hardship.”

Included are FIVE Special Bonus Reports: Bonus Report #1 - Making Money with Your Home, Even if You Lose It

Bonus Report #2 - Getting Your Home Back at 50% to 90% of Loan Value Bonus Report #3 - Secrets of Lease Options for Homeowners

Bonus Report #4 – Buying a Home (Possibly Yours) at the Foreclosure Auction

Bonus Report #5 - Do-It-Yourself Credit Repair for Homeowners


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GENERAL DISCLAIMER The Author is not an attorney, CPA, or a Realtor® and any information derived or found in this book is NOT to be construed as legal or accounting advice. See an Attorney or CPA if you have any questions about statements in this book before you take any legal or accounting action on your own. The Author’s comments about Realtors®, Real Estate Investors, Attorneys, and any other professions mentioned in this book are not meant to be any indictment of character or generalization about any group or any individuals. The Author believes any and all statements in this book are true to the best of his knowledge. For no specific reason, other than to save space, we have used the male gender (his, he) in all places where the female gender (her, she) would fit equally as well. Limits of Liability and Disclaimer of Warranty: The author and publisher of this material have used their best efforts in preparing this information. Dave Dinkel, Homeowners United, Inc., and/or Heritage Realty Services, Inc. make no representation or warranties with respect to the accuracy, applicability, or completeness of this material and its contents. They disclaim any warranties either expressed or implied, merchantability, or fitness for any reason or particular purpose. The author, publisher, and the above mentioned companies shall in no event be held liable for any loss or other damages, including but not limited to special, incidental, consequential, or other damages. The advice of competent legal and tax or accounting professionals should be sought if the purchaser has any questions what-so-ever.

This Manual contains material which is protected under Federal and International Copyright Laws and Treaties. Any unauthorized use of this material will result in severe civil and criminal penalties. Violating parties will be prosecuted to the fullest extent of the law. All rights reserved.

-WARNING- If you haven‘t been contacted by a horde of investors, realtors, investors disguised as

professionals who want ―to help you keep your home‖, lenders, attorneys, mortgage brokers, and even outright scam artists, - YOU WILL BE SHORTLY! A few of these individuals could possibly have a product or service that may make sense to your financial well-being but these are FEW and FAR BETWEEN. For your sake, trust no one!

Read this Manual so you are informed of what choices you have and specifically,

what options no one else will tell you! We STRONGLY suggest you DO NOT SIGN ANYTHING, unless your attorney reviews it first. We always ask homeowners we work with to give us their ―incoming‖ correspondence so we can review it. At least 25% - 50% of these letters, postcards and other written documents contain Fraudulent Information, because the industry is almost entirely unregulated! Do not let yourself be duped into making a decision that you can’t change.

The single worst enemy you face is PROCRASTINATION! If you hesitate or are indecisive, you will likely lose your home to foreclosure. To save your home or to stall for time to sell it at the highest possible price you will need to take action immediately. Frankly, it is very therapeutic to KEEP MOVING toward a resolution in what can be a very depressing situation.

Take charge of your life today by reading this text completely and as soon you can. The highlighted areas and colored print were placed here to stress their importance. Set aside quiet time to read this text and finally, keep yourself active daily by making a list of what needs to be done and, no matter how aggrieving, get the list completed each and every day.

Whatever you don’t want to do, that is exactly what you should do FIRST!


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TABLE of CONTENTS PAGE

Cover Page 1 General Disclaimer & Warning 2 Table of Contents 3

Introduction 7

CHAPTER 1 - Understanding the Foreclosure Process 12

Types of Liens Where Foreclosure Is Possible 13 HOA Liens 13 IRS Liens 14 Mechanics Liens 14 Tip #1 - Sub-contractor Payments 15 Municipal Code Violation Liens 15 Mortgages 16 Tip #2 - Cost of Prepayment 16 Types of Mortgages 17 Tip #3 – Accelerated Prepays 17 Conventional Mortgages 17 Adjustable Rate (ARM‘s) 17 Second or Third Mortgages 17 Home Equity Lines (HELOC‘s) 18 Hard Money Loans 18 Government Insured 19 FHA 19 HUD 19 VA 19 FHA HUD Reverse Mortgage (HECM‘s) 19 Tip #4 – Getting ―Good Faith‖ 20 Tip #5 – Which to Pay? 20

Judicial Foreclosure 20 Tip #6 - Seconds are $$$ Makers 21 Tip #7 - Partial Payments Non-solution 22 Tip #8 - Behind Again and Out 22 Tip #9 - Get it in Writing 23

List of ―Mortgage and Deed of Trust States‖ 24 EXTREMELY IMPORTANT 26 The Actual Process of Judicial Foreclosure 26 Tip #10 - Don‘t Answer the Phone or Door 27 Tip #11 - Summary Final Judgment 29 Tip #12 - SCAM ALERT Beware at Hearing 29 7 Possible Reasons for a Continuance 30 3 Reasons the Court May Not Grant a Continuance 31

Tip #13 - Supervisor Interventions 31 IMPORTANT NOTE – How Long Can I Stay? 31 Tip #14 - What is the Difference 34 The Actual Process of Non-judicial Foreclosure 35 Eviction – What to Expect 36

CHAPTER 2 - Determining Your Ability to Keep Your Home 39

Tip #15 - Relapse Rate & Its Consequences 39 Tip #16 - Single vs. Dual Contracting 39 Sample Monthly Income and Expense Estimator 40 Your Monthly Income and Expense Estimator 41 Tip #17 - Special IRS Lien Treatment 43 So What is Your Decision? 45

CHAPTER 3 - Determining The Amount of Equity in Your Home 46

The Majority of Foreclosures Are of Two Types 49


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1.) Refinance and Cash Out 49 2.) Personal Crisis 50 Extracting Your Home‘s Equity 51 Minimal Equity 51 Tip #18 - Deed in Lieu of Foreclosure or Not 51 Some Equity 52 Large Equity 52

CHAPTER 4 - Understanding Your Mortgage 54

Tip #19 - Seller Financing 55 Do You Have a Mortgage or a Deed of Trust? 56 Important Features of Deeds of Trust and Mortgages 56 Your Monthly Mortgage Statement 57 Tip #20 - ARM‘s, Resets, & Penalties 57 Tip #21 - Same Lender Application 58 Soft and Hard Prepayment Penalties 58 Types of Ownership 60

CHAPTER 5 - Specific Methods of Stopping or Postponing Your Foreclosure 61

Tip #22 - SCAM ALERT – ―I was at the courthouse‖ 61 Tip #23 - SCAM ALERT – Deed Stripping 52 Tip #24 - SCAM ALERT – Contract Wrangling 63 Tip #25 - SCAM ALERT – Equity Rebate 66

Summary of What Not to Do (Don‘t Do‘s) 67 32 Ways to Immediately Stop or Postpone Your Foreclosure 68

Methods of Keeping Your Home 68 #1 Friends and Family 68 Tip #26 - Get Confirmation of Partial… 69 Tip #27 - Options for CD‘s 69 #2 Stocks and Bonds 70 #3 Second Home Financing 70

#4 Home Equity Line at Your Bank 72 #5 Home Equity Loan Other than Yours 72

#6 Challenge Legality of the Foreclosure Docs 73

“How to Defend Yourself in Court” 74

Start Your Legal Action Before Your lender Does 76 10 Common Legal Challenges for a Foreclosure 76

Defense #7 Forbearance Agreement 80 IMPORTANT – It Isn‘t Over Just Because You Signed 82 #8 Small Second Mortgage 82 Tip #28 - SCAM ALERT – ―I can do it … oops!‖ 82 #9 Refinance Delinquent Loan 83 #9A Reverse Mortgages 84 Tip #29 - How Not to Loan Shop 84 #10 Outside Funding 85 #11 Employer Advance 85 #12 Liquidate Assets 86 Tip #30 – Ask Again and Again 86 #13 Rent-a-Room(s) 86 Tip #31 – Guideline for Rooms 86 #13A Format Change 87 #14 Rent Your Home 87 #15 Only for FHA, HUD, and VA Loans 88 WARNING – Violation of Federal Law 88 EXTREMELY IMPORTANT – Rights under SCRA 88 #16 Credit Cards 89

Tip #32 - Quick Credit Score Boost 89 #17 401-K Retirement Loan 90


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#18 Cash Value Life Insurance 90 #19 Employer Hardship Advance 79

Tip #33 – Repeated – Second for Insurance 90 VERY IMPORTANT – If Unemployed 91

#20 Grant Money 91 If You Have to Sell Your Home 91

#1 Talk to Investors 91 Tip #34 – New Laws Effecting Your Rights 92

Tip #35 – Whose Name, Who is Responsible 92 #2 Lease Option 92

Tip #36 – Avoid a Law Suit 92 Tip #37 – Court Hearing Exception 92

#3 Sell ―Subject To‖ Existing Mortgage(s) 93 #4 Sell Your Home as a Wholesale/Retail 94 #5 Sell as an Equity Split 94

Tip #38 – Splitting it Up 95 #6 Sign a Sales Contract 96 #7 Sell Using a Modified Auction Procedure 96 #8 Short Sale Strategy 97 26 Common Hardships for Short Sales or Loan Mods 97 #9 Combo of Strategies 100 ―Cash for Keys‖ Programs 100 Tip #39 – Investor Feeding Frenzy 101 IMPORTANT – Buyer‘s Agent Only 101 #10 File Chapter 13 Bankruptcy (or Not) 101 EXTREMELY IMPORTANT 102 Tip #40 - Bankruptcy vs. Foreclosure 103 #11 Deed in Lieu of Foreclosure 103 IMPORTANT NOTE – Deed in Lieu vs. Foreclosure 104 Hot, Hot, Hot Money Making Idea 104 Tip #41 – Asset Info That Will Come Back… 105 #12 Secret Method Not Disclosed Elsewhere 105 Tip #42 - Repeated- HUGE SCAM 106 Tip #43 – How to Get Escrowed Funds 107 Reviewing Your Escrow Options 107 Beware – Predatory Loans 108 Tip #44 – Negotiating With Investors 109 Foreclosure in a Probate 110 Another Word of Caution – ―I have a buyer for …‖ 111 Real Estate Investor‘s Foreclosure 112 Tip #45 - Double Your Advertising 112 Tip #46 – Appraisal Restriction 113 In Summary 113 Summary of Homeowner Strategies 115

CHAPTER 6 - Quick Start Check List to End Your Foreclosure 116

Check List – Day-by-day, Step-by-Step 118 What to Say to Investors 119 What to Say o Realtors® 119 What to Say to Mortgage Brokers 120 Getting Started 122 Part 1 122 Part 2 124 Contact Checklist 127 Summaries of Strategies 130

BONUS Report #1 - TOP SECRET – 12 Ways to Make Money From Your

Foreclosure, Even if You Already Lost Your Home 131 Twelve Ways to Make Money Even If You Lose Your Home 132


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1. Investor Abuse 132 Super Powerful Information - Statute of Limitations 133 2. Loan Reinstatement 133 3. Predatory Lending Practices 134 4. Elder Abuse 134 5. Right of Redemption 135 6. Overage 135 Tip #47 – Illegal Actions for Overage 135 Tip #48 - SCAM ALERT – Worthless Deed? 136 7. Money Opportunity at the Auction 136 8. Get Rid of Nagging Junior Liens 137 9. Sell Everything 138 10. Victims‘ Funds 138 11. Judgment vs. 1099C 138 12. IRS Workout 139 UNIQUE OPPORTUNITY – Renter Buys 140

BONUS Report #2 - TOP SECRET - How to Get Your Home Back at 50% to 90% of Loan Value 141

Tip #49 - SCAM ALERT – Some Lease Options 141 Tip #50 – Extinguish vs. Transfer 144

Tip #51 – Larger Discount Request 145 What is the Difference Between a Short Sale and a Short Pay 147 What You Can Expect to Supply to the Lender 148

BONUS Report #3 - TOP SECRET - Secrets Homeowners Should Know About Lease Options 153

Two Ways to Keep Your Home Using Lease Options 154 Lease Option Out 154 Tip #52 – Special Signage 155 VERY IMPORTANT – Option Consideration 156

Lease Option Yourself 156 Tip #53 – One vs. Two Agreements 156

BONUS Report #4 - TOP SECRET - Buying Your Home Back at the Foreclosure Auction 157

Tip #54 – Finding a Buyer 158 Tip #55 – Redemptive Rights 159 Tip #56 – Stick to it Pricing 162

BONUS Report #5 - TOP SECRET - Do-It-Yourself Credit Repair

for Homeowners 163 Tip #57 – How long Bankruptcy - NOT 10 Years 164 Getting Started 164 Tip #58 – FRAUD ALERT 165 Tip #59 – Exceptions to One Free Report 167 Tip #60 – Cost for Mortgage Broker to Pull 167 Tip #61 - Reporting Identity Theft 167 How the Credit Scoring System Works 168 42 Ways to Improve Your Credit Score or Get Payback 169 Tip #62 – Medical Bill Minimal Repay 173 Tip #63 – Divorce and Credit Issues 177

General Information on Credit Report Codes 177 The Bankruptcy Myth 179 US Department of Housing and

Urban Development Foreclosure Information 182 In Closing & General Disclosures 192 GLOSSARY 193


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Introduction

Congratulations on purchasing this book and taking the first step to resolving your foreclosure. You are to be commended for taking control of your situation and not falling into the foreclosure trap that over 2,000,000 homeowners will experience in the next several years. We have found that the knowledge in this text, combined with immediate action on your part, will achieve the goal of getting a foreclosure stopped or postponed very quickly – sometimes within 24 hours or less.

The not so obvious benefit of stopping your foreclosure is to keep your

credit score as intact as possible and get you into a credit repair mode for the future. Your credit score dictates how much your insurance rates will be, your ability to get a job, and more obviously, how much interest you will pay on consumer loans. A single percentage point of higher interest rates on these loans will easily become tens of thousands of extra dollars you will have to pay in the future.

This book contains everything to take you through all the methods that are used conventionally and many ―underground‖ but legal methods of stopping foreclosure and possibly profiting from your foreclosure - if your foreclosure does happen.

You will be learning secret tips and tricks that investors, lenders, mortgage brokers, and even attorneys will not tell you. They won‘t tell you because it is not in their ―financial‖ best interest since they won‘t be able to steal your home at a ridiculous price, charge you exorbitant fees, or make huge chunks of money that YOU should be making. As soon as possible, read this complete text so you get a head start on taking appropriate action to save your home. It also contains 80 tips, hints and scam notifications that will help you make your journey easier and reveal useful information that you can use in the future. Included is Bonus Report #1 which details twelve methods of making money even if you lose your home to foreclosure and since the statute of limitations is as much as seven years in some states, you can use these techniques to possibly get back some of your lost money or equity from your foreclosure.

Foreclosure is the result of a homeowner not being able to pay his mortgage or in more and more cases, not wanting to pay his mortgage. It usually starts because of a job loss; disability income loss; divorce; death of a wage earner; serious illness of a family member and the resultant medical bills; or in the growing trend in the United States, because the homeowner re-financed with the intention of cashing out his equity and never making any


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further mortgage payments. Whichever situation caused you to stop making your mortgage payments, or if you are contemplating not making your mortgage payments, we have solutions for you!

Foreclosure is a great travesty and a true blight on today‘s society that

results in the breakup of families, horrendous financial loss, and continuing financial costs because of credit damage to the foreclosure victim. The foreclosure victim‘s credit has been first damaged because of his late payments and if a foreclosure results, the victim will have his credit score impacted for at least 5 years to come.

The lower a person‘s credit score, the higher the interest rate charged

on all future items he finances. The lower the credit score, the greater the reason for a lender to make a ―windfall‖ profit on the same loan they would have financed otherwise at a lower rate because most large loans are collateralized by major items (i.e. homes, automobiles, boats, etc.).

The goal of this text is to help homeowners to either save their homes or, if possible, to get the most possible equity out of their homes if they are forced to leave. You will see that you don‘t have to have any equity in your home to walk away with money – if you know how to do it. The strategies you will see work for homeowners who have little or no equity, some equity (10% - 15%), and large amounts of equity (15%+) – in essence, everyone facing or already in foreclosure.

Our intent with this book is to do what is best for you, the homeowner,

and you should be forewarned that we will be stepping on the toes of investors, Realtors®, lenders, and attorneys because their interests are to make money off your personal crisis. It is just a business decision to them and your situation is just an ―opportunity‖ to make money for them.

Am I being harsh on Realtors®, lenders, attorneys and investors? No, because what I will be disclosing to you are the truths about a few individuals in their professions. Not every ―professional‖ is unscrupulous, many are fine people, but one bad apple can spoil the whole barrel. My goal is to help you to be able to decide for yourself who can actually help you and why.

If you aren‘t going to make them money, they may have no altruistic

goal of helping you. Frankly, you are at the bottom of the ―food chain‖ and some of these individuals are the sharks looking to take chunks of money from your property. However, we will show you how they can help in certain situations and how to ―work‖ the investors to your advantage as options of last resort. Everyone of these ―professionals‖ have their place, you just need to be informed about how to handle them – but, you must take control of your situation and we will show you how.


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We will also be discussing various scams and near-scams that you will

be hearing or seeing from various ―professionals‖. While we have seen numerous ones, one of the most offensive ploys is having an investor pose as a “Consultant” and having you pay him $900 - $1,300 to fill out a lender form called a “Reinstatement Request”, or a “Forbearance Agreement”.

You can fill these forms out yourself or if you need help, get an attorney

to help for 1/2 to 1/3 of the investor‘s (Consultant‘s) fee! With an attorney you have his malpractice insurance to make a claim against if he does something wrong. With an investor you have little recourse other than a civil suit unless your state has specific laws against this practice and similar practices in loan modification and short sale scams.

A growing number of states are passing strict statutes and regulations

governing these types of transactions because of investor, Realtor® or attorney abuses of homeowners in foreclosure. The above documents are legally binding obligations and should be filled out or reviewed by an attorney – not a person portraying themselves as a professional or expert.

Since 1975 I and my associates have worked with literally thousands of homeowners to help solve their pending foreclosures. In most cases we have been able to either help the homeowners get as much equity out of their property as possible if they had to leave, or help them stay in the property if they could afford to stay. These homeowners are mostly honest hard-working people, who about 95% of the time, want desperately to stay in their homes and continue their life.

This is not much to ask, but once the lender files a foreclosure notice

with the courts, their pending foreclosure immediately becomes public record and the hungry sharks will start sending you mailings, calling you using sophisticated telephone scripts, and even start knocking at your door to get there before their competition (other investors, mortgage brokers, attorneys, Realtors®, etc.). Very often, these sharks will know before the homeowner that the bank has filed a foreclosure proceeding against the homeowner!

We don‘t work with foreclosure victims as investors unless our proposed

solution is a ―win-win‖ for all parties (the homeowner, us, and the lender) involved. Ironically, some times, because of the resale of loans, the lender involved has made accounting mistakes and the resolution is as simple as showing the lender the problem. So after 36+ years investing in real estate, we thought we had seen most everything, but we are often shocked by the


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material we see mailed to homeowners and the statements and promises some greedy individuals make to homeowners in their worst time of need.

To the best of our knowledge, the text you are about to read reveals

some secrets of the real estate and banking industries that have never been revealed to the public. Again, we are focused on helping you either keep your home, or getting you as much equity out as quickly as possible if you have to leave. I would love to show you the internal memos and the ―confessions‖ insiders in the major lenders‘ mortgage departments have disclosed to me – mostly because of pure guilt on their part. I can‘t because the banks have deep pockets for legal matters and I don‘t need to win in court to know I am right – just helping others is my reward.

We will also help you determine if you can afford to own your home

because you need to take this into account when making your decision about staying or leaving. Unlike any book, text, or individual that we have read, interviewed, or been involved with, we will disclose the ―Best Kept Secrets‖ of real estate investors so that you may still be able to make money on your home - even if you have already lost it to foreclosure!

To our knowledge, no one has ever disclosed this information to the

public and especially to the foreclosure victims. We do know that some investors have used these techniques to get equity from a property that was due to homeowners who didn‘t know they had money coming or how to get these funds. You will learn how to do exactly this in this text!

The most important thing that you can grasp, and please do so IMMEDIATELY, is that your

foreclosure is TIME SENSITIVE! The longer you wait to get started, the fewer options you‘ll have

available. You have many options available to get money out of your home, AND possibly even if you lose your property or HAVE ALREADY LOST IT. You may have as many as ten possible ways to still make money or save on potential liabilities (see Chapter 6). HOWEVER, if you want to stay in your home you must get started NOW.

Start by reading this text completely, except for parts that do not apply to

your situation, and start taking action to make your plan as quickly as possible. Everything you should need to start is in this Manual and has been consolidated into lists for your convenience and ease of use. The hints and tips are strategically located in the text after an important related topic.


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The biggest misconception foreclosure victims have is that they will have to pay off their entire mortgage to stay in their home. This is very rarely true, so we will be focusing on the ways to keep you in your property that are the best for you. Please read this text in its entirety before you start assuming any path to take, including a foreclosure defense.

In the heat of battle with your lender(s) there often comes a time when it

seems very easy to just walk away. You may even believe you are hurting the lender by giving them your home back. Nothing is further from the truth! By walking away, you are hurting yourself beyond what you can believe and you may not even feel the bank‘s wrath for 4 – 5 years. You will see solutions in this material that allow you to legally take revenge on your lender – but you must stay in the fight to go on to victory. Victory has many meanings but for us it means you came out with the best possible resolution to your foreclosure.


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Chapter 1 Understanding the Foreclosure Process

Even though you may already be involved, or you are just contemplating

getting into the foreclosure process, it is important that no matter how much you think you know about the foreclosure process, you should read this chapter so you completely understand the fundamentals of how the system works.

This chapter may help answer questions that you may not know exist

and that you may not have realized before you got into foreclosure. Stick to it and read everything in this text, unless it is obvious that it doesn‘t pertain to you. Specifically, skip over any of the 32 methods of stopping or delaying your foreclosure, the type of foreclosure process that affects you - judicial, non-judicial, or any other special foreclosure process I discuss that may not pertain to you. In the foreclosure defense section, I have additionally included the 10 most common foreclosure defenses.

Let‘s get over the first issue right now – whether you believe your lender

or mortgage broker misled you, or even defrauded you, it is the courts that will have to decide that issue. You can start by asking Legal Aid Services in your community about how you can take action against the company or individuals that got you your mortgage. You will be reading about legal defenses and what has worked and what hasn‘t worked except to generate legal fees in the coming chapters.

The lender‘s agent gave you a ―contract‖ which you signed in at least

duplicate, and it falls under what is called Contract Law. This means if it is in writing in the contract, and the contract is legal under the law of your state, it is the law. It is wasted effort to vent your anger on either the mortgage broker or the lender at this time. There is a time and a place to do this and we will discuss it later. FIRST, focus ENTIRELY on resolution of your foreclosure or you will lose your home.

Let‘s review the foreclosure process and where you fit in it. Foreclosure

is the legal process of a lender taking legal action to claim a property which has a lien (mortgage or deed of trust) against it that was issued by the lender, or purchased by a mortgage assignment, and is currently in default. The foreclosure process is regulated by the state in which the property is located and administered by the county court system, but varies depending on which type of legal jurisdiction the State has chosen.


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Either you live in a Mortgage State, a Deed of Trust State, or a state that uses a combination of both procedures. The difference is that most Mortgage States use the ―Judicial Process‖ and the Deed of Trust States generally use the ―Power of Sale Process‖.

In the following pages, we have enclosed a list of each State and its

method of handling the foreclosure process, but we also suggest strongly that you discuss the exact process with your attorney. This is because the exact process in many states is dependent on the language in your mortgage contract.

This contract clause is VERY IMPORTANT because it can cause a

lender to have a judicial proceeding in a non-judicial state – this clause is possibly the difference between 30 days and 2 years to the foreclosure sale.

Types of Liens Where Foreclosure Is Possible

There are a number of types of liens where the lien holder can start a

foreclosure proceeding. In your best interest, you should understand who are these individuals or institutions.

The IRS (Internal Revenue Service) has the awesome power to lien your property, whether it is homesteaded or not, and with only a reason to believe that you are guilty of some tax evasion or non-payment of taxes due. Other lien holders must have either lent money to the homeowner or provided services or materials that were not paid. Certain states allow homestead exemptions which may have exceptions to the foreclosure process for certain types of liens.

The following types of liens can be foreclosed on in most states: 1.) Homeowners Associations Liens or HOA liens are issued by a Board

of Directors of your Homeowners Association (i.e. Condo Association) for nonpayment of a number of ―infractions‖, including non-payment of your association dues, special assessments, or unpaid fines for any number of reasons. In the good old days, the Board didn‘t want to actually purchase your property but they are seldom negotiable on discounting what are sometimes absurd fines because they know the liens will have to be paid in full to transfer title.


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Don’t mess with the Board of Directors, they can and will make your life a living nightmare because they have the power of deed covenant law behind them. These liens can be a VERY small dollar amount to more than the property is worth if they go unpaid for an extended period. The HOA Board generally didn‘t want to own the property because they are always strapped for cash. However, in recent years, the property owners haven‘t been paying dues and assessments because their properties are upside down. Now, many HOAs are foreclosing on small amounts of overdue fees, dues and assessments. The HOA gets title to the property through the foreclosure process but the mortgage on the property stays with the property and then the HOAs rent their newly owned units to the public. The rental income supplements the HOA‘s income and all is well until the lender on the first note foreclosures on their mortgage. Occasionally, the HOA will advertise the pre-foreclosed property for sale to the Association Members or try and find a buyer first before foreclosing – especially if there is no other mortgage or lien on the property. Be careful, especially if there is a probate involved, and deal with the HOA Board INSTANTLY if the HOA is owed any fees and this is what is causing your foreclosure. This may require you to “show extreme humbleness” to get it done, but do it whether you want to or not! This is our personal recommendation from extensive experience in dealing with HOA Boards.

2.) IRS Liens were mentioned briefly above, but the IRS doesn‘t like to foreclose unless it is an abandoned property or the homeowner (tax litigant) acts like a real jerk. They don‘t need to foreclose because they are in first position above any other lien including city or county liens! At the IRS‘s discretion, these liens can be removed if there is no equity in the property and if the homeowner (seller) will not receive any proceeds from the sale of the property. However, the removal of the lien does not mean it disappears; it is carried forward and attached to the individual owing the money. This is detailed later because it is an important point if you are trying to sell your home and it has an IRS lien attached because most buyers and lenders won‘t touch it. When a property is sold with an IRS lien attached, the IRS has a 120 day ―right or redemption‖ in which time it can ―void‖ the deed and repurchase the property from the buyer. This attempts to keep ―sweetheart transfers‖ to relatives or friends to a minimum.

3.) Mechanics liens are generally placed against properties by contractors

or material suppliers for non-payment of services rendered. There is


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usually a time period (90 days from completion of services) in which these liens must be filed or they can not be filed at all, but this varies by state and county. We have seen lawn maintenance companies file liens for non-payment of service when they actually did not cut the homeowner‘s grass. The homeowner would not be notified by the County Clerk of the filing and wouldn‘t find out until he went to closing. Mechanics liens usually expire after a certain number of years so they don‘t last past the legal limit, as do most liens and mortgages (unless they are paid off).

Tip (#1) – Some vendors or contractors, especially those involved in the

concrete trade (driveways, curbs, decks, etc.) may have other vendors or sub-contractors deliver material (i.e. concrete) to the job site. Unfortunately, if you picked the contractor with the lowest price, he may not have included the payment for the materials (concrete) and this vendor will be contacting you to pay – because the contractor hasn‘t paid the vendor and doesn‘t intend to pay!

Of course the supply vendor will lien your property for non-

payment so MAKE CERTAIN that any contractor doing work for you produces “Notice of Payment in Full for Services Rendered”, or we prefer a “Release of Lien” for each and every sub-contractor who worked on your job. This protective action should be done BEFORE you give the contractor his final payment. This is standard practice in commercial building but seldom understood or used in residential construction. 4.) Municipal Code Violations are common for many reasons from

something as insignificant as not having your grass mowed, to having junk cars in your yard, or the more serious items such as building additions or any mechanical work that was done without a permit. Code Enforcement is often the city department that enforces issues with ―Open Permits‖. An open permit is where a homeowner or a contractor pulled a permit to do construction, electrical or plumbing work, BUT never had an Inspector come back and ―Sign Off‖ on the work. It may have been because the contractor thought the homeowner would do it, or the contractor‘s work may not have passed the Final Inspection, but in the end, the result is the same, an open permit in essence becomes a lien against the property. Any open permit(s) should be resolved before title transfer. When lenders get a property at the courthouse auction, they can sell it with open city or county liens if these liens are properly disclosed to the buyer and he assumes responsibility for resolving them.


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As an idea of how much these liens can be, we tried to buy a home where the title was ―clouded‖ by a lien for not mowing the grass. The homeowner was given 10 days to mow his lawn, and he did mow it. However, the code enforcement department was never called back to close the file. Consequently, the fine of $50 per day was imposed and the amount of the lien almost 8.5 years later had grown to $168,568 including interest and penalties! We requested that the county reduce the lien so we could purchase the property and they did – to $150! So it is best to fix things quickly and ASK for the city or county‘s help if you find a problem – before it becomes so serious it can‘t be resolved without paying huge fines. Cities also take properties by ―Condemnation‖ if the reason(s) for the liens are not cured (fixed) and the property becomes a physical or health hazard to the community, so don‘t mess with them and do what is right. Instead of the city repairing these properties and reselling them, they usually have them demolished and charge the homeowner for the demolition fees

5.) Mortgages are liens against a property where a lender, either private

(individual) or commercial (bank), loans money to the deed holder or lien (mortgage) guarantor for the purchase of the home or some other use of the money. Mortgages are the most common form of property liens. There can be many mortgages against a property, but the first filed has priority or status over any others filed against the property. This is why lenders who do financings or re-financings are so very careful that no other liens are on the property before they issue the funding to the homeowner. Tip (#2) – Most mortgages have pre-payment penalties. These pre-

payment penalties are a percent of the unpaid balance or a number of regular monthly loan payments. The amounts generally decline as the mortgage gets older. A five year pre-payment is very long and a one year is short. A one year or no-prepayment penalty must usually be requested at the time of financing and the borrower might have to pay extra for this reduced prepayment penalty.

There are two forms of prepayment penalties – either they can be a

―soft‖ prepay, where there is no penalty if the seller (mortgage guarantor) sells the property, but a regular prepayment penalty if he tried to refinance. The other type is a ―hard‖ prepayment penalty where the seller must pay a penalty if the loan is either re-financed OR the property is sold. It is important that you determine if your mortgage has any prepayment penalty so you can


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circumvent this potential problem when you sell or transfer your property!

Types of Mortgages:

a.) Conventional – This is a mortgage that is not secured under a government insurance program and is always issued by lending institutions. Most are issued for 15 or 30 years but 40 and 50 year loans are becoming more popular to reduce monthly payments. Historically, most mortgages required 5% to 20% down but in recent years it was not uncommon to get 100% financing for credit worthy individuals. Usually if a borrower puts down less than 20%, the lender requires mortgage insurance (PMI) which helps reduce the loss the lender has if the homeowner defaults.

Tip #3 – Lenders are always finding ways to get more money from their

loans. The newest trick is for the lender to insert a clause in their loan documents that stipulates that if they accelerate your loan (pre-foreclosure because of a default or late pays), they can collect the prepayment penalty associated with the loan. Previously, when you went into foreclosure the final judgment did not have the pre-payment penalty included. Next time you look to finance, take the time to see if this clause is in your loan and ask to have it removed. No one, except scammers, plan on defaulting when they go into a loan. But stuff happens and you should cover yourself by understanding the terms of your mortgage or lien. b.) Adjustable Rate Mortgages (ARM’s) - These ARM‘s are the primary

cause of the foreclosure rate being so very high. The terms of the mortgage dictate an adjustment to the interest rate at set intervals, with some adjusting as often as monthly. There are ―2/28 ARM‘s‖ which means that the rate doesn‘t adjust the first 2 years and then adjusts every year for the next 28 years! They are extremely popular because of the low initial cost to buy a home. The problems start as soon as they start to adjust their interest rates. Some of these ―adjustments‖ are so extreme that the industry refers to them as ―Exploding‖ ARMS!

c.) Second and Third Mortgages – These liens are usually issued by

conventional or private lenders, including friends and family members who are willing to take the additional risk of default in exchange for a higher interest rate. These mortgages are recorded after a primary mortgage is recorded first. The order of recording dictates the seniority of the mortgage. The first to be recorded is the ―senior‖ loan (First


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Mortgage) and the next loan recorded is a ―junior‖ loan (Second, Third or Fourth Mortgage).

d.) Home Equity Lines of Credit (HELOCS) are usually issued by

commercial lenders (banks) and are based mostly on a percentage of Fair Market Value (FMV) of the home, and minimally on the credit rating of the borrower. We have seen lenders do 80% of FMV. Some important benefits of home equity loans are that the loans can be repaid without penalty, and interest-only and additional principal payments can be made monthly to reduce the homeowner‘s mortgage burden. The actual intent of the loan is generally to make home improvements to the borrower‘s property, but the proceeds of the loan are seldom restricted to any one use. If the loan is tied to construction at the homeowner‘s property, it is better classified as a construction equity line.

e.) Hard Money Loans are mortgages based solely on a percentage of the

After Repaired Value (ARV) of the property. Homeowners in foreclosure can get these loans from private lenders but must weigh the costs of closing points and fees that could be up to 10% of the loan amount and the fact that these lenders usually only give between 60% and 70% of ARV. For example, if a home needs repairs of $30,000 and the ARV is expected to be $200,000, a hard money lender might advance the homeowner $100,000 (50%) initially and $30,000 (15%) as the repairs are finished, for a total of $130,000 or 65% of the ARV. Interest rates will range from 10% to 20%, and closing points of 3% to 8% of the loan amount, depending on what your state allows. Remember, if you could not afford your existing mortgage you may have to look hard to find a hard money loan. Hand money lenders are traditionally called ―Predatory Lenders‖ for the obvious reason that they are often hoping that the homeowner will default so they can get the property to resell to investors at 75% to 85% of ARV. A hard money loan may be a blessing for you but you better read the ―fine print‖ in your mortgage note so you understand what you are getting into. Try a number of hard money lenders to see what terms each has and whether they will help you at all. Remember, you are already in default on your mortgage, why wouldn‘t you do it again? You should expect to get 50% of ARV or Fair Market Value (FMV) of your property if it needs few or no repairs, and pay 12% to 20% interest. You are actually better off trying to get “private money” which is a loan from non-professional lenders who want a better income than what


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they can get from a certificate of deposit. These people are everywhere – ask everyone you talk to and ask to repay interest only at 6% or 8% monthly.

f.) Government or Government Agency Insured Loans – there are three

types in this category: i.) FHA. or Federal Housing Administration is a government

agency which issues loans for marginally credit-worthy borrowers and gives them 95% to 97% of the required funds. FHA. loans require the seller to pay a majority of closing costs and the property must pass strict inspection standards. FHA is in the process of a ―reform‖ and is looking to offer 100% loans, 40 year loans, issuing larger amounts of principal so more buyers will qualify, condo loans will be included, credit standards will be lowered, and most seniors will be able to get reverse mortgages.

ii.) HUD or Housing and Urban Development is another

government agency that handles foreclosures on FHA loans but they will allow a work-out program for homeowners to try to keep the homeowner in the property. They also have the ability to purchase conventional loans and do a work-out with the homeowner. It is worth your effort to determine if your loan qualifies by contacting HUD directly.

iii.) VA or Veterans Administration loans are given to veterans of

the armed services as part of their benefit package for serving their country. The credit requirements are minimal and the seller must pay a substantial part of the closing costs as with FHA loans. Again, the VA is very helpful in working with homeowners to “work-out” a solution to their foreclosure. It is suggested that you contact them EARLY for the most benefit.

g.) FHA - HUD Reverse Mortgage (HECM) is designed to send the

homeowner a check each month instead of paying a mortgage payment. There are strict requirements for getting such a loan – homeowner must meet a few basic requirements of being over age 62, living in the property, and having substantial equity in the home. More than 60,000 HECM‘s were issued in 2010 and they are a growing trend. While they can be used to stop foreclosure by refinancing and paying off the old mortgage at closing, there may be better options available to the homeowner.

This method of refinancing is ultimately expensive especially where there is a penalty when the loan is closed out or the property is sold. Have an attorney review the terms or any conditions of the HECM if you


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believe it fits your needs or you could find yourself in foreclosure because of unpaid taxes or insurance.

As always, check with your attorney before you make any assumptions regarding any lien(s) against your home.

Tip (#4) – If you intend to refinance to stop your foreclosure, make

absolutely certain that you get a ―Good Faith Estimate‖ (GFE) from the mortgage broker, which is required by law! It is all too common for a mortgage broker to have a client sign a blank GFE saying that he needs time to get the various detailed amounts filled in and he will give you a copy later. Unfortunately, you may never see the estimate that you already signed and approved in that pile of documents you signed when you applied for the loan. The GFE is not allowed to be different from the final closing costs by more than 10%. By asking in the beginning, you can compare his costs with other mortgage brokers and you shouldn‘t be surprised at your closing.

Tip (#5) – When homeowners get into financial problems and have

more than one mortgage to pay they are often not sure which one to pay with what funds they have. If you have only enough money to pay one mortgage, pay the first mortgage. If you only have enough money to pay the second or third mortgage, it is probably better if you DON’T pay any of them.

The issue is not to save your credit on one loan, the issue is you may not be able to afford your home and if this is the case, paying the junior lien(s) will not stop the foreclosure. However, if you can pay the first mortgage (lien), the junior lien holders are less likely to foreclose because they are in a junior position and would have to purchase the first mortgage at the auction and resell your home to get anything back. If you can get back on your feet financially, negotiate with the junior lien holders to take partial payments because it is in their best interest to get some money rather than none at all.

Judicial Foreclosure

Judicial foreclosure, like every foreclosure, starts when the homeowner

stops making mortgage payments, tax or insurance payments, flood insurance payments, payments on junior liens (who foreclose themselves), or in some far-fetched cases (reverse mortgages) the homeowner‘s property is no longer their principal residence. It may also be instituted because the lender receives


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numerous payments late (after the 15 day grace period) and invokes terms in the mortgage that start the foreclosure process.

Generally, when the homeowner gets 90 days (Judicial Proceeding) or

30 days (Deed of Trust) behind on his mortgage or other required payments, the lender will ―accelerate‖ or call the loan and start the foreclosure procedure. In Judicial Foreclosure States, the lender (Plaintiff) will petition the County Court (file a law suit) to issue a ―lis pendens‖. In Latin lis pendens means ―litigation pending‖ and it is your first legal contact with the lender who is putting you on notice that he is taking legal action and will not wait any longer for your overdue mortgage payments.

Within the lis pendens filing, the lender also gives notice to any other

parties that have liens against the property that they have started the foreclosure process and these ―subordinate or junior interests‖ need to take their own legal actions or their liens will be ―extinguished‖ at the foreclosure sale. The lis pendens should have attached a copy of the original promissory note (an IOU for money) signed by the borrower and the mortgage note (collateralizes the real estate against the IOU) signed by the borrower.

The borrower DOES NOT HAVE TO BE THE OWNER OF THE HOME

for the lender to start the foreclosure process. If your lis pendens does not have either the Note or the Mortgage copies attached, you should find your original copies, or get copies from the County Clerk, as they contain strict legal language about what the lender can and cannot do in the foreclosure proceeding.

If your lender bought your mortgage after you closed on your home,

there must be an Assignment of Mortgage in the lis pendens documents that you are served with. If it is not there, this is one step in a foreclosure defense to make the lender produce this document – if your mortgage qualifies. Usually you will know this because the company you make your check out to changed sometime in the past.

In a Deed of Trust loan, the Trustee will notify the borrower with a

―Default Notice‖ and in 30 days he will move to sell the property. I go into more detail about both Judicial and Deeds of Trust foreclosures further in the text because it is very important that you understand what you have and your rights to legally protect your property.

Tip (#6) – There are a number of unique opportunities to make

money on seemingly worthless second mortgage loans or junior liens by the buyer of your property, which might be yourself in a short pay, not a short sale. You will have to go to these lien holders and negotiate a discount before the auction. Should these lenders or lien holders decide not


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to negotiate, tell them they will get NOTHING when your home goes to the auction and you have a perspective buyer who will not be able to pay off all the existing liens (loans) at 100 cents on the dollar. These lenders are savvy enough to know this, but are stubborn in many cases. Some of these guys actually lose the entire value of the note by just being stubborn and thinking that you won‘t allow the property to go to foreclosure. Offer 5% to start, but usually they will take in the neighborhood of 10% - 20% of the original amount owed. These loans can be used as 100% credits at the auction - which will be explained later.

Tip (#7) – Your lender has the right not to accept partial payments

unless they choose to, depending on the terms of the lien or mortgage. For example, if the homeowner gets four months behind on his payments, and sends in two monthly payments, the lender has the right to decline this payment. Unfortunately, most often the lender mails the check back to the homeowner and never calls or advises the homeowner until weeks later that the loan is even further in arrears. It seems unfair and it is, but often, if the homeowner speaks to a Supervisor and explains the problem in detail, the lender has the option of accepting the partial payment(s). The key to making this work is to keep asking for another HIGHER Supervisor and don’t give up!

The lender may request you to sign a Reinstatement Agreement or, if

you are very fortunate, a Loan Modification Agreement before they will accept any late payments. Remember, if you sign either one, its purpose is to put you on record that if you have late payments again, they will go back into foreclosure IMMEDIATELY and your rights to a hearing before a judge may be lost – no second chance! If you believe you want the settlement they offer, have your attorney review it, sign it and get it back to the bank as soon as possible! You now have a temporary solution for a long-term problem, especially if you can‘t afford to keep your property. Again, if you get your loan re-instated, but you can’t afford the payments, look to sell your home as soon as possible instead of trying to stall for a few more months – assuming there is equity in your property. If your loan is upside down, go for a short sale.

Tip (#8) – If you sign a Reinstatement Agreement that requires

substantially higher payments for three to six months, KEEP your new payments going in on time, because if you get behind again, your chances of the lender helping in the future are ZERO. You have actually lost many of your rights by agreeing to the reinstatement terms because the lender usually includes the rights to a speedier auction process if he has to restart the foreclosure process. We understand that bad problems happen to


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good people and we will detail how to overcome the problems you may encounter in the future – be patient and read this entire text.

Once the lis pendens is issued by the court, it must be served on the

homeowner OR whoever the guarantor is of the mortgage. As mentioned previously, sometimes the homeowner and the guarantor are different people. This part of the service process leaves itself open to claims of ―Improper Service‖ as the process server often times assumes the person answering the door is the homeowner, or his spouse and this may not be accurate.

For example, improper service could happen if the guarantor does not

live in the property or the person served is a renter and the renter is not mentioned in the original filing. The process server should find this out by asking - but sometimes they don‘t ask and just leave the summons and the renter just throws the document away. Supply your attorney will all the details of your ―process of service‖ so he can decide if it was done correctly.

WARNING – Don‘t think that by avoiding the process server, you

are delaying your foreclosure. The process server may come back once more but after that the plaintiff (lender) will start a publication notification to all concerned parties. Essentially the lender is moving forward without your receiving written notification to the parties involved. Your best option is to sign for the lis penders or Notice of Default and take proactive steps to resolve the situation.

Tip (#9) – Whether you speak to the lender’s representative or the attorney for the lender who is filing the lis pendens, ONLY believe what you see in writing! NEVER take their word as the truth because it is only your word against theirs and if your home is sold out from under you, you have no recourse without proof. In some states it is illegal to record two party conversations without telling the other party before the conversation starts, so just make sure to get everything in writing by recording the conversations and transcribing them to your notes.

You should determine right now if you will be having a Judicial

Foreclosure or a Deed of Trust proceeding by looking below at the following table and locate your state. If your state shows both Judicial and Non-Judicial in the “Foreclosure Process” column, you and/or your attorney must READ your mortgage to determine what type of proceeding you will have to go through.


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Here is a List of Each State’s Foreclosure Process, ESTIMATED Time to Complete the Foreclosure Process, Any Redemption

Period, and Whether a Deficiency Judgment is Possible:

State Security

Instrument(s) Foreclosure

Process Est. Time Months

Redemption Period

Deficiency Judgment

Alabama Mortgage or Trust Deed

Judicial or Non-Judicial

1 – 3 12 Months YES

Alaska Mortgage or Trust Deed


3 Varies by Process

Varies by Process

Arizona Mortgage or Trust Deed


3 None Varies by Process

Arkansas Mortgage or Trust Deed


4 Varies by Process

Varies by Process

California Mortgage or Trust Deed


4 Varies by Process

Varies by Process

Colorado Mortgage or Trust Deed


2 75 Days YES

Connecticut (Note Below)

Mortgage Judicial 2 None YES

Delaware Mortgage Judicial 3 - 4 None NO Florida Mortgage Judicial 5 - 6 10 Days YES

Georgia (Note Below)

Mortgage or Trust Deed


2 - 3 Varies by Process

YES

Hawaii Mortgage or Trust Deed


2 None Yes

Idaho Deed of

Trust Non-Judicial 4 – 5

Either 6 or 12 Months

Yes

Illinois Mortgage Judicial 6 - 7 None Yes Indiana Mortgage Judicial 5 Yes Yes

Iowa Mortgage Judicial 4 - 5 None No Kansas Mortgage Judicial 4 12 Months Yes

Kentucky Mortgage Judicial 6 12 Months Yes – but Restricted

Louisiana Mortgage Judicial 2 None Yes Maine Mortgage Judicial 3 12 Months Yes

Maryland Mortgage or Trust Deed


3 Yes Yes

Mass. Mortgage or Trust Deed


3 None No

Michigan Mortgage or Trust Deed


2 Yes Varies

Minnesota Mortgage or Trust Deed


2 Yes Yes

Mississippi Mortgage or Trust Deed


2 None No

Missouri Mortgage or Trust Deed


2 Yes No


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Montana Mortgage or Trust Deed


4 - 5 None Varies

Nebraska Mortgage Judicial 5 - 6 Yes No

Nevada Mortgage or Trust Deed


3 - 4 Yes Yes

New Hampshire



2 None Yes

New Jersey Mortgage Judicial 3 10 Days Yes New Mexico Mortgage Judicial 4 Yes Yes

New York Mortgage or Trust Deed


4 None Yes

North Carolina



2 Yes Varies

North Dakota

Mortgage Judicial 3 6 or 12 Months

Yes

Ohio Mortgage Judicial 4 - 5 Yes Yes

Oklahoma Mortgage or Trust Deed


3 None Varies

Oregon Mortgage or Trust Deed


5 - 6 Yes Yes

Penn. Mortgage Judicial 3 None Yes

Rhode Island



2 Varies Yes

South Carolina

Mortgage Judicial Varies None Yes

South Dakota



3 Varies Varies

Tennessee Mortgage or Trust Deed


2 Yes Yes

Texas Mortgage or Trust Deed


2 None Yes

Utah Mortgage or Trust Deed


Varies Yes Yes

Vermont Mortgage or Trust Deed


7 Yes Yes

Virginia Mortgage or Trust Deed


2 Varies up to

240 Days Yes

Washington Mortgage or Trust Deed


4 Yes, but …. Yes

Washington D. C.

Mortgage Judicial 2 None Yes

West Virginia



2 None No

Wisconsin Mortgage or Trust Deed


3 Possibly to 12 Months

Yes

Wyoming Mortgage or Trust Deed


3 Yes Yes


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Connecticut homeowners may be able to claim an exemption from foreclosure under certain circumstances, check with your attorney for full details. Georgia is called a Security Deed state but the process and time involved for the foreclosure is nearly the same as the Deed of Trust states. Beware - if your state has a black box in the column above under ―Redemption Period‖ you must formulate your strategy early or you may lose your home by hesitating.

-EXTREMELY IMPORTANT- It is absolutely necessary that after you look at your state‘s parameters above, you get more SPECIFIC information about your judicial or non-judicial foreclosure process. This information includes an evaluation of your mortgage or deed of trust document because the clauses in your mortgage determine specifically how your foreclosure will be handled either inside or outside the court system! We suggest that you go online and search for information entitled or related to ―State Foreclosure Information‖ which should be constantly updated as the laws change and may even give you a referral to a local attorney who can help you. Seek professional help if you have any questions because a few dollars spent now can save your home later – KNOW YOUR RIGHTS!

DISCLAIMER - We and our associated companies have no relationship with any of the websites you may encounter online that give state-by-state foreclosure law information, and we cannot attest to the information on these sites as being valid or legal. Contact an attorney before making any decision based on information on these websites and in this entire text.

The Actual Process of Judicial Foreclosure The following is an overview of the sequence of events that occurs when

a mortgage guarantor (you) gets thrust into the foreclosure process in a Judicial Foreclosure State:

1.) Homeowner gets behind on his mortgage payments. The

actual reason doesn‘t really matter to the court or the lender since they have ―heard it all‖. The lender only cares about solving the problem by the loan being re-instated, paid-off, selling the loan, doing a short sale, doing a deed in lieu of foreclosure, doing a loan modification or taking the property back at the foreclosure sale. The court is in place to offer judicial settlement of contract


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law (the mortgage) by one of the following means - postponing the court‘s decision, dismissing the filing, or issuing a final judgment amount and ordering sale of the property.

2.) Lender contacts homeowner by mail and/or telephone but is

unable to resolve the late payments, so the lender or Trustee petitions the court to issue a lis pendens. The lender(s) can represent themselves in court, as sometimes happens with smaller mortgage amounts (especially second or third mortgages and mechanic liens), but only if your state allows self-representation. The primary lender usually hires a local attorney for court appearances. The attorney for the lender does a title search to determine who has liens against the property, who is on title, sometimes even who is living at the property.

It is important to name both spouses if they are on title or have a spousal interest, otherwise foreclosure would only be for the one spouse‘s interest. Because of the large number of foreclosures, some law firms have huge rooms full of staff attorneys who just do foreclosures. While this process is a gut-wrenching experience to you, it is just another day at the office for the foreclosure attorneys and the court.

3.) A representative of the court (process server, sheriff’s

officer, privately licensed individual, etc.) serves the homeowner or spouse with the lis pendens or Summons as approved by the court. This ―serving of the homeowner‖ is called the ―Service of Process‖. Additionally, duplicate copies of the Summons go to all persons inhabiting the property, any and all persons believed to inhabit the property (John and Jane Does), all persons in the public record who have liens against the property, and the guarantor(s) of the mortgage note.

Tip (#10)- HUGE HINT - Many uninformed homeowners

believe that if the process server can’t find them, the foreclosure will simply “go away”. The courts have made a contingency for this issue and it is the process called ―Constructive Notice‖. This is where the Plaintiff (lender) simply files a notice of the proceeding in the local newspaper or legal trade journal for a specified time. So while the homeowner (guarantor) thinks the problem has gone away, it is actually growing worse by leaps and bounds because THE HOMEOWNER IS OUT OF THE INFORMATION LOOP! Don’t try and beat the system but rather try and understand it, and have legal representation when necessary.


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4.) The homeowner or mortgage guarantor is given 20 calendar days (this varies by county and state) from the Date of Service to answer the summons. Important – the 20 days start NOT from the date the court approved the request for the lis pendens, but rather from the date of service on the homeowner. The number of days is calculated on ―Calendar Days‖ which include Saturdays and Sundays, but generally do not include national holidays. The exact number of days and whether they are calendar or business days should be explained on the Summons (lis pendens).

5.) The homeowner must answer the summons by court

appearance or return letter (always refer to the Case Number in your correspondence), or by having an attorney submit a letter or by his making a court appearance – again, actual rules vary by county and state. It is critical that you respond so the court isn’t forced to issue a Default Judgment which will move you quickly closer to the sale.

The summons should tell you exactly what you have to do so

read it thoroughly. Usually the judge for the proceeding will schedule five to ten minutes for your hearing. The Plaintiff‘s (lender‘s) attorney will ask that the court set a sale date and grant a final judgment amount that is the full amount of the outstanding balance on the mortgage PLUS accelerated interest, late penalties, and attorney‘s fees and expenses. The judge will ask the Defendant (mortgage guarantor) to state his case and if he is absent, the judge may issue a “Default Judgment” equal to exactly what the plaintiff‘s attorney requested. If the guarantor is present, he can speak to defend his case of why he needs an extension of time, or that he has resolved the problem. If the grantor has responded by mail, the Judge will read the response and make a decision in favor either of the Plaintiff (lender) or the Defendant (mortgage guarantor). Generally, the only favorable decision for the Defendant is if a specific solution is offered to resolve the foreclosure process or if there is a question of the legal validity of the law suit.

Unfortunately, the court does not care about the WORST of hardship cases, but it is worth a try to tell your story of why you are behind on your payments. However, your response MUST contain a solution for the back payments and future


- 29 -

continuance of the mortgage payments (Reinstatement Agreement), indication of a sale of the property, or a payoff of the loan.

Very Important – If you file a response letter make certain it is

Hand Delivered to the Clerk of the Court or sent certified mail with a ―return receipt requested‖. The necessary information of where to send, or deliver your response, should be on the front of the summons. If it is not, immediately call the Clerk of the Court and get what info you need. You may later need proof that you responded to the summons to support your claim for an extension. If you decide to hand deliver it, CALL AHEAD to save yourself time and aggravation in finding the correct room and person at the courthouse. There should be a telephone number on the Summons that you received to start your search for information.

Tip (#11) - If you do not respond to the Summons or do not show up in court for your hearing, the Plaintiff or their attorney can request a Summary Final Judgment which will accelerate the foreclosure process by 30 to 60 days. Show up and make a case for your needing an extension of at least 30 days – BUT have a reason and factual proof in hand!

Tip (#12) – SCAM ALERT- Because your court appearance is a matter of public record, you may be approached by individuals as you leave the courtroom for the purpose of getting you to use their services to stall, stop, or refinance your foreclosure. BE POLITE but do not assume that the solutions they are offering are in your best interest. These people may even be soliciting for attorneys who want you to do a bankruptcy. Hold off – do not make any commitment until you review all your options which we will be discussing later in this text.


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Seven Possible Reasons you can use for a Continuance of Your Foreclosure:

1.) Improper service of the summons* 2.) Improper notification of all parties to the lis pendens* 3.) Other deficiencies or mistakes in the lis pendens* 4.) 10 of the most common deficiencies are listed in Chapter

5 under “Challenge Legality of The Foreclosure” section 5.) Catastrophic medical issues that may result in your

leaving the property – AGAIN have proof in hand! 6.) You are refinancing the property or you have a lender for

the amount needed to reinstate the mortgage in foreclosure (proof is essential)

7.) You have a qualified buyer for the property and need additional time to close. You MUST present a copy of the contract to the court, lender, and the lender’s attorney.

*All three of these reasons are best left to an attorney to decide and present to the court but many homeowners are representing themselves in court. In fact, almost 1/3 of all foreclosure court cases are so called ―Pro Se‖ motions by homeowners. Simply Google® online the words Pro Se and you will find examples that you may be able to use.

We have seen Defendants get a signed real estate contract** from a

relative to stall the sale. This may work but it could be construed as fraud so your situation better be resolved by the end of the extension date. **It is possible to sell your property in as little as one weekend using a program we have called the FSBO Power Selling System™ and it even has a section on selling homes in foreclosure. For more information go to

http://www.FSBOPowerSellingSystem.com

Some states actually bar the homeowner that has been foreclosed on from making a bid for his home at the foreclosure auction. The winner of the bidding at the foreclosure auction requires cash on the day of the sale, or some specified time in the future (as many as 30 days). We will be disclosing the super secret method of using a short sale to re-purchase your home at cents on the dollar in Bonus Report

http://www.fsbopowersellingsystem.com/


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#2. Some states do allow up to 30 days to pay for the foreclosure purchase, which gives you other options.

Three Reasons the Court May Not Grant a Continuance:

1.) Any reason that cannot be substantiated. 2.) Any personal reason, no matter how terrible the event or the situation

unless a medical hardship is involved that is related to staying in your home.

3.) A hardship situation that resulted from a scam, unless you have proof of it being reported to the Police.

When you are asking for an extension, always have proof of what caused your being late with your payments, including your lender

not accepting partial payments.

Any correspondence you have in writing with your lender or his attorney should also be sent to all other parties listed in the lis pendens. Otherwise, junior lien holders may start their own foreclosure proceeding. We do it by fax so we have a time-stamped receipt from our fax machine, but we also call back the same day to see if it was delivered and get the name of the person and time we spoke to them.

Tip (#13) - You should always ask the lender’s staff to give an extension if your story is horrific enough AND if it can be proven! The key here is to ask for a Supervisor immediately. You will be asked for a “Hardship Letter” which we will explain later in the Chapter on Short Sales. We have seen people get as much as one year because they simply spoke to the lender and showed proof of their situation. So try it if it applies!

IMPORTANT NOTE – While we have seen a clever homeowner delay

the foreclosure process for five years, it is extremely rare to get past six months in Mortgage states and usually less than 60 days in Deed of Trust states. In the case where the homeowner was able to stay for five years, he was an attorney and used the OLD bankruptcy laws to avoid the foreclosure. Don’t plan on this happening to you – especially if someone says they know how to do it using bankruptcy as the vehicle! Some states like


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Florida and Arizona, lenders are not in a rush to take properties back, especially higher-priced homes ($500,000 – $2,000,000+). In our county in Florida, the average ―un-contested‖ foreclosure is taking over two years to the homeowner‘s eviction.

Get your act together because time is working against you and you may find yourself watching the Sheriff dumping all your personal belongings on the front yard when the lender and/or new owner, evict you.

We will discuss the issue of filing bankruptcy later because it is

important that you know IT WILL ONLY WORK to stop the foreclosure temporarily. Again, it will postpone it for a SHORT TIME, but the cost to your credit report is very negative and ultimately very hard on your wallet and future credit history! There are times to do a bankruptcy and we will discuss them later.

6.) At your hearing, the judge will set a date for the auction sale

which generally is 30 to 60 days later, and he will determine the final judgment amount. This ―Summary Final Judgment” is the amount owed to the lender, including all interest, fees, expenses, penalties, and attorney charges. The most important part of the court‘s decree is the ―Sale Date‖. If you make an appearance before the judge at your hearing, it is somewhat likely that he will set a second hearing for 30 - 60 days later – even if you didn‘t make a case for a longer extension, and just by appearing and asking for time. In some states these ―extra‖ days can be as many as 180+. This varies by county and state so be prepared for anything. At this stage you have just begun to fight and at least you will know your sale day and have time to overcome your getting your loan re-instated, paid off, or work on a short sale!

7.) Lastly, before the actual sale, you can ask for a special

hearing and request an extension for a valid reason. However, there must be extenuating circumstances - such as a signed and verifiable sales contract where the buyer needs conventional financing and more time to complete his loan, a letter from a lender who is re-financing your mortgage, or previously unknown deficiencies in the Plaintiff‘s filing, service or disclosures. Assuming you don’t get a further extension, the next thing that happens is the actual sale at the courthouse steps.


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8.) The sale will take place about 30 to 60 calendar days after the Final Summary Judgment and will be sold to the highest bidder. We will cover the sale process later because it may be a further opportunity to get your property back or to make money that you would not have otherwise known about. The property is sold by open bid auction with the FIRST bidder being the lender who holds the first mortgage (usually but not always the Plaintiff in your case) – it could be a second or third mortgage holder, or even a lien holder who filed the foreclosure proceeding against you.

The first mortgage lender will usually bid $100 over the amount of his final judgment amount and the bidding starts there and goes until the bidding stops or a bidder reneges on the last bid. Chapter 9 discusses the various aspects of the Courthouse Sale. This chapter is very important, so read this chapter a few times so you completely understand the auction sale process.

9.) When the sale is complete, the Clerk of the sale will collect a

partial payment from the winning bidder, with the full amount paid by the end of the same day (or as much as 30 days later in some states). The transaction is for cash, but if the buyer is also the lender, the lender gets ―credit‖ for the mortgage amount shown in the public record or the Final Summary Judgment. For example, if the lender has a lien (mortgage) for $100,000, his attorney‘s first bid will be ―$100‖; it means he is bidding $100,100.00. The one hundred is usually the minimal incremental bid in most auction sales but it could be as much as $1,000 depending on the county‘s rules. In Chapter 9 we will discuss secrets of how professionals bid for and get properties at auction.

10.) After a cooling off or “Redemption Period” of usually ten

days, the Clerk of the Court will issue a Certificate of Title, assuming there has been no challenge by any interested parties to the foreclosure sale or the mortgagor hasn‘t paid the final judgment amount. If there is a challenge by a party to the lis pendens, the challenger must petition the court for a hearing. As soon as the outcome of this hearing is finished the judge will instruct the Clerk to begin distribution of all proceeds from the sale and ―overage‖ proceeds to any qualifying entity or individual (COULD BE YOU!).


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This may give you an opportunity to get some of your equity or principal back (later discussion is coming because this topic of “Overage” is VERY important). We will discuss your rights as a mortgage guarantor and homeowner in a later chapter. This redemption period could be as long as two years and it varies greatly, so check your local state laws. To have any hearing on the disposition of the property or any moneys that may be due you, you must petition the court for a hearing during the Redemption Period. The redemption period can be as little as ZERO days or, as I mentioned above, as much as TWO years, see your specific state information to determine your rights. Assuming there is no challenge to the auction sale, either the corporate entity, lender, or the individual who purchased the property at the auction will now be issued a certificate of deed to the property, and they can now sell it or keep it. Certain states have granted homeowners who lose their homes as much as two years to re-purchase their homes by coming back with the full amount owed, any rehab costs incurred by the new owner, and past due interest and costs to the Trustee. This gigantic advantage to re-purchase your lost home will be discussed at length in Chapter 6 because we will show you how you may be able to make money without buying back your home!

Tip (#14) – REMEMBER, the above information IS NOT ACCURATE

in states where the Trustee or lender has used the Power of Sale clause to sell your home. The exception is where the Trustee or lender has used the Judicial Process to foreclose. The Deed of Trust clause is sometimes called a Non-judicial foreclosure process. There is a HUGE difference in the final eviction time for the Non-judicial foreclosure process where as little as 30 days is common, compared to the Judicial Foreclosure process where 3 to 5+ months is typical.

NOTE- If in your state, the court orders an appraisal, remember that

you should not accommodate the appraiser by getting your home or property cleaned up. Often the appraiser will just do a ―drive by‖ or use the information in the public record to estimate the value of your property. The higher he estimates the value of your property, the less negotiating power you have with your lender! This is especially true for short sales and will be explained fully in Bonus Report #2. You can also challenge the appraisal to stall for additional time should you need it.


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The Actual Process of Non-Judicial Foreclosure

This foreclosure procedure is very much simplified when

compared to the Judicial Foreclosure we discussed previously.

1.) Homeowner gets behind on his mortgage payments but,

unfortunately, the reason doesn‘t matter to the court or the lender. The lender only cares about solving the problem by re-instatement, pay-off, or taking the property at the public foreclosure sale. Depending on the lender‘s criteria of what they believe to be sufficiently late (as little as 30 days), they can start to sell your property by sending the ―Trustee‖ a Letter of Authorization to file a default Notice with the Court.

2.) The Trustee first sends a letter to the homeowner or

mortgage guarantor that stipulates that payment(s) have been missed and immediate action is required to “cure” or fix the problem. This notice is called a “Notice of Default”. If action is not taken, the Trustee has been authorized to sell your property on behalf of the Deed holder (lender or ―Beneficiary‖)!

If you have the funds to reinstate the loan, the foreclosure procedure will STOP at this time. We will discuss this Reinstatement Option in greater detail later. The only important thing here is that this option requires money to settle and very quickly. Do not tell the lender that you will do the reinstatement if you have no intention or are incapable of doing it – THEY REALLY get angry if you fool with them and you may need their empathy later!

3.) The Trustee will next send a second letter stating that the

mortgage has been “Accelerated” and that payment in full is due immediately. This document is often referred to as the “Notice of Sale”. Usually, but not always, at this time the Trustee will make an Offer of Reinstatement, which allows the mortgage guarantor the right to pay or ―reinstate‖ all back payments and fees and go back to his same status before his first late payment. This offer expires as soon as the Trustee‘s sale takes place for which a date has been set in the Notice of Sale letter to the


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homeowner –which will be POSTED on his home and in the public records so anyone can find out if he chooses to do so.

4.) If no solution is arrived at by the lender and the homeowner

or mortgage guarantor, the Trustee will sell your home at auction either on the court house steps, sheriff‘s sale or he may have the authority to sell your property on his own at his leisure through a realtor®.

5.) Once the auction is completed, the homeowner has the

ability to get his home back once again BUT ONLY if the Trustee used a Judicial Procedure to foreclose. This “last chance” is called a “Right of Redemption” and varies from state to state by as much as no days to two years.

HOWEVER, if the Trustee used the “Power of Sale” clause in the Deed of Trust, YOU HAVE LOST all rights to get your home property back after the sale is complete. The lender would use the Judicial Procedure if he felt that he could collect on a ―deficiency judgment‖ that would be issued by the court if he sold your property for less than was due and payable at the time of the foreclosure. If he used the Power of Sale clause to sell your home, the lender CAN NOT get a deficiency judgment no matter how large the loss. Some exceptions may apply if fraud is involved so check with your attorney before you assume anything. The homeowner is not allowed to purchase his home back at the Trustee‘s Sale but someone else could bid, win and lease back the home to the former owner in most states.

While there are emergency measures or ―stays‖ that can be gotten from the court, these must be filed quickly in the court system as ―motions‖ by the defendant (homeowner). The actual steps the lender can take are outlined in your original mortgage documents and should be reviewed carefully. It is not uncommon for the lender to take legal action that is not in your mortgage agreement but the homeowner doesn’t know any better and neither does the court – unless you bring it to the court’s attention.

That’s it – it is OVER! You are now living in someone else’s home and you will be evicted by the Sheriff,

pretty much at the whim of THE NEW OWNER!


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Again – the difference of the judicial and non-judicial foreclosures is the amount of time the entire process takes and how soon you will be evicted varies from as little as 30 days in a “Power of Sale - Deed of Trust” state, to four months or even longer in a “Mortgage or Judicial Process” state.

If you have any questions regarding the exact procedure applicable in

your state and county, first call the number on your summons as most clerks in the court system are usually very helpful people. However, you MUST preface your questions with “I’m not asking for legal advice, but could you tell me …“ This statement lets them know that you are not trying to get them to tell you anything they could lose their job over, and that you just want the usual information. Many counties have gone to online assistance to answer the Frequently Asked Questions (FAQ‘s) and the courthouses (or libraries) have computers available for you to use if you don‘t otherwise have access to a computer.

It is pretty much common knowledge that lenders press non-

judicial foreclosures if they believe they can make money on the sale. If the property is sold at auction, they can bid aggressively to take your home, while in flat or declining real estate markets, they are more lenient about helping resolve your problem.

Eviction – What to Expect

If your home is lost at the auction, or you have a lease option where you know you will be evicted, you must take action immediately! While an eviction may sound like an eviction, there can be a difference. An eviction from an auction sale has a specific and definite time period as allowed by law. You can easily find this out by asking your county clerk or the Sheriff who will be doing the eviction.

I am GENERALIZING, but you probably have about ten days. Once

the Sheriff serves you, you have 24 to 48 hours – BUT assume 24 hours. You should ask the lender‘s attorney if you need extra time and explain you will take care of the property and clean it out before you move. If the attorney is uncooperative or not responsive, go to the lender directly. Neither the


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lender nor his attorney will allow you to stay very long because of the liability if you get hurt on the premises!

The perceived image of people throwing your belongings out into your

yard is accurate, so don‘t fool around with thinking you can talk your way out of the situation. The Sheriff is paid a flat fee and he doesn‘t get paid for a second trip so expect the worst. Short of a court ordered stay for medical purposes, you will be leaving. Knowing this, get ready early and move your furniture and personal items into a storage unit if necessary.

If you have signed a lease option with someone (investor or friend who

purchased your home) who is now evicting you, the circumstances could be radically different. As a tenant, you have more rights legally than your landlord! However, to get the full benefits of these rights you must hire an attorney who specializes in tenant-landlord law. The meaner the better, and if necessary, use legal aid services.

Tenant-landlord law is called contract law and is very specific about

process of service and all the parts of an eviction. Many states will penalize landlords as much as three months rent for such ―offenses‖ as incorrect eviction service – even if for only one day‘s difference or the incorrect type of postage/mailing used.

Heaven help your landlord if he shuts off your water or electric, changes the locks, or in any way threatens you with bodily harm. These “contract breaches” are real money makers for attorneys and tenants!

In whichever of the two situations you find yourself involved, get ready

early for the worst or you may make yourself a target for a whole lot more personal problems in the future. Remember, homelessness is not an option so take charge early and study Bonus Report #1 carefully to determine how to possibly make money even if you lose your home to foreclosure or have your lease option cancelled.

Your credit report will show the filing of an Eviction Notice so it is always

better to prepare early and leave on reasonably good terms with the lender. Some lenders file an eviction within their motion for a final judgment as a standard operating procedure. Always finds out your rights from an attorney to save you huge hassles.


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Chapter 2

Determining Your Ability to Keep Your Home

It was mentioned elsewhere, but somewhere around 95% of all homeowners in foreclosure want to keep their homes. Ironically, both lenders and investors know that even if a homeowner is saved from foreclosure, he has about an 80% chance of going back into foreclosure again and not coming out. Avoid letting this “relapse” happen to you by doing some financial planning about whether you can realistically afford your home.

Tip (#15) – The statistics for relapses into foreclosure lend themselves to investors offering homeowners a short-term fix by doing a ―Lease Option‖. The lease option is a binding contractual agreement that makes the homeowners a renter (tenant) until such time as the homeowner has the financial ability to re-purchase his home, which is the other part of the contract (Option part).

Naturally, the investor has to make a profit for being so gracious in

saving the homeowner, but remember, the investor knows that the odds are 80% in his favor that the homeowner will again default on the now lease payments and not be able to exercise the option.

A number of investors have had criminal charges brought against

them because they waited until the renter missed a lease payment by as little as one day, and EVICTED the homeowner and cancelled his option agreement. This type of contract term is ―Usurious‖ because it is unfairly or unreasonably enforced and often impossible for the tenant to make new higher payments timely for any sustained period of time. The other issue is that if the date for the option to expire gets near, the homeowner must exercise and buy the property back at a substantially higher price than he originally paid. If the homeowner couldn’t pay the old mortgage on his lower priced home, how will he do it now?

Tip (#16) – We will be showing you other alternatives besides lease-options to end your foreclosure, but if you believe this is your only solution to stopping your foreclosure, the keys to protecting yourself are: 1.) get a single contract from the investor containing both the lease and the option agreement, and 2.) have an attorney explain any issues he has with the contract. The purpose of one contract is that its enforceability is not nearly as strong as a separate lease (easily evicted) and an option agreement (easily


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cancelled). But as one document, the courts have ruled the lease payments were in fact, principal payments against the option terms of the contract. Check with your attorney and have him OK it or reject certain parts and make certain that you can make the new higher mortgage payments in the future.

On the following page is a simple Income and Expense Estimator that

you can use to determine if you can actually afford your home. If you are writing checks for the expenses for your home, you know what it feels like to have no money left at the end of the month.

However, this exercise is to help determine your daily carrying costs so

you can estimate if you can carry your home in the future. Please take the time to fill it out and get an answer about affordability. If you find you really can‘t afford to keep your home, we have options to sell it and get as much equity out as possible. Keep the emotion and disappointment out of your decision because your family’s future is dependent on this decision.

Sample Monthly Income and Expense Estimator

Following is an example of the calculations for a ―typical‖ homeowner that is in arrears with his mortgage payments. Fill in one for yourself on the following page.

Expense $ Amount

Mortgage Payment (P & I) $1,850

Mortgage Escrow (Taxes & Insurance) $275

Electric/Gas $125

Water $20

Garbage $40

HOA Payment $100

Repairs & Maintenance Est. $500

Food for one Month $550

Auto Payment(s) $450

Auto Expenses $200

Credit Card Payments $800

Other Monthly Payments for Loans $750

Misc. Expenses (10% of above) $566

TOTAL $6,226

Net Income from All Sources $4,000

DEFICIT $2,226


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Your Personal Monthly Income and Expense Estimator

Expense $ Amount

Mortgage Payment (P & I) $

Mortgage Escrow (Taxes & Insurance) $

Electric/Gas $

Water $

Garbage $

HOA Payment $

Repairs & Maintenance $

Food for one Month $

Auto Payment(s) $

Auto Expenses $

Credit Card Payments $

Other Monthly Payments for Loans $

Misc. Expenses (10% of above) $

Line A. TOTAL $

Line B. Net Income from All Sources $

Line A. – Line B. DEFICIT ? $

The lurking problem, in the previous example, is that the mortgage may

already be three to four months behind and with the accelerated interest, penalties, forced insurance, and attorney fees it could be as much as $12,500. This lump sum needs to be repaid in whole before the loan can be reinstated and the payments resume to what they were previously. The lender can and should offer what is called a ―Reinstatement Agreement‖ which will stipulate new, but much higher, monthly payments for a specific period (3 months to 2 years).

The reinstatement terms for repayment of the late amount and all its

fees added in is usually calculated by taking the entire amount and dividing it by either 3, or 6 months and adding in a ―chunk‖ of cash. For example, a homeowner who may be behind $12,500, the ―loss mitigation officer‖ will try to get the minimum repayment time, say three months.

This means that the homeowner would have to pay his regular monthly

mortgage payment of $2,000 plus another $4,125 for a total of $6,125 monthly for three months! Even if the decision is for a six month payback, the amount would be $2,000 plus $2,083.34 for a total of $4,083.34 for six months!


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If the homeowner had a problem with $2,000 what sort of problem will

$4,000 - $6,000 monthly be for him? Needless to say, it is virtually impossible to make these payments! Because of many lenders‘ inflexibility in extending the payback over a more reasonable time, they have actually caused many homeowners to lose their homes.

You will be offered these extremely short terms to pay back your back

payments and lender costs. Resist and get in touch with a Supervisor and again, more Supervisors and strive for at least one year, or better yet, try what is suggested in the following paragraph.

What has become very common in the past seven to ten years is

what lenders call a “Loan Modification”. In this contractual agreement, the delinquent payments were tacked onto the principal sum of the mortgage and the monthly payment was very slightly increased ($10 – $30). The other option was to just keep the payments the same, but add on additional payments at the end of the loan, so instead of 300 more payments, the homeowner would have 310 when interest was calculated into the equation. This settlement option was the most favorable and comfortable for the homeowner and usually resulted in the homeowner staying out of another foreclosure.

Loan modification is always available, but it takes work to get the

lenders to agree to it. Hint – publicity or negative publicity for national lenders sometimes works well in a true hardship to get the lender to give a generous loan modification. Perhaps with the rapidly rising foreclosure rates and lenders going out of business, they will realize this old method of handling foreclosures could be a huge part of the solution to the ―mortgage meltdown‖ crisis.

What this means to you is that you should FIRST ask for a loan

modification agreement where the past-due amount is added on the back-end of your mortgage. They will say ―No‖ but tell them that someone you know had their bank do it and ask to speak with a Supervisor.

Keep asking for a higher level Supervisor until you get the real Vice-

president of the bank if necessary. Isn’t it worth your time talking to the lender’s personnel to save your home? How badly do you want to keep your home or to get additional time to sell your home at the best possible price? Even if you have decided to sell your home, this method will give you time to get maximum dollars for your home AND you pay off the past-due payments at the closing of your home‘s sale.


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The lenders‘ attitudes about financing marginal borrowers changed when variable rate interest loans become popular and interest rates could be accelerated on a scheduled or ―adjustable basis‖. The result was that homeowners had larger and larger mortgage payments as they got further along into their mortgage.

This strategy was justified by rationalizing that inflation would bring

higher salaries so the higher mortgage amounts could be covered. The other component in this decision was the simultaneous rapid rise in real estate prices fueled by cheap ―teaser rate loans‖ (initially low interest rates), that gave the lenders confidence that they could take back properties in foreclosure and actually make money selling them back to retail buyers.

Unfortunately, they were correct for a few years and they became

confident their lending strategies were invincible. The lenders next move was not to invest in low yielding, short-term interest rate portfolios, but rather to finance perspective homeowners who could barely afford the initial monthly payments and later fell behind as the rates jumped as part of the escalation clauses in their mortgages.

Tip (#17) SUPER SECRET - If you happen to have an IRS lien against

your property, it comes BEFORE your lender‘s mortgage at the auction, so the lender will try to work harder with you to resolve your problem. However, if you strike a deal with the lender and still want to sell your property, you will have a problem if the buyer doesn‘t want to pay off your IRS lien because it is simply too large.

There is a solution, and it will take some effort (asking for many

Supervisors) on your part to get your local IRS office to release the debt from your property by formal application. Request IRS Publication 783 “How to Apply for a Certificate of Discharge of Property From Federal Tax Lien”. They will not forgive the loan but will simply keep it against you personally, adding interest and penalties until paid.

The IRS will usually remove it from the property if the sale price of the

property does not give the seller (you) any proceeds at closing. Why should an IRS lien attached to your home matter? Because you have the opportunity to get your mortgage paid off when you sell, you may be able to negotiate the IRS penalty amount, and you can start re-building your credit and your future.

If your lender buys your property at the foreclosure sale, or by accepting

a ―Deed in Lieu of Foreclosure‖ from you, and the lender resells your home for a loss, the lender has two options to ―charge‖ you with this loss:

1.) the lender will get a ―deficiency judgment‖ against you personally*, or


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2.) the lender can issue you an IRS Form 1099C (Miscellaneous Income) for the amount of the deficiency.

Until 12/31/2012 (and likely to be extended), if the property being sold

was the homeowner‘s personal homesteaded residence, the 1099C ―phantom income‖ will be waivered for income tax purposes. Check with your CPA to make sure the regulation is still in effect and that you qualify. If you have a second mortgage or home equity line, these may not apply for the waiver. These junior lien holders may pursue a deficiency judgment.

Lenders have become very informed about judgment collection. They

will file away their judgments and wait 3 – 5 years before they look to start a legal proceeding to get their money. Usually, a client will call and say their bank account suddenly ―lost‖ every penny in the account. They will be shown a court order that transferred the funds to the collection agent for the lender! Don‘t get caught thinking the lenders forget with time.

Yesterday, a note buyer who has millions of dollars in deficiency judgments told me he has them all carefully filed away in an air conditioned storage unit waiting for the next three years to start collecting them………..

In the first case where the lender gets a deficiency judgment, they still

have the problem of collecting it and since you have had so many monetary problems, they probably can‘t get blood from a turnip (you). If you later file bankruptcy, it is likely that this judgment may be ―vacated‖ or thrown-out, so you may or may not have to pay it back. The new bankruptcy laws have changed the old system dramatically and while 85% of people who apply still qualify, these same people generally cannot just ―lose‖ their debt as in the ―old days‖.

In some states the deficiency judgment is based not on the actual sale

price of your home but rather on an appraisal. This is very unfair to the homeowner because the lender could later sell your former home for a substantial profit and the judgment still shows against you. Your deed of trust or mortgage will contain the clause or provision that allows this practice. We suggest you challenge any appraisal that results in your getting any deficiency judgment!

The second option where lenders issue IRS Form 1099C is most common and always comes as a surprise to the homeowner who lost his home. The income reported to the IRS is referred to as ―Phantom Income‖ because you never really got any of the money the lender is reporting you received. It can‘t be said whether this is common practice or not, but with


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proper proof of the hardship that caused your foreclosure, the IRS has allowed most of these phantom incomes to be written off, which is frankly very fair. But trust me, you have to ask possibly through a couple levels of agents and you must plead and prove your case. Again, until 12/31/2012 (and likely to be extended), if the property being sold was the homeowner‘s personal homesteaded residence, the 1099C ―phantom income‖ will be waived for income tax purposes.

In summary, this chapter should have made you better aware of

whether you can keep your property and have it be affordable, or if it makes sense to sell and not carry a larger financial burden into your future.

This decision should be determined not by what you WANT, but rather what you NEED for your physical, emotional and financial wellbeing.

So What is Your Decision? If you cannot get a loan modification program that will increase your monthly payment only slightly or give you a principal reduction or lowered interest and lowered mortgage payments, then:

1.) [ ] I CAN AFFORD higher payments for 6 months of at least twice my current payments, or 2.) [ ] I CAN NOT AFFORD the higher payments, and need to sell as soon as possible to get my equity out and move

on.

By making either of these decisions, our goal is to still work toward STOPPING or stalling your foreclosure to give you more time to regain control of your destiny.

It is important to have a goal in mind for the complete cycle of keeping

or ultimately selling your home. We will help with this by offering ways to reduce or eliminate your foreclosure problem in the coming chapters. Specifically in Chapter 5, we give you 20 ways to save your home and 12 things to do if you have determined that you have to sell your home. Don‘t jump ahead! Please read everything so you have a better understanding of the entire foreclosure process and your rights.


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Chapter 3

Determining the Amount of Equity In Your Home

In a few words, equity is the amount of cash remaining when you sell your home and pay off any debt attached to it. There will be closing costs but they should be about 2% of the sale price for the seller. If your home can be sold for $200,000 and you owe $140,000, your equity is $60,000.

Why would it be important to determine the equity in your home if

you want to stay and not sell? Because you need to be prepared for the worst circumstance if you are unable to timely stop your foreclosure or postpone it long enough to effectively sell your home at full market value. ―Effectively‖ sell means you don‘t want to have a distressed sale if you don‘t have to.

Almost every homeowner at sometime has thought about how much his

home is worth. In the early to mid-2000‘s rapidly rising real estate prices had virtually everyone talking about real estate investing. Until the sharp declines in the market, it was being said that real estate investing was becoming more popular than baseball.

Besides the potential to make large profits with minimal investments,

homeownership is usually a big part of your net worth. The ―true‖ actual value of your property is only what you are able to sell it for and nothing more – and when you need to sell it. We love to think about the fact that a smaller property sold for so much down the street and, consequently, our home must be worth much more! However, this may not be the reality and the average homeowner often compares apples to oranges to get a ―market value‖ for his home.

We have so often heard, ―Smith‘s place sold for $250,000 and it was a

dump, I‘m not selling for a penny less than $300,000!‖ In a strong ―seller‘s market‖, a homeowner may get away with this but in a strong ―buyer‘s market,‖ he may be looking at holding the property for many months or even years.

The next thing we hear is ―Well, I don‘t have a mortgage so I can hold

out forever!‖ This may be true, but what the homeowner fails to consider is his carrying costs of taxes, insurance, utilities and miscellaneous repairs and maintenance. But the larger cost that is seldom taken into consideration is lost


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interest on the equity in his home if he just puts the proceeds of the sale in the bank.

In mid-2007 interest rates for CD‘s averaged 6.5%, which meant that

proceeds of $250,000 from the sale of your home, the amount of annual income LOST by not having it invested would have been $16,250 or about $1,354.16 monthly. This monthly income may be too small to mean much to you, but for many senior citizens, it is equivalent to their Social Security checks that they worked for all their lives.

To determine the equity in your home you have to determine the price

you can sell it for in the current market. What needs to be factored into the equation is, ―How soon do you have to sell?‖ If you have equity because you are not upside down on your mortgage, your lender will be pressing to foreclose. This means you need a solution to your foreclosure and fast – either by selling or solving your foreclosure problem.

I could talk about online services such as www.Zillow.com for an

estimate of your home‘s value, or an actual appraisal, but the reality is that the best estimate of what your home will sell for is comparing your home to all the others in a ½ mile to one mile radius that are for sale with Realtors® or For Sale By Owner. You find these by driving your neighborhood and calling each seller or real estate agent and questioning him about the property and, of course, what each owner is asking.

To get the actual price these sellers will take, you have to probe by

saying, ―I am a cash buyer and can close in two weeks, what is the best you will take?‖ If you are uncomfortable saying that, tell the seller you are inquiring for a friend who wants to move into your neighborhood. If you make the same statement at least three times and finally ask if that is their ―absolute‖ lowest and best, you will have determined both their motivation and lowest price. This is your competition and you know what you are up against.

Normally this exercise would stop there but if you are motivated to sell,

you have a chance to do so by making your home look as good as possible without remodeling – patch and paint only. Then you‘ll need to start a marketing campaign to end all marketing campaigns.

The other obvious option is to simply call a Realtor® and ask for a

Broker‘s Price Opinion (BPO) or a Comparative Market Analysis (CMA). Both of these analysis‘s take close comparable sales from within a ¼ mile or ½ mile of your home that are similar in size (+/- 10% of the square footage) and that have sold in the past 3 months, 6 months or as much as one year if there are few sales in your area.

http://www.zillow.com/


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The Zestimate® that I mentioned that you can get at www.Zillow.com is in most peoples‘ opinion, too high in value. This has to do with how they evaluate the home and land it sits on. But the real value is you can see comparable properties to yours that have actual SOLD – not wishful thinking by listing agents.

Here is the rub with using a Realtor® - you run the risk of what is called

―Selling the listing‖ happen to you. In the industry, the real estate agent or broker with the most listings makes the most money. To get the most listings, a few unscrupulous ones will use their sales abilities to make you believe they have ―pocket buyers‖ just waiting to buy your home. If your estimate of your home‘s value is unrealistically too high, they will both agree and possibly even say they can sell it for more.

If you interview multiple agents, you will get a reality check with at least

one saying your home is worth much more than the other(s). For example, if two agents tell you they believe you should list your home at $150,000 and a third says he can definitely get $200,000 – who would you naturally list with? What follows is a string of excuses about other homes selling for less and that you have to reduce your price to be competitive. Likely you are also trapped in a 6 month or one year contract so he will get his commission even if you sell it yourself.

Realtors® in general are good people, very hard working for what they

receive but sometimes they are more concerned with getting the listing than your well fare. How do I know, from interacting with thousands of sellers and agents over the past 36 years.

I publish articles on an online article website located at

www.Ezinearticles.com My most popular article is ―How Does a Foreclosure Affect My Credit Score?‖ but right behind that article in popularity is one I wrote entitled ―How to Fire Your Real Estate Agent‖. This tells volumes about the problems sellers have with some Realtors®. I am sure there are thousands of success stories where homeowners used an agent to sell their home; it‘s the bad apples in the barrel that get the attention.

What would really help you sell your home quickly is our course on selling your home ―For Sale By Owner‖ (FSBO) in a very short time. It is packed with creative ways to sell your home very quickly, at full market value and without paying a realtor‘s commission. This FSBO Power Selling System can be seen at www.FSBOPowerSellingSystem.com

http://www.zillow.com/

http://www.ezinearticles.com/



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The Majority of Foreclosures Are of Two Types:

1.) The homeowner recently refinanced and cashed out the home’s equity and now the payments are unaffordable, or he never planned to make any payments because he is “selling” his home to his lender. This refinance may have been intentional to get the equity out of his current home for buying another home, updating his home, paying off credit cards, or spending the money on other major purchases. Within a short time the payments on the new mortgage escalate and becomes unaffordable. The second situation is where the homeowner refinanced clearly with the intention of not making any further mortgage payments and he has effectively ―sold‖ his property to the lender when he defaults on the new loan. This process of refinancing, cashing out, and never making another mortgage payment is becoming more common in today‘s tough buyer‘s real estate market and it is being aided by the lenders lending 80% to 100% of fair market value to the homeowner. In essence, the lenders are giving the homeowner the best possible incentive to avoid having to wait to sell their home and to go straight into foreclosure. This is becoming a common event in all parts of the country and we believe a rapidly increasing national problem. In some parts of the country (mid-west for example), lenders have completely stopped refinancing if there is any cash-out to the homeowner, but elsewhere lenders tend to refinance almost without hesitation. One reason for lenders‘ seeming lack of common sense is that they are doing 80%/20% loans with high profit margins in the closing costs. The primary lender is also selling the second mortgage (the 20% loan) to secondary lending institutions at substantial discounts. The thought process of the primary lender is that if the homeowner goes into foreclosure, their first mortgage is covered because it is at MOST 80% of the recent appraisal, so they have little or no risk when re-selling the property after they get it back at the auction. This thinking has proven correct in many parts of the country until home prices fell more than 20% in as little as one year. The lending institutions that were buying the second mortgages have also stopped because they experience virtually 100% losses when the homes go to auction, and many of these sub-prime lenders have been put out of business because of their predatory lending practices that went bad.


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Not every homeowner that refinanced and defaulted had planned it. In some situations the homeowner had every intention of selling his home to pay off his mortgage and purchase another property. This idea worked in a hot seller‘s real estate market and was done quite often and with great success. However, in recent years, the homeowner will have selling expenses of between 10% and 35% depending on the price reduction he has to take, realtor fees, closing costs, accrued taxes, and ironically his new home’s mortgage payments to keep the property long enough to sell it. This usually means that the seller could have to bring money to the closing table to get out of his property – the easy alternative is to default on the ―new‖ mortgage(s) and let the lender worry about it. The text you are reading is designed to give you options to postpone your foreclosure sale long enough to sell your home. If you find yourself in a position where you need to sell quickly at full market value, take a look at www.FSBOPowerSellingSystem.com

2.) The more common type of foreclosure is where the homeowner has

a personal crisis and he is either temporarily or permanently unable to make the mortgage payments. Very often when the crisis has passed, the reinstatement costs are impossible for him to get together at one time to reinstate his loan. The lender‘s Forbearance Agreement for the modified monthly payments is even more unreasonable for the homeowner to pay. He can do very little but wait for his home to go into foreclosure and get sold at auction. We have the solutions for this problem and as above, if you know you will have to sell your home, look at our FSBO Power Selling System online at www.FSBOPowerSellingSystem.com to save the realtor commission and get it sold quickly before the lender takes it at auction.

Our objective with this text is to save your home if that is what you want, but as explained in Chapter 2,

if you can’t afford to live there, make other arrangements before your lender does it for you!




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Extracting Your Home’s Equity

Homes with minimal equity:

These homes have generally been refinanced within the past few years and a personal crisis has happened that is causing the late payments, or again, the refinance was a plan to sell the home to the lender. Because of the refinance there may be minimal equity, especially if the local real estate market was ―hot‖ before the refinance, there could be minimal equity.

Generally with minimal equity, the homeowner may be able to refinance into a fixed rate loan with a longer term (40 or 50 years) to reduce his mortgage payment – essentially a loan modification with the lender‘s approval. He may even be able to finance his lender‘s costs into the new loan. If you want to stay in your home and this is an option, try and do it BEFORE you get behind on payments.

For the individual who refinanced to get his money out, his need is to sell as quickly as possible and for at least the mortgage amount due. Be careful if you use a realtor for selling the property as you may have to come to closing with cash that you took out when you refinanced. The commission of only 5% can be a chunk of change when you are trying hard to make ends meet. Your other option is to let the bank have the property via a deed in lieu of foreclosure, or finally, let itI go to auction. You can easily sell your home if you have a plan and work your plan!

Tip (#18) HUGE HINT – Lenders may offer what is called a ―Deed in Lieu of Foreclosure‖. This is the process where you sign your ownership (title or deed) to the lender without going through the foreclosure process. The lender‘s representative will explain that it will save them money and save your credit rating. This is true, BUT you need an additional agreement that must accompany the deed that forgives you for any amount due if the lender takes a loss on the sale of the property. In this situation, ―Forgive You‖ means not filing a judgment or their giving you an IRS Form 1099C. The lender will say it can‘t be done - but it can be and is done all the time! The bank‘s representatives will almost always tell you their bank doesn‘t do it by policy, however, that is either a lie, misrepresentation or the representative talking to you isn‘t that informed.


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If they won‘t agree to not issuing a 1099C and not giving you a deficiency judgment, you may be better off taking your chances at the foreclosure process because you have more options in your favor. Consult an attorney who specializes in foreclosure law to determine what is best for you and how the agreement should read. If you know someone who is interested in buying your home, this is an opportune time to tell the lender so they have an opportunity to finance the new buyer or allow him to take over your existing loan. The new buyer would have to qualify for the loan and possibly pay some closing costs. There is another option called a “short sale” which we will discuss at length in Bonus Report #2. With this option, the homeowner‘s mortgage is reduced by 10% to 50% but only for a new buyer coming in to purchase the home.

Homes with some equity:

As a general rule of thumb, the amount of equity here is somewhere in the 5% to 20% range of the value of your home. For a $250,000 property, this could be $12,500 to as much as $50,000. The range of equity chosen is just that – simply as an example in this text. To some people $50,000 is a fortune while to others it is not nearly enough to buy a new car. Either way, there is enough money involved to make it worth someone‘s time to extract it out of their home if they are leaving because of foreclosure.

To retrieve this equity the homeowner must first take back control of the

foreclosure process and then sell the property. Selling quickly is not the issue here, once the foreclosure has been stopped, but rather retrieving the most equity is the larger and more important issue. It is unlikely, but if the foreclosure can‘t be stopped by using our guidelines and suggestions, the property must be sold quickly before all is lost at the auction sale. As mentioned previously, visit our website at www.FSBOPowerSellingSystem.com for information on how to get your home sold quickly.

Homes with large equity:

We are now talking about more than 20+% equity and the amount can be anywhere from $15,000 to $5,000,000 or much more. It is imperative that you split your focus on selling your property immediately and you work on the resolution of your foreclosure. Spend particular time looking at bringing your mortgage current with a small ―second‖ mortgage that will be well covered by the additional equity in your home.



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If your home is unaffordable, borrow enough additional money from the

second mortgage (HELOC for example), to carry your original and second mortgage payments for six months at a minimum. This should give you more than enough time to work out a solution to keeping your home, refinancing both mortgages, or selling at the best possible price.

Our first suggestion because of your larger equity, is to get a home equity line (HELOC) as soon as the foreclosure issue is considered (behind one month or even less is preferred). Lenders that are familiar with your history of banking with them will probably give you an equity line for 80% to 90% of a current appraisal. This amount will cover you while you search for a long-term solution.

Again because of the larger equity, the homeowner will qualify for a hard-money loan. The cost to close these hard money loans will be hefty – as much as 3% to 10% closing costs plus interest rates as high as 12% - 20%. If you are a prospect for paying the new high monthly interest-only payments, this is a viable, but long-term expensive option. In all cases do what is best for you and your family, not what you think the lender wants because they do not care about your personal crisis.

Since the first quarter of 2007, a few major national lenders have established departments to work with homeowners who are in foreclosure. They have these individuals go to your home and sit and counsel you in what steps you can take and what the lender is willing to do.

Unfortunately, some lenders have chosen to hire outside firms, who have alternative motives of listing your home on the MLS® (because they are actually Realtors® and want the commission) by doing a short sale with the lender and taking your property for themselves.

Any interaction you have with individuals who represent themselves as being sent by the

lender, YOU MUST check their credentials, DON’T sign ANYTHING, and be aware they may

have hidden motives!


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Chapter 4 Understanding Your Mortgage

Most people believe they know how their mortgage works. The reality is they know how to send in a check monthly but don‘t really understand what happens when the mortgage is called, accelerated, transferred, sold ―subject to‖, or paid off.

―Subject to‖ is mentioned here because anyone can take over your

mortgage payments by simply making them each month. The homeowner or mortgage grantor is still liable for the payments if they are stopped. Realtors® and even a few attorneys, who don‘t understand the nature of this contract law will say it is illegal to take over someone else‘s mortgage because of a ―Due

on Sale‖ clause in all mortgages. THIS IS ABSOLUTELY AN UNINFORMED OPINION.

Your lender has the ability to ―call‖ or ―accelerate‖ your mortgage if he

determines that you have transferred title to the property. The lender can request that the mortgage be paid in full in 60 or 90 days – sounds pretty tough! In reality, if the mortgage payments are being made, the lender doesn‘t care. Actually, if the payments are late, the lender doesn‘t care – as long as the payments keep coming.

Since the late 1980‘s, lenders have made huge amounts of additional

money on loans using mortgage contract language that contains what is called a ―due on sale‖ clause. This contract clause simply says that if the guarantor of the mortgage sells the property or transfers its ownership, the mortgage is due and payable in full.

However, there is no “due on sale” jail, so it is not illegal to allow

someone else to pay your mortgage payments. It is actually only a breach of contract law with the result that the lender‘s recourse is to call or ―accelerate‖ your mortgage which makes it due and payable in full. In fact, it is a very common practice by investors to take over a seller‘s mortgage so the expense of new financing doesn‘t have to be paid.

This ―subject to‖ type of financing of a real estate purchase by making

the existing mortgage payments for the homeowner is one of the first things we look at to buy a property. The seller has the ―not so marginal‖ risk that the buyer doesn‘t pay the mortgage payment on time and their credit is tarnished. Solutions for this potential issue are mentioned elsewhere in this text.


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What happens if the lender discovers that you have transferred the property without their knowledge? In over 25,000+ cases that we and our associates have been involved with, no mortgage has ever been called after being taken over ―subject to‖. Some investors tell tales of angry sellers who call their lender and squeal on the buyer. Remember, that the guarantor is still the seller, so this stands to hurt him more than the buyer.

Our personal experience, since we transfer the title into a land trust for

each sale is that some lenders do know what is happening and the worst we have personally had happen to us is they stop sending the monthly statements and billing notices. We simply send in a payment equivalent to the last payment and keep moving toward the sale of the property. When sold, the closing agent calls the lender for the final payoff for the mortgage and we close out the loan.

As a homeowner what you probably remember is going to your home‘s

closing and signing a stack of papers (average is about 2‖) that you couldn‘t read if you had days on your hands! But you are actually signing two important documents that take up 99% of that pile of papers.

The first is a Promissory Note that in essence is a ―promise‖ that you

(the guarantor) will repay the mortgage note. The Mortgage Note is the second document which is the binding contractual agreement that collateralizes your home against the Promissory Note.

The Promissory Note contains all the ―details‖ of your mortgage,

specifically the terms, interest rate(s), payment schedule, and due date. Mortgages and Deeds of Trust are not the same and we discuss the differences in detail shortly. It is VERY IMPORTANT to determine which one you have and reading your documents will tell you immediately!

Tip (#19) - This technique of using “in place” seller financing can

work VERY well for a seller (foreclosure victim) to get out of his property by allowing a buyer to take over his existing loan. HOWEVER, the seller must not transfer title until the mortgage has been paid and the buyer, who is only a tenant, must make the mortgage payments to the seller who in turn makes them to the bank. This effectively becomes a Lease Option for the buyer and seller. The seller can use the same check that the buyer gives him each month to send to the lender – JUST make certain the

check is made payable to the lender - NOT the seller.


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Do You Have a Deed of Trust or a Mortgage?

The terms mortgage and deed of trust are often used interchangeably, but they are quite different and it is important that you understand what one you have and their specific differences. It is important because the clauses in each of these contracts allow the lender various degrees of flexibility to foreclose but also come with constraints which the lender is allowed to do to the homeowner in foreclosure. Following is a table that shows the general differences, but it is strongly suggested (again) that you read your loan document to see what it is and what rights you have:

Important Features of Deeds of Trust and Mortgages

Important Features Deed of Trust Mortgage

Parties to the Contract

Three parties Trustor (homeowner),

Trustee (person holding property‘s deed, and Beneficiary (lender)

Two parties Lender and

Mortgage Guarantor

Type of Proceeding

No court filing necessary to sell home, but Judicial

filing can be used by lender Check your Contract!

Court (Judicial) filing necessary to get a

judgment to sell the home

Estimated Time to Sell Very Short!!! 30 – 45 days

Varies Greatly 90 days to 12 months+

How Sold Trustee’s Sale Auction by county‘s

personnel

Cost to Lender Inexpensive -only the cost

of Trustee‘s Sale Expensive because of

time and legal fees

Risk to Guarantor or Trustor

Only home unless Trustee uses Judicial proceeding

Home plus deficiency judgment

Expect Deficiency Judgment

Must be done as separate court filing – usually not

done

Included in the Judicial filing but still the

discretion of lender

Redemption Rights Absolutely NONE Variable from none to maximum of two years


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Your Monthly Mortgage Statement You will likely continue to receive a monthly mortgage statement during

your initial foreclosure, but at some point they will stop sending them because they believe you will no longer pay and the total balance due can no longer be easily calculated because of attorney‘s fees and expenses that have yet to be billed to the lender.

What is unfortunate about your mortgage balance due, prior to the start

of your non-payments, is how much it increases exponentially when the lender adds the accelerated interest, penalties, fees and expenses. You would assume that if you had to pay off your mortgage, this newly inflated value is the amount due. However, many mortgages additionally carry pre-payment penalties for as much as five years which can also be added to the final judgment amount or payoff.

As investors, we were personally involved in paying off a mortgage that

a homeowner had for 4 years and 10 months and had a yearly pre-payment penalty of 5% - for 5 years! Usually the prepayment penalties are a declining percentage of the balance owed. Had we known this penalty still existed after so long, we could have stalled the closing.

This oversight by the homeowner cost her $11,600 at the closing table

because she assumed she didn‘t have a pre-payment penalty after all that time. We could have used a couple of provisions in the mortgage document to eliminate the full prepayment amount – if we had known. Keep your closing and mortgage documents in a safe place so you can always find them!

Look at your mortgage document’s first two or three pages and any

addendums at the end for these prepayment penalties and other pertinent information that could save you thousands of dollars if you have to sell your home or transfer it to someone. If you don‘t want to do this ―review work‖ have your attorney review it. The review can be very important because the lenders often try to push penalties or guidelines on borrowers that are not in any way applicable to them. However, the homeowners agree because they don‘t know any better and are in a hurry to close.

A recent statistic that was shocking to me was that one of every three

homeowners who have an Adjustable Rate Mortgage (ARM) will wind up in default and eventually lose their home to foreclosure. Do you have an ARM?

Tip (#20) – If you have an adjustable rate mortgage (ARM) the first time your interest rate adjusts or ―resets‖ your pre-payment penalty lapses or is


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greatly reduced. If this is your case, try and wait for it to adjust to the higher interest so the pre-payment penalty is no longer an issue for the buyer – unless you don‘t mind paying thousands of dollars that you may be able to avoid..

To avoid this issue you might simply make the closing date be a day or

more after the ―anniversary‖ date of the mortgage interest reset. Lenders don‘t really care about this as long as it isn‘t months and months away and the buyer is solid. You do not have to be in foreclosure to use this strategy when selling your home.

Tip (#21) - Have your buyer consider making application to the same

lender for his new mortgage. Because the buyer is applying directly to the lender, there are no mortgage brokerage fees involved and your buyer could save thousands of dollars and very likely get the same or a lower interest rate!

Soft and Hard Prepayment Penalties Most mortgages issued in the last ten years have pre-payment penalties

unless it was part of the original mortgage commitment. When you applied for your mortgage you would have had to ask for this ―no prepayment penalty‖ feature and it would cost additional money at closing, or a higher initial interest rate, and possibly even additional closing points or fees.

Some mortgages have no prepayment penalty after one year. A selling

point by some lenders is that there is no prepayment penalty after the first year, but during the first year the penalty is usually 3% to 5% of the mortgage balance, or six months of interest payments. There are two types of prepayment penalties and it is important that a homeowner understand the difference.

“Soft” prepayment penalties are those that allow the early repayment

of the mortgage (lien) without any penalty if the homeowner (mortgage guarantor) sells or transfers the property. However, if the homeowner wants to refinance, the mortgage payoff will include a penalty of usually six (6) months interest or a percentage (3% to 5%) of the remaining mortgage balance. It is important to know this so that when you go to closing, you or the buyer are not surprised and need more money to close. The closing agent will know this because he has to contact the lender for a loan payoff at closing.

“Hard” prepayment penalties are those that charge a pre-pay penalty

if the mortgage is either refinanced or the property is sold. Usually these


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penalties last for up to five years as ―This is the average length of homeownership in America‖ – what a coincidence! There can be an exception to this penalty and it must be carefully researched in your mortgage document – sometimes the lender will allow an exception if the new buyer makes application to the same lender and is approved for a mortgage on the same property.

For example, earlier I mentioned losing $11,600 at closing because the

seller didn‘t have the mortgage and note for me to read before the closing. When I did get to see it, it offered an exception to the penalty if the new buyer applied and qualified for a new mortgage on the same property with the same bank. I could have said to the new buyer, ―Apply to the old lender and see what they will charge you and I will give you $4,000 if you get the loan from them.‖ This would have saved $7,600!

A very important message about the ownership or title to your home - Typically homeowners put the title to their home in both the husband‘s and wife‗s names, but it is not uncommon for a husband to put the title in his wife‘s name only, especially in New York State. For the sake of the foreclosure process, the name on the title doesn‘t matter.

The guarantor or signatory of the mortgage is responsible for the

payments – even if they do not own the property. A common example is where the loan is taken out in the name of an individual who has good credit and he is the guarantor or he ―co-signs‖ on the loan (i.e. a father for his son).

Sometimes in a foreclosure, the owner of the property may not have the best interests of the mortgage guarantor at heart. This is especially true in divorce situations where the husband or wife is estranged and the wife is on title and the husband was guarantor for the mortgage. In certain states, when a homeowner marries, the spouse becomes half owner immediately if he or she has lived in the home for even one day. This is called ―Spousal Rights‖ and every state has different guidelines – so check with an attorney in your state.

We strongly suggest that you get an attorney that does real estate

closings on a regular basis, NOT a referral to an attorney who does general law. Make certain what rights you have to sell your property so “clear title” can be transferred to a buyer. This issue of clear title will become critical if you need to sell fast and don‘t know that you only have a right to one half or less of your home.

This is the same situation that can occur in probate cases where one

spouse has died and the other was not on title and must make the mortgage payment or lose the property. Technically, if the grantor of the mortgage dies,


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the mortgage is due and payable immediately. JUST CONTINUE to make the payments until the probate situation is cleared and you can transfer title to the spouse or sell the property. Otherwise, the lender is in his legal right to call the mortgage and start foreclosure proceedings.

Many properties that we purchase are bought ―Subject To‖ the existing

mortgage staying in place while we continue to make the monthly mortgage payments. We do not try to hide who is paying the mortgage because the lenders are happy to get the payments and do not check to see who is sending in every check. We have never heard of a lender accelerating a mortgage to get their money back from a loan that wasn‘t in default but was being paid by someone other than the guarantor.

In summary, there is no ―Due on Sale Jail‖ and when necessary just

keep sending in the payments rather than have your property go into foreclosure, which is certain if you don‘t make the payments! This ―subject to‖ investing is usually done by investors purchasing properties where they want to put in as little money as possible or where the death of a family member puts the property in probate for an extended period and exposes it to foreclosure.

Types of Ownership

I mention types of ownership here because it is often a problem,

especially in probates, that the homeowners or their relatives do not understand who is actually on title or responsible for the mortgage. Most often they are the same but the title holders do not have to be the guarantors (signatories) on the mortgage or the Trustor of a Deed of Trust.

1. ―Absolute or Fee Simple‖ is where a single person owns a single piece of property, however, because one person is on title does not mean a spouse isn‘t entitled to a partial ownership.

2. ―Tenants in Common‖ is when two individuals each own one-half interest in the property and if one dies, the other still owns only one-half interest in the property. The other half will have to be re-titled after a probate or terms of a trust are invoked.

3. ―Joint Tenants with Right of Survivorship‖ implies that while alive, both parties own the property and when either of the owners dies, the other becomes the absolute owner. Title changes at the court house may only require a death certificate or in some cases the outcome of a probate to transfer a clear title.

4. ―Tenancy by the Entirety‖ is the same as tenants with rights of survivorship except the parties must be married.

Ask a real estate closing attorney if you are uncertain about what needs to be done to transfer title and your rights in any situation.


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Chapter 5 Specific Methods of Stopping or

Postponing Your Foreclosure

As we mentioned previously, we are sorry for your situation. We have seen and heard literally thousands and thousands of horrific stories of disrupted families and broken lives as the result of foreclosure. Please remember:

We are on your side!

What you read in this section may not be what you want to see, but we are sharing our experiences, proven methods, and offering options that should resolve your situation - however uncomfortable they may be. When you read something you think you could, or would never do, just ask yourself “How important is saving my home or getting out as much equity as possible?”

Very recently a national real estate guru sent out an email with great

fanfare about the fact that in the last 30 days more than 45,000 homeowners had filed bankruptcy to stop their homes from going into foreclosure and in the same time frame, 9,978 MORE homeowners got kicked out of bankruptcy due to non-performance of their bankruptcy obligations and are now headed into foreclosure anyway. Little did the other 45,000+ know that their homes‘ foreclosures will also be kicked out of their bankruptcy filings.

This Guru was selling leads to investors so they could contact people

filing bankruptcy to offer these homeowners a few pennies on the dollar for their property. His statements went on to say he had made millions of dollars getting foreclosure property and so could anyone. I wish this real estate guru could fully understand the horrendous hardships that these families are enduring and the emotional stress associated with their financial situations.

Tip (#22) - The next time a person knocks on your front door and

says “I was at the courthouse doing some research and I noticed you have a bank trying to take your home, let me help”, you will know they are probably lying because they can get your name online from the public records or pay a few cents for a list – why travel to the courthouse and spend the time researching your case? This is not the way you want to start a relationship with a ―consultant‖, A/K/A a real estate investor. Understand your rights first and your options as explained in this text. Then go informed into ―battle‖ with an investor.


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In the tri-county area where we live, in this month alone, foreclosure

rates doubled over the same time last year. Bankruptcy and foreclosure victims are TARGETS of real estate investors, mortgage brokers, realtors, and even attorneys who push bankruptcy as a viable option to ―postponing‖ your foreclosure. It is an option but it may be the best option for the attorney since he gets paid up front and doesn‘t have to contend with the stigmatism of the bankruptcy in the future.

The foreclosure industry is a $100,000,000,000+ (100+ Billion Dollar

Industry!) which attracts a lot of individuals for the money – either YOUR personal out-of-pocket money, or for the EQUITY in your home!

Unfortunately, when dealing with your foreclosure, procrastination leads

to financial disaster when you deal with lenders, attorneys, mortgage brokers, realtors, investors, and the legal system. As mentioned previously, lenders DO NOT care about the reason for your problem; they hear thousands of hardship stories every day that are much worse than yours.

Stay focused on a solution and DO NOT HOPE that other people will

come to your aid at the last minute - because everything will be lost if it doesn‘t happen! The legal system is very efficient and follows specific guidelines that are not in your favor time-wise, and again the ―system‖ doesn‘t care about your problems. The experience and knowledge we have gained from dealing with thousands of foreclosure victims in stopping their foreclosure problems will be yours starting below:

SCAM ALERT- Three Common AND Sinister Scams to Be Aware of:

Tip (#23)- “Deed Stripping” is the process whereby an investor gets

the homeowner to sign a deed or similar document that transfers title to the investor. The homeowner is promised something in return for signing the document, which could be a promise of cash or as simple as ―this document is needed to help with speeding up the closing process‖, or ―stopping your foreclosure‖.

The reality is that as soon as the document is signed and recorded (the

next day) the homeowner no longer owns the property. However, the now “former homeowner” still owns the liability that caused his foreclosure. Unfortunately, the transfer of your home to another individual by signing a deed DOES NOT transfer the mortgage LIABILITY to the new owner. The property is still encumbered by the mortgage or deed of trust and the


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foreclosure will continue until the new owner (scam artist) gets rid of the property by evicting the former homeowner (you). The original homeowner no longer has the ability to sell his home to recover any of his equity and pay off the existing debt for which he is still responsible. It does not matter if your deed is placed in ―trust‖ or not, it is no more secure. Most importantly, by signing a quitclaim deed, you have completely lost control of your property.

If you happen to find a buyer on your own, and you find out you no longer own your own home, the scam artist may agree to cancel the deed BUT will probably ask for a ―Document Preparation Fee‖ which could be $5,000 or more. All this happened because someone gave you a great story of why he needed control of your deed to facilitate stopping your foreclosure. You may not have even known that you signed a deed when you signed documents with the scam artist because he stuck them in a pile of documents he had you sign!

The correct thing to do is to contact the Police immediately and tell them

your problem. They should refer you to the State Attorney‘s Office for an investigation and possible prosecution of the scam artist. Working your way through the legal and court system can be frustrating but explain the urgency of the potential of losing your home and ―stick to finding help‖ until you get it done. Any inaction on your part will result in pushing your foreclosure forward more quickly. Bonus Report #1 discusses how to go after these scam artists even if you lose your home and for as long as seven years later!

- Remember- THERE IS ABSOLUTELY NO REASON TO SIGN A DEED TO SOMEONE

“HELPING” WITH YOUR FORECLOSURE! DO NOT SIGN ANYTHING UNDER ANY CIRCUMSTANCES UNLESS YOUR

ATTORNEY HAS APPROVED YOUR SIGNING BEFOREHAND.

Tip (#24) - “Contract Wrangling” is a term used when an investor has

a homeowner sign a contract for sale, knowing he himself will not purchase the home. This practice is not illegal and can help you get your property sold quickly. The investor‘s intention is to re-sell (―assign‖) the contract, or sell his right to purchase your home to another investor who generally will rehab the property and re-sell it to a retail buyer. In some cases the investor is up-front about his intention to not purchase your home.

The first investor has a contract that is binding on you, but the dilemma

may be the second investor comes by and offers $10,000 or more than investor #1. You need the money desperately so you call investor #1 and tell him you want to cancel his contract because ―You decided not to sell‖, ―You‘ll get the money elsewhere‖, or some other lie. These excuses are what investor #2 told you to say, and they seem like plausible reasons. Investor #2


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has just coached you into committing fraud and BOTH of you could be subject to criminal and civil penalties. But you need the extra $10,000 and you don‘t feel it is fair that investor #1 is making $10,000 more than he should. What should you do? It is very common for unscrupulous investors to offer the homeowner more money after they have already signed a contract with someone else. It usually happens like this: you have signed a binding contractual agreement with investor #1, but investor #2 may tell you that if you didn‘t get a ‖Good Faith‖ deposit or ―Earnest Money‖, investor #1‘s contract is invalid.

The contract from investor #1 is STILL VALID because the contract terms call for ―The Sum of $10 Dollars or Other Good and Valuable Consideration‖ to be exchanged which includes the valuable consideration of investor #1 purchasing your home. If investor #1 is worth his salt, he has recorded the contract in the public records using a ―Memorandum of Contract‖ or MOC that will ―cloud‖ your title transfer and stop your selling your home until it is ―cleared‖ or ―extinguished‖ from the public records. Even if he didn‘t, he still can bring a Breach of Contract Action against you in court and win.

If you decide to sign a contract with investor #2, remember that he

was unscrupulous enough to cheat investor #1 out of his contract, so if it comes down to it, what do you expect he will do to you? Here are four important elements of any Purchase and Sale Contract that will help protect your best interests:

1.) Deposit – the investor will want to give you $100 or less. You need to get $2,500 or more. The way to accomplish this is to agree to $1,000 initially and on the last day of the inspection period get the rest of the deposit (twice the original) or the contract is void. Both the first and second deposits should be non-refundable after the inspection period for “any reason including the buyer’s inability to get financing” (this term should be in your contract). If your attorney writes this clause into the ―Clauses or Addendum Section‖ it should override any ―contingencies for financing‖ sentences elsewhere in the contract. The investor will want the sale contingent on financing, but he is supposed to be a cash buyer so financing shouldn‘t be an issue. Your attorney MUST hold the escrow deposit or you may never see it if the investor defaults. If the investor comes back on the last day of the inspection and wants his initial deposit back, he should get it back. This is why an inspection period should be kept as short as possible, preferably 7


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days or less, but an industry standard is 10 days. Longer than 10 days is wasting your time and losing you more money in carrying costs for your home and getting you dangerously close to possibly losing your home to foreclosure.

2.) Inspection Period – the investor will want an inspection period of

20 days or longer, but you should only give him 10 days or LESS. This is important because he will effectively tie up your property and has taken it off the market while he is in contract with you. We strongly suggest that you continue to market your home and take a back-up contract that clearly stipulates it is only valid if the primary contract is cancelled. If the investor sincerely wants to purchase your home, he will have no problem with the shorter inspection period and the requirement of an additional deposit. However, if he only intends to ―flip‖ your home to another investor, he will strongly protest both the deposits and the ―short‖ inspection period. If his inspection period expires and he does not make the additional deposit, you must cancel the contract by CERTIFIED or REGISTERED MAIL. DO NOT forget to do this because otherwise he still has a valid contract!

3.) The Assignment of Contract Clause – this is a contract clause that

allows a buyer to sell or transfer his contract with you to a new buyer. The assignment can be done with the original buyer having no further responsibility for closing, or with the original buyer still having responsibility for closing (even though he isn‘t buying the property), or the seller does not have to allow an assignment of the contract. You can expect an investor to put this clause in his contract, and that he can assign the contract without recourse to him. His only risk is the deposit if he doesn‘t close, but you will have lost weeks not selling your home - so try and focus on investors who want to purchase your home themselves. You will have investors coming by to see your home because of the public nature of your foreclosure so always keep a “For Sale By Owner” (FSBO) sign in your yard to prospect for other perspective buyers. Don‘t worry what the neighbors think; your personal survival is at stake. Frankly, they don‘t care about you – don‘t believe this? Ask them for money….

4.) Closing Date – this is the date of the closing where you and your

lender get paid from the sale of your home or refinance of your mortgage(s). However, simply putting a single date does not mean your buyer has to close on time and you could have to extend the


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contract‘s closing date because it was non-specific as to what happens when you don‘t close. We always use the words ―On or before‖ a specific date. The investor will want to use ―On or about‖ a specific date. The latter is open-ended and you might wait so long for the investor to close, you lose your home. We actually include ―closing delay‖ daily charges so the investor is penalized for not closing timely. Remember you are paying carrying costs you didn‘t expect to pay because of his not closing –the investor should be responsible for paying your expenses if it is his fault you aren‘t closing timely ($100 to $150+ per day).

Tip (#25) - “Equity Rebate” is a term used when an investor has a

homeowner sign a contract price that is well above market value. The investor says he intends to close and walk away with money from the closing table. For example: The full market value of your property is $200,000 and the investor gives you a contract to purchase your home for $300,000! Sounds neat, but this is not a re-finance, cash out homeowner mortgage since the $100,000 difference does not go to the homeowner.

The investor will explain that he will have a friend purchase the home

and maybe live in it but he is really hoping for the market to move and he will use the proceeds he takes out to carry the property‘s new mortgage. The investor may explain that it is legal (which it isn’t) and that he does it all the time.

The reality is that the investor will come up with a couple of real estate

commissions and a management fee to take the proceeds of the closing funds into his and his accomplices‘ pockets – often times including the appraiser, mortgage broker, person whose credit he used to buy your house, the closing agent, and, of course, himself. Everyone, but you, gets a cut of the lender‘s money over the actual purchase price of your home. Often the new legal homeowner doesn‘t even move in and the investor‘s chosen buyer defaults on the new mortgage. This is called a “straw buyer” and it is a criminal offense! Since you sold your home at full market value and escaped foreclosure, why should you care? In the simplest of terms – you are now involved in bank fraud which is a federal offense and mortgage fraud which is also a state offense. It is possible that you might be personally meeting your local FBI agents and State‘s Attorney personnel in the next couple of years as a co-conspirator. It is extremely tempting to have your problem solved and possibly even make money on your home, but the ramifications can be far reaching!


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As always get your attorney’s approval or at least get him to tell you what disclosures the buyer needs to sign to cover you.

Summary of What Not to Do (Don’t Do’s)

Here is a summary of general things NOT To Do when involved with individuals who have presented themselves as wanting to ―help‖ you:

1.) Don’t sign anything without an attorney reviewing it 2.) Don’t allow yourself to be separated from your family or your

attorney in your decision making 3.) Don’t make any mortgage payments to anyone but your lender 4.) Don’t ever sign any type of document that is a Quitclaim Deed or Deed to Trustee 5.) Don’t let yourself believe that by putting a deed in trust that it isn‘t immediately in effect when you sign it. 6.) Don’t be taken advantage of if you are a member of an ethnic group, be even more cautious when dealing with a member of your own ethnic group because you are more vulnerable. 7.) Don’t sign any documents, but if you do, make certain that ALL of the lines of the document are filled in BEFORE you sign – Don‘t take ―no‖ for an answer on this. 8.) Don’t sign anything that will transfer your property without paying

off your loan and eliminating your responsibility for the mortgage – ―Subject To‖ financing.

9.) Don’t sign any document that you have not personally initialed and numbered each page because of possible substitution of pages.

10.) Don’t be mislead that the person refers you to a website to strengthen his credibility, anyone can have a website set up in a few hours to say whatever they want.

11.) Don’t give any money up front to anyone, except your bank, who claims to be able to refinance your mortgage (i.e. loan application fee or processing fee, good faith deposit, etc.)

12.) Don’t assume anything and get everything in writing. 13.) Don’t get pressured into signing anything because of deadlines,

plan ahead so you have time to weigh negatives and benefits.

14.) Don’t get involved with ―counseling services‖, ―professional mediators‖ or anyone who represents themselves as willing to fill out lender required responses – for a fee. The forms that you are sending to the lender are legal documents that you are responsible for and can do yourself or have an attorney do them – for less or no money!


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15.) Don’t stop talking to your lender‘s representative so you know exactly what is really happening. 16.) Don’t answer a knock at your door or allow anyone inside your home that is ―trying to help‖ you – your safety may be at state as well as your money. 17.) Don’t believe it if it sounds ―Too good to be true‖!

To save potential aggravation and possible legal issues - BEFORE you sign any contract with an investor, interview all the investors who call or come by to see you!

And, as always, contact a competent real estate attorney for professional advice on specific contract issues or general legal information.

The real estate investor should not oppose the attorney’s review if he has nothing to hide!

32 Ways to Immediately Stop or Postpone Your

Foreclosure

As you review these options, remember that you should read them all thoroughly and don‘t settle on only one as your solution because it is the easiest. Work on at least 3 - 4 so you have a backup in the worst case if your most promising option does not work out at the last minute!

Methods of Keeping Your Home Method #1 - Friends and Family Members – Whether you are late or not with your mortgage payments, but know you will be soon, make desperate calls to friends and family and ask for an amount that will be enough to carry you for at least 3 – 6 months, or for the full reinstatement amount discussed previously. This is the true test of friends and family and it is a shame that they most often seem not to be willing to help. Don’t be shocked or disappointed; keep your focus on solving your problem


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without them. Usually, you will find that they have solutions for all your problems, and have ―amazing hindsight‖, but seldom will give up their cash. The key to getting their money is persistence in calling them over and over with the progress of your foreclosure proceeding and ―How you have solutions for paying the mortgage when the process is stopped.‖ Persistence pays and the true test of their friendship will come out very quickly.

To get, and keep, their attention, you must have thought out what you will be saying to them beforehand, specifically why you need this amount of money and how you are going to resolve the problem. In addition, we suggest that you offer them a second mortgage on your property in the event something doesn‘t go exactly right for you. Offer them a specific interest rate (8% usually works because it is better than a CD rate), and definite monthly payments for a set term – three years or longer if possible.

We suggest homeowners offer a higher second mortgage amount than is actually borrowed so that if your home goes to auction, the second mortgage lender may well get back more than what they loaned you. For example, if you need $10,000 to reinstate your loan, offer your perspective lender a second mortgage for $15,000. They may complain that a second mortgage has no value – which is correct if there is no equity in your home.

So if there is no equity in your home, you have to collateralize your loan from them with something else or have them lend you the money on faith. Don’t be EMBARRASSED or AFRAID to ask! It is not a failure on your part that the foreclosure happened and it will pass – ask them ASAP! This is the least expensive and quickest way to resolve your foreclosure problem.

HUGE TIP (#26) Don’t send your lender a partial payment - especially if it is for one or two of the past due payments, UNLESS you are assured by FAX that they will accept your PARTIAL payment. Very seldom will a lender accept partial payments. If they don‘t accept your check they may hold it, not cash it, but only occasionally will they return it to you. What happens next is you get a false sense of security that your problem is being resolved because you haven‘t heard from the lender. Nothing has been resolved and you are steadily advancing toward losing your home!

Tip (#27) - If you, a friend, or relative has a Certificate of Deposit with a bank, and the prospective lender says he can‘t break it without paying a penalty, there are two options: pay your perspective lender the interest they will lose, or keep the CD intact and borrow against it if the bank allows it – which many banks do. The interest rate on the CD loan is low (2% or less) because the collateral is cash in their bank! Therefore, this is not an excuse for someone saying “no” to your need for money.


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Method #2 - If you, or a relative, have Stocks or Bonds you may be able to put them on margin with their brokerage firm, or collateralize them with your local bank to raise the reinstatement amount. Currently, stock margins are at 50% of the stock‘s daily closing price and even higher rates of margin (60% to 90%) for bonds depending on their bond rating and type.

You should pay the interest on the account monthly and the interest rates are set by negotiation with the stock broker - but are very, very competitive with mortgage rates. If you borrow money from this source, keep an eye on the market so you don‘t have a decline in the stocks or bonds and have to sell some to meet margin calls.

You can get funds in one day with this method. If your bank does the

loan, they will want to hold your stocks and have you endorse them so they are negotiable if you default. This is their and the Federal Reserve‘s required way of doing business. It is much easier if your stock broker holds them. If you use this method, have a plan to repay the amount loaned as soon as possible to avoid market risk. If you have to, or just decide to sell your stock because of market conditions, there may be capital gains taxes due so don’t forget this liability later– consult your CPA or tax advisor. Method #3 - It is very possible that one of your relatives may be able to finance your property as a second home – depending on his credit. It is likely that he will have better credit than you because of your mortgage default and late loan payments. The potential beauty of your relative financing your property is that he may be able to purchase it at 60% to 80% of the current mortgage by doing a short sale with your current lender. Most lenders will have the homeowner sign an “Arms Length Transaction” Disclosure that states the seller, buyer and realtor have no relationship with one another. This is to deter the homeowner from selling his home to a related party who will allow him to buy it back or live in it by just paying the mortgage. Some homeowners don‘t take this disclosure seriously and do the transaction anyway. The result can be the lender rescinding the deed and reinstating the mortgage and going back into foreclosure against the homeowner.

A short sale is where your lender discounts the principal amount due on your mortgage to a new buyer so the lengthy foreclosure process and subsequent market risk can be completely avoided. The interest rate for a second home mortgage is about 1/2% to 1% higher than a typical mortgage but it doesn‘t matter since you will be paying the mortgage anyway. Make certain any pre-payment penalty is kept to a minimum because if you sell


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your house later, you don‘t want to be surprised at closing by losing a chunk of money to your relative‘s lender. We are often asked why a lender would discount a homeowner‘s mortgage. It‘s because the cost to sell your property is high because of the cash requirements the lender has to maintain for Federal Reserve requirements whenever a property goes into foreclosure.

For every $100,000 that lenders have in foreclosure, or properties they have taken back at the auction, the Federal Reserve requires they keep as much as $1,000,000 in cash reserves. Besides the inconvenience of having to sell a portfolio of properties, these huge cash reserves also substantially reduce the amount of new loans the lender can make. The result is a cycle of reduced loans and reduced profits on their loan portfolio, so getting rid of mortgages at a loss can actually make them more money on new loans.

There is another option called a “Short Pay”. Most attorneys and investors don‘t even know that is exists, or won‘t admit it because they can make money with it. In this case, the lender offers the homeowner the opportunity to buy out the lender‘s mortgage for cash and close in 2 – 3 weeks. The lender will discount the mortgage amount based on the current Fair Market Value (FMV) of the property from an appraiser.

We get these calls asking for hard money at least twice a month because the homeowner doesn‘t have the cash to buy the mortgage. Two recent examples were a $168,000 mortgage that was offered to the homeowner for $60,000 and a $60,000 mortgage (condo) that was offered for $25,000. If you have the money, or access to the money, to do a Short Pay, ask your lender how to go about getting a short pay approved.

This process of reevaluating your home’s value is called “Mark to the Market” and will possibly be the long-term solution to the mortgage crisis.

As can be expected, the lender‘s representative will say it is impossible and the bank doesn‘t do it. Ask for a Supervisor and keep asking until someone in real authority says ―No‖. If the question comes up about, ―If you have the money, why don‘t you pay down the mortgage?‖ simply explain that you have a relative who is willing to do it. If you show your lender you have assets of your own, they will not agree and will go to foreclosure. Years later they will try to collect on a deficiency judgment.


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Method #4 - Try and get an equity line at the bank where you have your checking and/or savings account(s). Ironically, many local banks or savings institutions will lend on the equity in your property even if you are slightly behind in your primary mortgage payments. Their decision has a lot to do with your banking history with them and, obviously, the equity in your home. However, you only need enough money to reinstate your mortgage, so if you are certain that you can afford the mortgage payments plus the equity line interest-only payments, consider this as a viable option for the money you need.

If the lender realizes that you are having a problem and asks about it, tell them the truth about your hardship and show them you are making enough money to cover both the first mortgage and their ―interest only‖ equity line payment. Before you go to see the lender, write out your ―Hardship Letter‖ to leave with them.

Do not base your repayment of the loan on selling your property, but

rather on sound practical ―money sense‖ of where and how much money you will be getting. In your hardship letter, focus on a two-part theme – first the problem that caused your current situation and the solution that you can show proof of (i.e. you are back at work, etc.) of how you will repay your old mortgage and your new second mortgage. The chances of your getting an equity line are actually pretty good if you present your case in writing, show proof of your ability to pay, and have an account record with the institution. An even better solution, and if you have 20%+ equity in your home is that the institution may offer you a refinance with an equity line for up to 80% of the Fair Market Value (FMV) of your property! Don‘t be discouraged by a branch manager or ―Vice President‖ saying ―no‖ to your request. Ask to go to the next higher level and keep pushing your case. Stick with following up with whomever you speak with because of the urgency of your problem. Method #5 - If you have a friend or relative who has equity in his house, he can get an equity line in a matter of days and use the money to reinstate your loan. Usually the lender (we suggest your local bank), will only need an appraisal and they will often pay the closing costs. If the homeowner repays the balance within one year, the lender may require a small penalty (usually $500) to cover part of their closing costs. Pay these costs for him! You should pay your relative or friend the interest and principal due each month as soon as they are due. As mentioned above, give him a second mortgage to secure his position on his loan.

Again, consider giving him a second mortgage that is larger than the actual amount borrowed. If anyone would ask you why you did this,


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explain this is the ―points on the mortgage for borrowing the money and interest included in the note‖. But it is no one‘s business anyway and likely no one will ever ask.

Method #6 - Challenge the legality of the foreclosure starting with the Lis Pendens by looking closely at any ―issues of material fact‖ such as:

1: whether the Lender‘s Attorney failed to include any material facts

about the foreclosure, 2: there was incorrect process of service, 3: foreclosing bank only services the loan and is not the note holder – hence they may be unable to sue, 4: lender did not supply a copy of the original mortgage so the validity of his claim is jeopardized or invalid, 5: the lender‘s attorney possibly didn‘t notify any or all of the other lien holders or interested parties, 6: you did not sign the note and were unaware of its existence

(identity fraud), 7: you have a perspective buyer for your property and have a signed contract that requests an extended closing date – don‘t lie about this to the court for your own good, 8: if an appraisal is required for your foreclosure proceeding because of the type of foreclosure, challenge the appraisal ONLY if it helps

your case, 9: use any and all possible local issues that your attorney may have used in the past.

Your Attorney should know what to do, if not, find a different Attorney who does. When any of these tactics works, which is more frequent than you might think, it only delays the hearing for 30 to 60 days, so don’t plan on this delay being any longer and keep working on your first-line solution to the problem. As mentioned previously, you have the opportunity to challenge any appraisal that the court orders which will help stall for time and possibly reduce any final judgment that results. This appraisal process for determining a deficiency is not used in every state.


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How to Defend Yourself in Court Against Your Lender’s Attorney

If you decide to mount a legal defense yourself, or so called ―Pro se‖

defense, you should get prepared as quickly as possible for what to expect and what you will have to do in court. If you have a specific track to follow, you stand a very good chance of slowing the foreclosure process and staying in your home longer. Even if leaving is what you decide, you should not let the lender‘s attorney run over you in court. As an individual working with homeowners as Pro se litigants, I found myself in foreclosure court occasionally. I would see helpless individuals standing before a judge telling the judge the reason they haven‘t been able to make their mortgage payments. These homeowners in many cases just wanted time to fix their problems – unemployment, divorce, job transfer, medical hardships and the reasons are valid and go on and on.

Unfortunately, for each defendant who came to court probably 50 did not and the lender‘s attorney was granted a Final Judgment Sale Date. Later the attorney might return to court to get a deficiency judgment against this same homeowner.

At least 99% of these homeowners should have been granted relief but weren‘t. In most cases the judge was ―helpful‖ to a point but the homeowners (Defendants) had no idea of what they were doing. This was a true tragedy happening over and over again on a daily basis and nationwide, not just in my county. I worked for two years trying to get even one local attorney to help me write a Do It Yourself (DIY) book for the public to use. Not even one of the local attorneys would help and most actually laughed at me. The reason was simple – ―Why would we write a text that is will kill our personal incomes?‖ The simple reason that homeowners needed help was laughable to them.

In their actual practices, they would charge $500 - $2,000 upfront and $100 - $1,000 a month to mount a defense. Can you imagine how much income this is if each attorney has 100 clients? Most of them readily admitted that they only had to go to court to file, or answer motions, about once every


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two months for each homeowner. Their court appearances were scheduled so they could answer or submit multiple motions the same day.

One time I saw a homeowner make a presentation to a judge and I

thought he was an attorney. The judge asked him if he was an attorney and he said ―no‖. He made the lender‘s attorney look foolish in court and he was granted his motion for an extension. Afterward, I approached him and asked how he got so proficient in court proceedings and he said he bought a course online. Then I asked how long he had been studying it and he said ―24 hours‖. Frankly, I couldn‘t believe it but he gladly shared the online address with me.

“How to Win in Court” 24 Hour Self Defense Course!

When I read what the course had to offer I bought it immediately and it has made a world of difference in my life. It is not specifically designed for foreclosure victims but for how to handle court proceedings of all types! With it I was able to see what I had been lacking in my personal view and actions in working in the legal system. And the interesting part was it did only take 24 hours to digest the material!

If you are wondering what motions to file, it‘s very simple. Do some

research on what local attorneys do for foreclosure defense. Then go online or to your local county courthouse and ask to see filings by these attorneys. Use their filing documents, which are public record, to structure your motion(s).

I strongly suggest that you use a service that I and other of my clients

have used successfully. The material will allow you to become very informed about judicial procedures, rules of evidence and other aspects of litigation in just a couple of days. Now you stand a chance in court!

Just click the link below to see more information:

How to Win in Court – 24 Hours Self Defense Course

or go to - http://tinyurl.com/3doqufo

I know you will be as amazed as I was. With this self help course, you will stand more than a fighting chance in court. I even suggest you get the course before you discuss your situation with an attorney – it could save you tons of money!

http://tinyurl.com/3doqufo




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Start Your Legal Action Before Your Lender Does!

What has been a developing trend among top foreclosure defense

attorneys is to start an action against the homeowner‘s lender before the lender files his motion to the court. It may sound peculiar, but it really catches the lender and his staff of attorneys off guard. They are used to being the Plaintiff and bringing standard motions to the court against the defendant. They are not used to being the Defendant. This strategy should be used if your have been current on your payments but the lender is uncooperative in resolving your loan problem or just hasn‘t helped at all.

Most motions are filed in state court because of jurisdictional issues. However, these clever attorneys are filing in Federal Court and making the lender‘s attorney go to a whole new level of time and expense. Ironically, a lot of the final results have to do with the actual judge you get for trial. Some understand your plight, some are not so helpful and some actually shouldn‘t be on the bench. All will have to work with a Pro se defense or in this case a Pro se Plaintiff.

10 Most Common Legal Challenges for a Foreclosure Defense

Depending on who you speak to, various attorneys have their personal

strategies to mount a foreclosure defense to keep a homeowner in his property. Since the attorneys generally require an initial charge, ranging from $500 to $5,000, and a monthly fee ranging from $250 to the homeowner‘s mortgage payment on the property, it is in the attorney‘s best interest to extend the defense as long as possible.

Most attorneys will advise the homeowner that the defense is a stalling tactic and not a solution to his mortgage problem. Some will state that the end goal is to have the mortgage rescinded by the court. This is very seldom the actual outcome. While a few famous cases have made headlines about homeowners who won in court, the actual experience was just the beginning of the lender‘s legal actions including appeals.

It is not suggested that you try your case ―Pro Se‖ or having yourself be your own attorney. There are websites where staunch believers in defending their mortgages chat and update each other as to their personal experiences, progress with their own cases and what strategies seem to be working. I would have listed some of these sites but my experience is that they come and go with alarming frequency.


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If you want to be informed about current legal defenses, try Goggling® the key word terms, ―foreclosure defenses‖. Most of the sites that rank the highest will be paid sites by attorneys, but you should be able to find blogs devoted to handling foreclosure defenses. Should you choose to pay an attorney for a mortgage defense, you should carefully interview a few attorneys who specialize in this niche legal environment.

Many attorneys will require a ―mortgage forensics‖ analysis of your original closing package. These detailed reviews of your mortgage documents and the documents you signed and received at closing, may be critical to your ultimate case. The cost of this review ranges from $400 to $4,000. The cost is not dependent on the amount of your mortgage, but rather what an attorney can charge you and get away with. Very few attorneys do their own forensics analysis, but rather farm it out to the same vendors you can find online.

I interviewed two of the most prominent analysts in the industry and both told me their business was becoming useless for the actual use of the information in court in a mortgage defense. Judges have heard all the arguments about the illegal nature of the transaction and the notes themselves. More and more of these judges are not responding to the claims by the plaintiff‘s (homeowner‘s) attorney and are ruling for the defense attorneys (banks).

It may be worth a try to take up a defense against your lender. Frankly, most deserve it and their loans should be rescinded. However, the practicality of our society is that making all loans on the bank‘s books being charged off would result in a banking collapse and anarchy. What would it be like to not have money or credit cards? How long can someone barter for food until a person with a larger gun comes along and ends your life for simply some food?

I‘m not trying to scare you. No. I am being practical in saying that banks will survive no matter what it takes because the federal government can print money to keep their doors open – something we citizens can‘t do. I don‘t mean this to be a soap box for my personal views. You should focus on a solution to your particular situation and always keep in the back of your mind that you will have to leave. Planning ahead will allow you to control your exit, not a sheriff‘s officer serving you with an eviction notice.

Some attorneys attack the banks in federal court while most stage their defense in state court. The difference can be dramatic because of the cost to work at the federal level and the time involved getting a hearing date. Some federal court systems are backed up for years with criminal cases and foreclosure cases do not take priority, allowing the homeowner further time in his property.

Judicial foreclosure states are notorious for taking many months to hear a case, but non-judicial states are very quick to foreclose, so a plaintiff‘s action must be taken as a pre-emptive strike before the lender strikes first. This action against the lender does take them by surprise, but again, it is a delaying tactic, not a solution to the problem.


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All of the following commonly used foreclosure defenses should be pursued by an

attorney on your behalf. If you legitimately can‘t afford an attorney, seek legal aid from your local Legal Aid Services and non-profit defense organizations.

1. Failure to Attach the Note (or Mortgage) to the Complaint may be a problem especially if the note can‘t be found. For proper service, the plaintiff (lender) must attach a facsimile copy of the note and/or mortgage to the summons. However, most lenders will quickly acknowledge the note is lost and move to reestablish the existence of the note under state laws. This also starts a series of possible defenses including the idea that the mortgage servicing entity who is the plaintiff is not entitled to sue the homeowner or bring any action what-so-ever. This defense is viable as a stalling tactic but has been much misused by attorneys and is usually cast out by the court. Anyway, let your attorney try everything!

2. Violations of TILA (Truth in Lending Act) and HOEPA (Home Ownership and Equity Protection Act of 1994). These federal regulations require that lenders disclose certain very important information to a prospective borrower. They also cover inaccurate statements, limits of finance charges, improper statement of interest charged the borrower as an annual percentage rate (APR). Another area of contention is, ―Did the mortgage broker properly disclose how much he made in commissions, fees and backend credits to the borrower?‖ The list goes on and on and very often violations occur at the closing table when a closing attorney makes an adjustment to the HUD-1 Closing Statement and does not give the lender the new costs to re-figure the APR and other material disclosures. This is the reason for a mortgage forensics analysis of the closing statement. These mortgage forensics analysts use the same software that a lender uses to re-calculate the ―new‖ APR to find an error.

3. Unjust Enrichment results when any benefit is derived that comes from an

improper act and the result is an enrichment of the lender based on the ―enrichment‖ of the lender taking the homeowner‘s property by foreclosure that violates state or federal laws or statutes.

4. Violation of RESPA (Real Estate Settlement Procedures Act) is common when a loan is transferred from one lender to another and improper notice is given the borrower. Often when the transfer takes place, the new lender charges unreasonable fees or expenses that are illegal under the RESPA as well as rewarding the new or old lender with any unearned income including commissions, fees or ―anything of value‖ for the transfer and servicing of the loan.

5. Inadequate Notice of Service is one of the most common defenses that can come back to haunt a foreclosing lender sometimes years from when it ―didn‘t


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happen‖. Some issues are service of the summons (lis pendens) to a minor, non-related person to the defendant (mortgagor), non-service of an interest party, signing of summons by the officer instead of the homeowner and issues with the method of official publication if the homeowner can‘t be served after a number of attempts. Very often a homeowner will tell me he hasn‘t been served when it was because he didn‘t or wouldn‘t answer the door. Not taking service when you know the process server is hunting you is not the same as not getting served.

6. Violation of FDCPA (Fair Debt Collection Practices Act) Any collection

agency or attorney who is attempting to collect a debt, has to provide the borrower official notice of what is owed and provide verification of the debt so the borrower can dispute the supposed debt. This is often not done even when a borrower requests it in writing from the lender and is often the first stage in a foreclosure defense to request the note.

7. Fraudulent Inducement is generally associated with a misrepresentation of the interest rate the mortgagor (homeowner) is paying, the ability of the borrower to repay the loan itself, or any inducement that is misleading that results in the borrower accepting the loan.

8. Violation of Deceptive and Unfair Trade Practices are statutes that are

slightly different from state to state but follow a similar track. Generally, these statutes regulate changing or adding fees at the last minute, misstating APR‘s, paying yield spreads to mortgage brokers that aren‘t properly disclosed to the borrower, making loans that cannot reasonably be expected to be repaid by the borrower, excess funding of escrow accounts, not honoring promises for a specific interest rate. Again, each state varies with its specific regulations so these ―causes for action‖ must be checked individually.

9. Violation of the HUD Act of 1968 (Housing and Urban Development) happens when a homeowner is late 45 days on his payments and his lender does not give him proper notification of remedies he may have such as HUD approved counseling organizations, information and remedies that are available to him. This law is very commonly violated by the lenders to the point that many lenders seem to not even be aware of its existence.

10. Breach of Covenant of Good Faith and Fair Dealings is associated with

commercial loan transactions and standards of fare and reasonableness in the transaction. This can have broad reaching ramifications if certain allegations can be proved. The violations in question include but are not limited to ALL of the breaches and violations in this series of foreclosure defenses.

The key to your mounting a successful foreclosure defense is getting all your closing documents, notes that you took from your lender‘s calls and any and all correspondence from your lender for your attorney to review.


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Secondly, you must take action ASAP because the lender‘s attorneys are working to get your property and get you evicted. Any hesitation on your part will only cause you more grief later. Be responsive and aggressive when dealing with the lender‘s attorney or collection department. Just know that your conversations and whatever you say may be recorded and used as evidence against you later. Frankly, stay in contact with your lender to try to work out a solution, BUT never believe they will do what they say until you see it happen.

Every major lender is currently in discussions and negotiations with Attorney Generals and with the Federal Reserve for a solution to the ―problems‖ with the document and legal issues of their mortgages. This is similar to what the cigarette industry was negotiating out of the potential lawsuits. These companies paid substantial fines and were exempt from law suits by the public. The other solution for lenders is to declare bankruptcy for their mortgage units. This would keep their banking distant from the litigation crisis and allow them to move forward. The bankruptcy would effectively stop litigation from the public. The outcome from the bankruptcy courts would likely shift the collection of debt to the Trustee of each bankruptcy. Some ―reasonable‖ solution would then have to be imposed on the homeowners.

Don’t wait for either of the above solutions to happen to you. You’ll need to take action and quickly or you will be evicted when you least expect it.

Method #7 - Work out a Forbearance or “Workout” Agreement with the Lender. Your unpaid mortgage payments will be divided over an extended period (3 months to 9 months) but repaid in full. This is used most commonly when a homeowner is injured or was employed but is back working and the lender won‘t take partial mortgage payments.

For example if you owe $12,000 in back payments plus interest, penalties and attorney‘s fees, the lender will divide this amount by 3, 6, or 9 months as ADDITIONAL monthly payments (added to your old payment) of $4,000, $2,000, or $1,333,34. Again, if your ―regular‖ mortgage payment was $2,000 per month, your new payment will be either $6,000 for three months, $4,000 for six months, or $3,333.34 for nine months.

Your lender may even have a specific ―Workout Department‖ just for dealing with solving this type of delinquency. However, you will have to sign a document that requires you stick to a payment schedule once they agree to the terms. Have your attorney review this document because lenders’ attorneys have been known to put clauses in these Forbearance


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Agreements that substantially reduce or eliminate your rights if you pay late again. Other requests for a workout solution can include your doing the following:

1. asking to pay ―interest‖ only for a specific period, 2. asking for a fixed rate adjustment if you have an adjustable rate

mortgage, 3. requesting a deferment of all payments for a few months, or 4. requesingt the lender to look at refinancing your loan.

Each of these options requires the homeowner to present them as a

benefit to the lender as well as the homeowner. If you can’t envision a benefit to the lender, it is unlikely the lender will be interested. Always make certain that you provide the ―proof‖ that you will be able to make the terms (timely payments) of the new agreement work or the lender will stop working with you.

WARNING - If for any reason, you are permanently out of work and you

disclose this to your lender, he is likely to accelerate the foreclosure filings and proceedings. Have a solution for your problem and share it with your lender‘s representative. The solution the lender wants to hear is ―Where‘s the money coming from?‖ Lenders frown on small businesses or selling items on Ebay®.

If the Lender is truly cooperative, the total reinstatement amount will be

added to the end of your loan and IT IS POSSIBLE for the term of your loan to be extended to lower your payments. Occasionally a true hardship case carries some weight with the Lender’s supervisors, so try telling them your problem.

If your lender asks for the full amount immediately and you have been

trying to comply but have a true hardship, try the ―let me speak to your Supervisor‖ and keep asking until it either works or as a last resort tell them you will be contacting the State Banking Commission because of this lender‘s abusive lending tactics. This should not be a bluff, call your State Banking Commission or Citizen Complain Board and ask for help. At this stage we also suggest you contact an attorney or Legal Aid Services – again do it ASAP!

Some lenders may request a substantial cash payment immediately just

to allow you to start your Forbearance Agreement with its new double-sized payments! Appeal this “cash to start” option to a Supervisor the first time you hear it!


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On the opposite side of the coin are loan guarantors such as Federal National Mortgage Association (FNMA) who will work with a borrower who is late, to give them a ―no payment‖ period for 3 – 6 months as part of a forbearance agreement solution. During this time the homeowner makes NO payments, but he will have to make up the past due amount later.

FNMA also will not foreclose on individuals who are in default because

of a natural disaster and they provide interest rate relief for active military homeowners. FNMA requires the borrower to complete and submit a ―Request for Military Indulgence‖ form to get the various benefits they offer active duty personnel. If you have a lender that is not following FNMA guidelines with reference to military personnel, you should get an attorney to seek a court order to delay the foreclosure.

IMPORTANT - If you sign a Forbearance Agreement with your lender, the foreclosure process is delayed, but not stopped, despite what the lender may tell you. You could be in foreclosure in one department of the lender and working out a solution in another. You could have your home go to auction while you have a signed agreement!

If you miss any payments or send them in late, you are back in

foreclosure and headed to court! Because part of your Forbearance Agreement stipulates that you waive judicial procedure if you are late on your payments again.

THE CLOCK DOES NOT START OVER AGAIN!!!

Method #8 - Apply for a loan from a lender who specializes in small second mortgages or a hard money lender but only for the reinstatement amount. (Do it quickly before you are too far behind on your mortgage payments or they won’t lend to you at all). Get it out of your head that 15% is a high rate because it is on a small amount of money and they have a larger risk with you. The amount of the second mortgage payment is insignificant compared to losing your home.

They can see from your credit report how bad your problem is but you must make a case for how you will re-pay the loan. We suggest that you advertise in the local newspaper for ―money wanted‖ and work with at least two lenders so if one reneges at the last minute, all is not lost. You can expect to pay 3% to 10% loan costs or more to get the loan plus paying a high interest rate. Again, ask yourself the question ―is my home worth saving?‖ We would hope it is, so don‘t let this ―rip-off loan cost‖ be so distasteful that you lose your home.

Tip (#28) - Outright Scam - Here is a common scam to watch out for - a mortgage broker says he can get you the loan from private


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sources and there is no problem. You may have been turned down by other lenders, but he reassures you he can get you the loan. He takes an application, may or may not collect an Application Fee and may even have an appraisal done that you have to pay for. However, his actual intent is to not get you a loan, and at the closing table he says something like ―I just heard from the lender and they changed their lending guidelines (criteria) and you don‘t qualify any longer‖. However, ―I have an investor who will pay you something so you get some of your equity out of your property‖. The amount you are going to get may be 5% - 10% of the total equity! Remember, you are at the closing table and looking at having your property go to auction very soon or even the next day, so instead of losing everything, you agree to take a few cents on the dollar. While it is illegal, the issue is prosecuting the individuals involved – which may include the mortgage broker, the investor(s), and most likely, the closing agent. AFTER THE CLOSING or attempted closing call the State’s Attorney Office and ask for help.

Method #9 - Attempt to refinance your delinquent loan, which will be difficult, but not impossible if you have decent equity in your property and/or an income to make the new payments, and preferably a real hardship case that you can prove. Again, the issue here is that because of your delinquent loan payments, your credit has taken a ―hit‖ and reduced the likelihood of getting a reasonable interest rate. However, there is hard money or equity only lenders who will lend not on credit ratings but rather on the equity in the property.

As I mentioned earlier, this may be as little as 60% of Fair Market Value (FMV) or as much as 80% of FMV if a conventional lender does an equity line. Do not try to get additional money at the closing table (“Cash Out”) as the lender will only escrow funds in excess of refinancing needs for improvements and issue them as receipts are received for the completed work. If you just try to cash out your equity, the lender may well decline your loan application at the last minute and really cause you a hardship. Play it straight with the lender to save your home.

Refinancing can be costly, but it could be even more so if the

mortgage broker you are dealing with can’t complete the loan. If a mortgage broker asks for any money to start the loan process or for an application fee, it is very probable you’ll not get your money back and you probably won’t get the loan either! It should NEVER take a Lender


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any more than two - three weeks to process your loan if you cooperate with all requirements and documents that the lender requests!

Unfortunately, it is usually the mortgage broker that drops the ball in

sending the material to the lender on a timely basis. If he sends in an incomplete package for processing, the lenders usually won‘t even start the review process until the missing documents have arrived; resulting in possibly weeks of lost time. Get all the documents the mortgage broker requests and as quickly as possible – losing your home is the cost of procrastination.

Method #9A - Creative mortgage brokers are beginning to offer more senior citizens what are known as Reverse Mortgages to stop their foreclosures. To qualify, a homeowner must be over age 62, live in the home to be refinanced, and have substantial equity in their home. These mortgages offer the homeowner a check a month instead of worrying about where their next income check is coming from.

Given the right circumstances this mortgage refinance will work to stop

foreclosure and the homeowner will receive a check a month until they are deceased or the home is sold or title transferred (gifted to a relative or friend). Standard life expectancy tables are used to determine just how much money can be ―advanced‖ and for how long an individual will receive the equity out of their home. Because of abusive tactics by some mortgage companies offering these loans, the government has strict standards of disclosure and qualifications for these loans.

However, I strongly suggest that if a homeowner has a large amount of

equity in their home, that refinancing conventionally is likely a better option. Large amounts of equity are often a prerequisite for the loans. Depending on the specific reverse mortgage terms, homeowners are sometimes responsible for paying their own taxes and insurance separately and these expenses offer a second chance for a foreclosure to take place.

One standard condition of these loans is that the homeowner must live

in the property. If they are moved to a nursing facility, the loan can be foreclosed. While it may be painful to part with your past to leave your home, it is usually always better to sell the property and bank the proceeds or purchase an annuity that will you pay a monthly payment for life. Of the more than 76,000 reverse mortgages issued in 2006, it is estimated that about 5% - 8% were used to stop a foreclosure. Be completely informed of other and possibly better options if you consider a reverse mortgage.


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Method #10 - Start looking for a second job, part-time job, encourage your spouse or any other unemployed family members to apply for a job to help out the family‘s financial situation. This may be embarrassing and a bitter pill to swallow, but it is better than being homeless. The point of this effort is to have ―get away‖ money if you can‘t make any of the other options we discussed work for you. It is important that you be prepared to move if you can’t resolve your foreclosure and the often unrealized benefit to you is that your home will be ―de-cluttered‖ if you have to sell. This technique of removing all small items and major furniture is a first step to preparing your home for sale and is called ―staging‖ by professionals in the industry. Not only do the rooms appear larger to perspective buyers but it gives them a sense that there may not be anything else wrong with the house as is their impression of a messy – cluttered property. Again, if you are attempting a short sale, don‘t do anything to improve the looks of your home (especially the exterior) until the commitment letter from your lender arrives and you have a buyer in place. More information on this specific process of eliminating your foreclosure can be found later in Bonus Report #2, and below in Method #27).

Method #11 - Many employers have been known to give advances on salaries or commissions, especially if they can get a second mortgage as collateral. If you are truly a valued employee, your employer is probably willing to help instead of having to replace you and spend more money to hire and train your replacement. Explain your situation to him and don‘t be discouraged if he says ―no‖. Remember to offer him a second mortgage to collateralize the loan and have him deduct money from each pay check to repay it timely.

It is important that when you go to ask your boss or a fellow employee, in your mind you MUST expect that they will loan you the money! Tell your story, don‘t be apologetic about your situation and act as if you have your life

Tip (#29) – Be careful of going online to shop for a mortgage or to refinance your loan. Many lenders will compete for your business, they each pull your credit report and this will reduce your credit score even further. See your perspective lenders in person and take a copy of your credit report with you so they aren‘t each pulling it over and over again. This issue has been less of a problem in the last couple of years but you can always ask to have your credit report ―hand scored‖ to eliminate too many ―pulls‖ by other lenders including furniture, automotive and credit card applications you may have made. You can get your credit report free online at http://www.annualcreditreport.com but it does not contain your credit score.

http://www.annualcreditreport.com/


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under control. If you don‘t act like you are confident that you will come out of this situation, you may not have a chance to get your loan.

Also ask your fellow employees that you trust and consider as friends. Tell them the truth and good things may well happen. Always remember to lead in with the second mortgage offer – we find that most of the time they won‘t make you do a second mortgage, AND REMEMBER, keep your payments to your new lender on time or you will lose a friend! Method #12 - Liquidate any assets that are easily sold and have higher price tags (i.e. autos, RV’s, boats, luxury toys and collectables) to raise money to reinstate your loan. Again, this is the time to take action because these more expensive items take time to sell. Consider putting your items online at ebay.com for a fast and fairly priced sale or list them free on http://www.Craigslist.com for local buyers.

You can check ahead to see what to expect to get for your item and it is simple to get online and get started. Ebay® is famous for auctioning almost anything you can think of including household items, but they are also a huge seller of homes and autos. If you are trying to sell your home, it can be effective to advertise your home at this site – www.Ebay.com

If you are certain you will be selling your home, put it on Ebay‘s® real estate listing category and the various free listing sites on the internet, including www.Craigslist.com. Take a look at our FSBO Power Selling System at http://www.FSBOPowerSellingSystem.com for more information on how to sell your home quickly (usually one or two weekends), at the best possible market price and without paying a Realtor’s® commission.

Tip (#30) – As you raise money in any of the methods above, go back to your perspective lenders that are your friends and family members who originally said ―No‖ and ask AGAIN for more but less money! They are more apt to say yes for a smaller amount and if they know someone else has offered you money, but above all, just keep asking for the loan! A national survey showed that salesmen asking a perspective buyer for an order or a loan in your case succeeded on 2% of the time on the first request. However, that number jumped to 85% success after the eighth time the salesmen asked! Method #13 - Rent a room(s) in your home and collect the first, last and security deposit upfront, and if necessary double up people in the rooms if the situation fits so you can raise enough to reinstate your loan. We have seen desperate homeowners rent individual beds to bring in money – especially in areas where there are transient people such as boat crews that are on shore leave as their boats are getting refurbished.

http://www.craigslist.com/

http://www.ebay.com/



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Tip (#31) - As a guideline, single rooms rent for about ¼ to 1/3 the rent

of an entire home and you can rent single beds for 2/3 of a single room rental. For example, if a 3 bedroom/2 bath home rents for $1,200 a month, a single bedroom should rent for about $300 - $400 a month and a single bed for about $200 - $300 a month. For single room rentals, you can ask for a deposit but it is unlikely you will get one. If you need the money, get them to prepay for a month and give them a small discount like $25. Method #13A - If you are not already in foreclosure, or if you don‘t care who buys your home, an option is to look at what we call a “Format Change”. While this can be a somewhat complicated process it is being done throughout the United States on a daily basis. Currently the most popular formats what is called a Sober House. Just like it sounds, it is a rehab facility for recovering addicts. Somehow, this type of rehab facility seems to circumvent some zoning laws in many areas. There may be state laws where you live that allow rehab facilities in spite of local ordinances. These regulations may require some internal changes for safety reasons, but nothing that can‘t be handled easily. You can also do research on local non-profit organizations that are using single family housing to house their clients or patients. In most states, the legislature has passed legislation to allow single family homes to be converted to exempt out-patient care facilities. Local homeowners will really hate having a care facility in their neighborhood but federal legislation also supports the state‘s legislation that allows such facilities. Property values tend to decline close to the facility, so if you try this strategy, don‘t tell your neighbors ahead of time.

Usually what happens is that the non-profit organization purchases the property for above fair market value by using the stealth method of using a Realtor® as a buyer‘s agent who generally doesn‘t disclose the name of the buyer. Instead of waiting for someone coming to you, start contacting every organization that houses patients.

The benefit to the non-profit organization is they can purchase a property and update it for 40% to 50% of the cost to build a new facility and it is set in a quiet residential area that is conducive to their patients‘ healing. Expect them to pay 10% to 30% over fair market value for a property that has numerous rooms because they ―rent‖ or receive income for each patient BED, from state and/or federal funding that could give them as much as $600 to $1,400 per month per bed.


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For a 3 bedroom home, they would be looking at having 6 to 10 beds for a gross income of $3,600 to $14,000 per month, versus renting your home for $1,000+/- per month under normal circumstances. Think about state or federal agencies who house patients for rehabilitation or as a hospice. Method #14 - Rent your house and get at least the first and last month’s rent and a security deposit to use for the reinstatement amount. This may only make sense if you can live rent free or super cheap elsewhere with family members or friends. Remember, if you lose your home you will have to move anyway, so keep this as a viable option.

If you live in a seasonal rental area because of a mild climate, keep this tactic in mind because the seasonal rental amount can be 2 to 4 times a normal monthly rent. Your home will have to be furnished, but that isn‘t a problem and you may have to pay a commission to rent it, but these are minor problems for the solution they could give you. Seasonal rentals require more substantial deposits than yearly rentals so this may help also to get money for your loan reinstatement. If you have to sell, ask your seasonal renters if they have an interest in buying as it may be cost effective for them to purchase instead of renting every year. Method #15 - For VA, HUD or FHA guaranteed loans ONLY - contact these guarantors ASAP and work out a payment program with them. These agencies and insurers will work with you but you must contact them before you are in default and facing foreclosure. These agencies are very helpful, but you must cooperate early and work through the red tape to get the help you need. It will be well worth the effort. If need be, bring your loan current by one of the other means in this text and go back to them when you are NOT IN arrears on your mortgage to discuss refinancing or help in reducing your loan payments.

WARNING: It is against federal law for a homeowner with an agency insured loan to sell his property “subject to” his existing financing. In this case it is illegal to sell to an investor or another homebuyer and leave your financing in place. The investor will probably not know this, so don‘t argue with him and don‘t get yourself in trouble because it seems like an easy way out of your property.

EXTREMELY IMPORTANT


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Know Your Rights Under the Servicemembers Civil Relief Act

On 19 December 2003, President Bush signed into law the ―Servicemembers Civil Relief Act‖ (SCRA). This law is a complete revision of the Soldiers‘ and Sailors‘ Civil Relief Act (SSCRA) which provided a number of significant protections to servicemembers.

While protecting the United States during the war on terrorism, some servicemen and servicewomen may face difficulty in meeting certain financial obligations at home, such as rent or mortgage payments, if they are activated for military duty. HUD has taken steps to ensure that service members protecting our country do not suffer the added burden of worrying about the loss of a home.

Military personnel should learn about the SCRA and the protections and benefits it provides for themselves and their families. The SCRA can provide many forms of relief to military members. Below are some of the most common forms of relief.

Mortgage Relief Termination of Leases Protection from Eviction. 6-Percent Cap on Interest Rates Stay of Proceedings Reopening Default Judgments

The SCRA actually provides many more protections than those listed above, and the Supreme Court has ruled the SCRA must be read with "an eye friendly to those who dropped their affairs to answer their country's call." Military legal assistance attorneys are available to provide guidance on the SCRA. Use these individuals, it is your right and you deserve it!

Method #16 - Use your credit cards to raise extra cash if you aren’t way behind on them. If your mortgage payments are not too far behind and you have not exhausted your credit cards already, use them to get cash for the reinstatement and pay them back ASAP.

This is not a pretty or inexpensive way to stop your foreclosure but it will stall things until something better and more permanent happens. Remember you should have taken into account your monthly credit card payments in your calculations in Chapter 2 to determine if you can really afford your home. As soon as you are late on your mortgage payments, and without being late on your credit card payments, your credit card companies will probably increase


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your card limits. The interest rate on delinquent credit cards could be between 25% and 33% or HIGHER, so borrowing on your credit cards is a last resort that should only be done if you have a solution to repay these cards timely. Tip (#32) - You can get a quick credit score boost by asking your credit card company to INCREASE YOUR CREDIT CARDS‘ LIMITS. This reduces your outstanding debt to equity ratio on your credit cards and adds points to your credit score. You should ALWAYS keep your outstanding balances at 50% or less than the card limits for best results! Method #17 - Use your, or someone else’s, IRA or 401K retirement plan to make a loan to yourself for the amount you need. Repayment is usually structured by the Trustee but is usually lenient. This amount MUST be paid back over time or you will have the IRS declaring that you had taxable income and did not report it – resulting in penalties and interest of huge proportions. The Trustee may or may not be able to make loans from your account – if he is able to, you have a ―self-directed‖ program.

Borrow this money carefully and refinance your home to pay it back if you are going to stay in your home - it is

that important that these funds get paid back! Method #18 - Check on any cash value in your life insurance policy and borrow it. Borrowing against its cash value doesn‘t close out your policy, your interest rate will be typically very low, and your insurance should remain in force if you take the money as a loan. This is a neat option, but many people have term policies that have no cash value. Check before you assume anything and when you call your insurance carrier ask them if they give home mortgages – surprisingly many do! Since your life insurance will stay in force, should something happen, the insurance company will pay the ―face amount of the policy‖ or death benefit after deducting the outstanding loan balance. For example, if your death benefit is $200,000 and your loan amount is $20,000, your “net” death benefit would be $180,000. Method #19 - Approach your boss about your hardship and see if he will advance you the funds needed and repay them from each paycheck. This may be emotionally difficult, but this is a desperate situation and you will be paying him back on a regular basis. This option is different than Method #11 mentioned above in that you are asking him to advance you money against a weekly or biweekly repayment plan from your pay checks.


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If you calculate how much you can pay weekly, show him how long it will take to repay him and if you have other income such as a tax refund or your spouse‘s income, add what you can afford into the repayment plan. Again, make certain that you can afford to stay in your home, or you could be setting yourself up to lose your job.

HUGE TIP (#33) - This option was repeated again because it is so important - always offer a second mortgage to a private lender to secure their position if you should default again. Your defaulting is foremost in their mind about lending money and you must address it early in your conversations. If they say they don’t need a mortgage, don’t PUSH IT!

VERY IMPORTANT - If you happen to be unemployed or ―under-employed‖ by definition, in some states you will be able to get an exemption or an extension from your lender for a period of time equal to your unemployment compensation benefits. Ask for the details at the unemployment compensation office that you get your checks from.

Method #20 - If you are on public assistance, approach your counselor and request emergency assistance or a grant. Either of these are usually available and if it is documented that you have applied, your lender should halt the foreclosure. Often these grants or emergency funds do not have to be repaid if you stay in your home for a certain time period, usually 5 years. There are hundreds of millions of dollars in grant programs for both ―first-time home buyers‖ and existing homeowners just waiting to be given away.

Don‘t pay anyone to research this for you, rather call or go to your

county government‘s office and ask for help! These county agencies are often called Community Development Corporations or ―CDC‘s‖ and are readily assessable to citizens who take the time to call and get the information. Not all their information is on their websites so ask for a counselor to give you the latest updates on what aid is available and whether or not you qualify.

If You Have to Sell Your Home Method #1 - Advertise for, call, and talk to Investors who may be willing to do a Lease - Option with you (they already know you have a problem and will be looking for you because your foreclosure filing immediately becomes part of the public records).

They would reinstate your loan and you would make a new monthly

payment to them and the property would be deeded to them. You would get


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an Option to purchase the property back in one or more years at varying prices ABOVE what you own it for now. These Investors are betting on taking your property either by your defaulting again or your inability to finance the higher option price in the future.

It is in your best interest to have a single document that combines both

the option agreement and lease agreement, instead of two agreements. Have your Attorney review all documents before you sign ANYTHING, especially a Quitclaim Deed! Pay attention specifically to what happens if your ―new‖ mortgage payment is late, for example, what rights and how fast your new landlord can terminate your lease and cancel your option! You should have at least 30 days with 2 or 3 chances to reinstate your lease.

Tip (#34) - Lease Options are often held out as the easy solution to foreclosure by investors who are really looking to take your property but being patient enough to wait for you to stumble once more. A growing number of states have instituted specific regulations regarding lease options because of investor abuse against homeowners. Some states have even made lease options illegal under most circumstances. As always, make sure to check with your attorney before signing anything.

HUGE TIP (#35) If an Investor does a lease option with you, he should pay off your existing loan and give you at least some of the existing equity in your property as a cash payment. Otherwise, the existing loan is STILL in your name and any late payments will hurt your

credit. If you pay the investor your lease payment and he doesn’t pay the lender, you will be in foreclosure again and could lose your home even though you paid timely!

Method #2 - Do a Lease Option with a Buyer YOU FIND, and get at least a 4% Option Consideration. If you are moving and want to sell but the market is distressed, use the buyer‘s option consideration to pay your reinstatement amount. It is very likely that your buyer or ―tenant‖ will not exercise his option and you may be able to do this lease option strategy over and over again. Remember you are dealing with tenants but because they have a sense of ownership with their Option to Purchase Contract, they generally treat your home with respect, almost as if it was their own home. Important, if you are signing a Lease Option with a buyer you want a separate Lease and an Option Agreement for the reasons previously mentioned.

Tip (#36) - Do not lease option your property if the tenant‘s monthly lease payment doesn‘t cover your mortgage payment. You may be setting yourself up for a law suit when the buyer tries to exercise his option and finds


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that that he is unable to make the actual monthly mortgage payments. To be fair to the buyer or lessee, he should be able to afford the monthly payments when he gets financing for your home when he exercises his option to purchase your property.

HUGE TIP (#37) If you get a contract to sell to a Buyer, the lender will generally postpone the foreclosure sale until the contract expires. BUT NOT ALWAYS, because in some states there are no extensions allowed for any reason except payment of the full amount due to the lender. Sometimes you can get a special court hearing before a judge who may be able to postpone the sale long enough for you to close with your buyer.

Method #3 - If you must sell your home, the fastest way is to find a buyer and do a “Subject To” sale. The ―subject to‖ sale means that you are willing to allow a buyer to immediately take possession of your property without doing conventional financing. The actual financing for your sale will be your existing mortgage. Since the late 1980‘s lenders have put a ―Due on Sale‖ clause in their lending documents. This clause allows the lender to ―call‖ your loan if you sell your home or transfer title.

The reality of this clause is that it is a ―threat‖ that we have never seen enforced. We are talking about tens of thousands of loans that have been taken over by a new buyer, usually an investor, but the lender did not invoke the clause or didn‘t care who was paying the mortgage.

None of our associates have ever heard of a loan being called if the

monthly mortgage payments were being made timely because the lender processes thousands of mortgage checks daily and they do not match up who the check is from versus who is responsible for the mortgage, they simply deposit the checks and credit an account. The benefits of selling your property using ―subject to financing‖ is that a buyer can have poor credit and not have to qualify for a loan to buy your home. There are minimal closing costs so the buyer can get in your property for much less than if he paid loan costs to finance your home. He will have to qualify for a new loan in the future and hopefully at that time, his credit will have been repaired. The major issue is that you are still responsible for the mortgage and if he pays your payments late, your credit will be impacted. If he doesn‘t pay your mortgage, you will be back in foreclosure with no control of your property – unless you got a second mortgage from him and you foreclose on your second. Using a lease option, you would be able to evict him and not have to go the foreclosure process. So the lease option is quicker, retains more control for you, and is more cost effective. Using a lease option with


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your buyer, you can help his credit repair by giving him an Affidavit stating that he has paid his lease payments timely on your property.

If you sell him your home using ―subject to financing‖, you can have the buyer give you a second mortgage that is due ―the sooner of one year OR when he refinances your home‖. Part of your agreement should be that he gets his credit back to normal using credit restoration and pays his bills on time.

The process of getting his credit improved should take about six months to a year unless he has a large number of judgments against him. Even if he has judgments, he now has the ability to negotiate a reduction in their balances in return for repaying them on a monthly basis. It is best if you make the buyer pay for a reputable credit restoration service, and agree to reimburse him when he repays your second mortgage. This risk of losing control of the disposition of your home, rather than it going to auction, could be worth the risk of the buyer‘s defaulting in the future - but you have to assess that risk. You could have him send you the monthly mortgage check and you forward it to your lender while you check your monthly statement to make sure his check didn‘t bounce.

If he is late or gets behind on payments, you could start foreclosure on your second mortgage. Usually, this technique is best handled if you stay in constant contact with the buyer after he is making your payments and you check on his credit restoration progress.

Your attorney could draft a ―Deed Covenant‖ that helps protect your

interest when you sign the deed over to the buyer (i.e. ―if homeowner is late on the second mortgage, the note holder has the right to take the property without judicial procedure‖) – check with your attorney about this or a similar clause in the deed. Method #4 - If you have equity, market the property as a foreclosure and look for a quick sale at a reduced market value using a wholesale to retail strategy. We call this ―wholetailing‖ in real estate investing because we are selling a property at a wholesale rate (just below full market value). Your home must be in good condition to get the most equity out of it and sell it quickly. Try this strategy if you cannot make the mortgage payments after you reinstated your loan. The wholesale/retail strategy is detailed in our FSBO Power Selling System™ at www.FSBOPowerSellingSystem.com.

Here is a brief description of this sales process: you prepare your home for sale and retail it at a wholesale price directly to the public (retail buyers).



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Investors will come, but your marketing effort should be directed to buyers that want to live in the property. This may take a couple of days longer, but you should get a higher price than working with an investor. As soon as you get a buyer, you should show the lender your signed Sales Contract to delay the courthouse auction sale. Method #5 - Advertise for an Investor who is willing to do an equity split after he reinstates your loan, does the rehab needed, and sells the property at fair market value. This is a very viable option for someone who knows they must sell and who have a lot of equity in their property – if the property were in pristine condition. However, they are under the gun to get out before the property goes to the courthouse sale. While it may seem like too much to give away to a stranger who hasn’t worked or lived in the home, it may be better than losing everything at the auction.

We have used this technique ourselves many times and it is a win-win for everyone involved, except the lender!

The key to considering this option is not only how much equity there is in the property but also the amount of repairs necessary to get full market value. This process of reinstatement of the loan by an investor is being attacked in some states by attorneys in civil law suits (on behalf of homeowners) with the pretence that the reinstatement amount is actually a loan at usurious interest rates and the investor is not a licensed mortgage broker.

The rate of return to the investor is considered his entire profit on the

transaction divided by the amount of the reinstatement. So it is likely that the percentage return on this transaction to the investor could easily be in the hundreds of percent (100%+). Attorneys have been winning judgments against investors using the reinstatement technique for years - even if the homeowner makes money as proposed by the investor. However, these judgments turned out to be uncollectable and the state never got involved in further pursuing the mortgage broker issue – if it was real at all.

From personal experience, I will always remember giving a couple a

check for over $40,000 on the sale of their home that was to have been sold at auction months before. The bank would have sold it and essentially pocketed the huge fees and expenses. If the home had sold over the final judgment amount, the homeowners would have been entitled to the ―overage‖ but it would have been less than $3,000.

In this case I had to reinstate the loan using borrowed money from

another investor – so I wasn‘t sued for lending my money as the rehabber. Then I found another place for them to live and paid their rent while I rehabbed their home. The property was in a gated-guarded community which made it


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more difficult to sell. It took two months of rehabbing to complete the project, four weeks to find a qualified buyer and 30 days to close.

Tip (#38) – If your do an Equity Split with an investor, he will offer you

50%/50% split but you can request a 70% to you and 30% to him as there is no ―standard‖ by which these contracts are drafted. The expenses MUST be watched and approved by the homeowner because they will be reimbursed to the investor BEFORE the profit split and they should not be allowed to get out of hand.

For example, if the home has a fair market value of $200,000 and a

mortgage of $100,000 and the homeowner is behind $10,000 in payments, the investor will possibly have to reinstate the loan for $10,000. Assuming further that the rehab costs $20,000, the profit split on a 50%/50% basis would look like: $200,000 - $100,000 (payoff of mortgage) - $10,000 (reimbursed to investor for reinstatement costs) – $20,000 (reimbursed to investor for rehab costs) – $5,000 (closing costs) = a net profit of approximately $65,000 or a payout to the homeowner and the investor of $32,500 each.

The investor should know a lot more about rehabbing a property than

you do, but check to see if the costs and expenses make sense. There has to be a high degree of trust between the homeowner and investor because of the potential for abuse of the rehabbing costs. The most powerful partnership agreement would be a 49%/51% with the homeowner having 51% so he had control of the project.

You must have everything in WRITING, let your attorney do the contracting or at least have him review EVERYTHING!

Method #6 - Sign a Contract for Sale with a qualified buyer and present it to the lender. This contract should postpone the auction if the closing date is reasonable and the buyer looks authentic. Lenders have heard it all when it comes to excuses, so your best approach is to be truthful with them at all times. If they ask you something you don‘t have an answer for, tell them you don‘t know but you will find out and call them back. This will give you time to correct the issue or focus on a solution. Ask the lender if they have a provision that if the buyer uses them as a lender, would this reduce or eliminate any prepayment penalty in your mortgage. If they do have such a provision, calculate how much you would save by the buyer using your lender and give the buyer a bonus (50% of the savings) to apply to your lender – IF the buyer gets the lender’s approval and closes using your lender. Method #7 - Try our modified auction strategy to generate a fast sale of the property, which can be seen at www.FSBOPowerSellingSystem.com.



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The people coming to see you are mostly investors who know you are in foreclosure because of the nature of the public records – your name has been published for everyone to see – so get over the embarrassment and get on with what is important and NOW! This sale process of advertising in the newspaper and with a yard sign that you are having a foreclosure sale will bring droves of inquiries. Fully, 95% will want to steal your home, but you have a chance to catch that 5% who are true buyers. Method #8 - Work on a short-sale strategy with an investor or friend who will stall the sale by putting in a purchase contract for your home. You may be able to get back into your home for 20% to 50% off the current mortgage amount. This is one of the best kept secrets in the foreclosure business and you will be told that homeowners can‘t do short sales and stay in the home.

That‘s technically correct but Bonus Report #2 will tell you how to do this yourself and do it legally. Investors do this all the time when a mortgage is at 80% to 100% of FMV of the property and the homeowner agrees to cooperate doing the short sale with an investor. Unfortunately, the homeowner gets hit with the short sale reduction amount (deficit) as ordinary income for IRS purposes (IRS Form 1099C). However, I discussed this earlier in the text – these are being forgiven because of recent legislation that will likely be extended after 12/31/2012.

Investors tell homeowners that the short sale is the only way they can make any money and promise to give the homeowner $2,000 - $5,000 which is ILLEGAL if the lender doesn‘t know about it. To side-step the law, the investor disguises this money going to the homeowner by saying that the homeowner supplied services or the investor bought something in the home that has a ―fuzzy‖ value such as antiques. This is bank fraud and don‘t let yourself get caught being involved in this scheme. You need the money desperately but there are other ways to get it legally.

Twenty-six Commonly Used Hardships for Loan Modifications and Short Sales

A hardship letter explains to a lender‘s representative the borrower‘s

(homeowner‘s) reason that he cannot make his mortgage payments. This letter becomes a part of the lender‘s file on the case to justify the reason(s) the homeowner has been granted a loan mod or a short sale. I suggest that you never lie about your hardship as it could be grounds for legal action in the future by the lender.

The most requested reason is that the property has declined in value and the borrower no longer wants to pay on his mortgage. If the homeowner can make the mortgage payments despite the market value decline, his request for a loan mod or a


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short sale will likely be declined. The reason a lender requests a financial statement is both to see how much money the homeowner has and where to find the money if the lender gets a judgment that will be collected from the borrower. Here are reasons for hardships that I have seen:

1. Loss of employment for one or both borrowers (homeowners) and no income to pay the mortgage. While a lender may request you raid your retirement funds, this is unreasonable and detrimental to your financial well-being.

2. Involuntary job transfer where there are suddenly two homes to support on the same or lesser income.

3. Instead of a loss of your job, you are kept on by your employer, but your

income is substantially reduced.

4. Illness resulting in your inability to earn a living.

5. Substantial recurring medical bills that must be paid or the loss of medical attention will result in severe medical issues or death.

6. A disability caused from an accident or from medical reasons that result in the

only source of income being state or federal disability income payments.

7. A disability of a family member such that the primary or secondary bread-winner has to stay with the disabled person instead of having a salaried job and a steady income.

8. Death of the primary breadwinner, his/her spouse or a family member.

9. Divorce or separation resulting in the loss of a substantial portion of the

family‘s income.

10. One or more income earners in the family who are suddenly incarcerated, resulting in a substantial loss of income to support the mortgage payments.

11. Extremely depressed real estate market where your neighborhood is being decimated and becoming unsafe to live in.

12. Notice or decision to leave the country (America) for a foreign land and with no

intention of returning anytime in the future.

13. Decision to investigate or file bankruptcy. This may be an excuse, but do not file until your short sale or the foreclosure has been completed.

14. You are facing a ―reset‖ of your interest rate that will not allow you to continue

to make the new mortgage payments. You would think this would be easy for the lender to make a decision to hold on the interest rate to keep you in the


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property, but this favorable offer by the lender only happens about 5% of the time. The rest of the time, the property goes to foreclosure.

15. Massive numbers of foreclosures are happening in your community and the

neighborhood is decaying rapidly. The lender may not want to hear this but you can show the proof by getting the statistics from your local newspaper or a local realtor who can do research on your neighborhood.

16. Inability to maintain the property so much so that it becomes a health hazard

living there.

17. You used ―stated income‖ on your original loan application and you lied at the mortgage broker‘s direction (or your own). Now the resetting terms of the mortgage have caused your real income to be insufficient to pay your mortgage. I mention this because your lender may ask you to sign an ―Authorization to Release Information‖ from the IRS regarding your last two years tax returns. Actually the lender wants your tax returns from the years when you filed for the mortgage to check what your real income was. If you ―cheated‖ about the amount of your income, this is serious mortgage fraud.

18. An inability to pay increasing property taxes, HOA (Homeowner‘s

Associations) fees or assessments, or skyrocketing insurance premiums.

19. Inability to pay income taxes due – this reason is important to the lender because of a possible IRS tax lien on the property that is NOT wiped out by a foreclosure.

20. Inability to pay massive credit card debt or other monthly payments for

revolving credit that is impossible to pay because of accelerated interest or penalties.

21. Inability to pay for property maintenance or for damage from an act of nature,

specifically because of no insurance coverage for a natural disaster.

22. Inability to pay for routine monthly bills because of a loss of income or an increase in the cost of the homeowner‘s monthly bills.

23. The mortgaged property is vacant for whatever reason and cannot be properly

maintained.

24. Inadequate cash reserves when the property was purchased so any income stream change results in an immediate inability to make mortgage payments.

25. Inability to pay real estate taxes which may or may not already be delinquent.

This is a major issue with lenders because a tax deed sale can extinguish their first mortgage. Lenders will usually pay the delinquent taxes to avoid a tax certificate being sold on the property and ultimately a tax deed sale.


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26. Insolvency of the developer so that basic services and maintenance are no

longer provided to the community and the HOA is put into receivership. This can result in electric and water service interruptions.

The above commonly used hardships can also be combined into a finalized letter

of your particular situation. It is important that if you are doing a hardship letter, that you really have a hardship. If you have financial reserves and are employed, unless your bills exceed your income, you likely will not be granted the short sale approval or loan modification.

Usually it is best to try a loan modification first before a short sale. The document package you‘ll need for the loan mod and the short sale are nearly identical. While the lender‘s package will stipulate what is needed, it is ―advisable‖ to add proof of your hardship if it can be documented in photos, piles of medical bills, or other ways to reinforce your case.

Look at the requirements carefully before you simply fill in the blanks and send in your loan mod application or short sale request. Especially with the loan mod, you are giving up your rights to contest a foreclosure by signing. Lenders usually require this as a stipulation when granting a loan mod because 75% to 80%+ of all loan modifications are defaulted on within eight months. Loan modifications are covered elsewhere in this text.

Method #9 - If you have resolved yourself to losing your property, stall for time with as many of the above tactics as possible and market your property by advertising it as a ―pre-foreclosure sale‖. This will bring loads of buyers, both investors and retail buyers, and it will be up to you to sort them out. Retail buyers will not understand the foreclosure process so you can use your attorney as a referral source for their questions.

Schedule all the appointments at virtually the same time each day so there is a sense of urgency when everyone gets there. Spend the money on advertising and have open houses each weekend. Little of this will help your pricing if your home isn‘t cleaned out and ready to have someone move in. Remember, you will have to get everything out anyway - so get started early. If you intend to sell all the fixtures, cabinets, and appliances in the house, give yourself two weekends to do this. They are still your assets until the lender foreclosures. The lender will likely send a Realtor® to make sure you are moving out of your property. This person will tell you that removing anything is illegal and the lender will prosecute you. Simply put – it will not happen unless the value of what you removed is part of the house and it is worth more than the house itself.

If you have agreed to a “Cash for Keys” program with your lender,

you will have to leave your appliances and fixtures in place. This program is


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not only growing in popularity but the amounts paid are getting almost staggering. In the past two weeks we have had one particular bank pay $20,000 and $30,000 to different homeowners in a short sale both of whom were investors and not living in the homes. The prices of these properties were $200,000 and $245,000.

Tip (#39) - Another option is to stir the local real estate investors

into a feeding frenzy to buy your property. Focus your newspaper ad on your property being a Pre-foreclosure sale and that you have only two weeks until you lose the house. Make the ad double sized. We make at least 75 hand-written yard signs (bandit signs 18‖ x 24‖ yellow with black ink) that we put in the neighborhood and along major highways.

Next, go on-line and look at every website that says anything about

―Save my home, buy my house, cash for houses, cash for my home, help with foreclosure, etc.‖ It is also time to start calling EVERYONE that sent those mailing pieces you received and ask them to come for an appointment. Schedule the appointments 5 minutes apart and cut to the chase - ―What is your best offer for this property, in the condition you see, and for cash closing in 15 days or less?‖

They can easily close in 48 hours if they understand the system, but

don’t count on them closing that quickly or at the very last minute before the actual Sheriff‘s sale. It can be done with the right Attorney, with all documents in place, a cooperative lender, and a degree of luck. The risk of waiting until just before the sale is risking losing your home entirely and not getting any equity out! START EARLY AND WORK HARD AND RELENTLESSLY!

IMPORTANT - If you decide to use a Realtor® to sell, advertise

on a flat fee listing site and offer a 4% BUYER’S Agent commission. Most importantly, only sign a single party contract if an agent brings a buyer and

HAVE YOUR ATTORNEY REVIEW THE CONTRACT – no matter what

the agent says! Look to see much more information at www.FSBOPowerSellingSystem.com

Method #10 - File a Chapter 13 Bankruptcy (or NOT). We do not recommend this as the most viable strategy to stop foreclosure. If you have extensive other bills you are not paying, this may be a viable option – short term. This federal court filing only temporarily stops the foreclosure and it costs $750 to $8,500+ which must be paid in advance. It can stop a sale at the courthouse steps if you have run out of time. We have used a document called ―Intent to File Bankruptcy‖ that has worked as well for us to



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get the property removed from the auction. This does not mean it will work for you.

The benefit of filing an Intent to File Bankruptcy Notice is the auction may be postponed for usually 30 days or longer and you have time to decide if you want to really file a bankruptcy proceeding. This letter must be hand delivered to the Clerk of the Court, who is doing the auction, ON THE MORNING OF THE AUCTION.

The lawyer for the lender should also receive a copy by fax the day

before the sale and will have to get back to the court to have another sale date scheduled (judicial foreclosures). The actual filing bankruptcy strategy is an absolute last resort because it will stay with your credit history long after your foreclosure is dropped off. In addition, you will no longer have control of selling your home because the Trustee of the Bankruptcy Court will have to ―release‖ your home from the bankruptcy proceeding for you to sell it.

Even if the lender‘s attorney is an amateur at filing foreclosures, he will

have your home thrown out of the bankruptcy filing within a few days or weeks and you will be facing the courthouse foreclosure auction again. In addition, you will also have to deal with the ugly mess of the remaining bankruptcy filing. Your attorney will already have been paid his fee……….. Amateur real estate investors will tell homeowners to file for bankruptcy to stop their foreclosure. The lenders are not fools and the homeowner filing is akin to him shooting himself with a shotgun to prove a point. The lender will have his attorney file a motion for dismissal of your home from the bankruptcy filing – which will be granted almost immediately. The lender will be charged more money, and you will wind up paying for it when the lender issues his final Deficiency Judgment!

- EXTREMELY IMPORTANT-

If you proclaim to a lender that you are considering bankruptcy, the lender will likely not accept a Deed in Lieu of Foreclosure – PERIOD. The reason is that the bankruptcy trustee looks back at least six months to two years to see what property was transferred and he has the capability of reversing the lender’s deed transfer as a fraudulent conveyance because the lender may have received preferential treatment.

Don’t make idle threats as some “stop foreclosure” books or individuals recommend. In fact, the bankruptcy trustee has the power to reverse the deed


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transfer whether you sold it to an investor or a retail buyer so filing a bankruptcy is similar to a child playing with a loaded gun.

BRIEFLY- A bankruptcy filing is standardized throughout the United States because it takes place in Federal Court. Chapter 13 of the Bankruptcy Code allows a petitioner to get protection from creditors with the intent of the person(s) filing to reorganize their finances. As soon as you file the bankruptcy petition an ―automatic stay‖ becomes effective and creditors can no longer contact the petitioner and it does stop your foreclosure from proceeding – BUT ONLY temporarily. This filing eliminates the headaches of heckling debt collectors, but puts all of your assets into a trustee‘s control for eventual sale unless the property is removed from the list of assets by petition from a lender. Your home‘s lender will petition the court very quickly to remove your home from the bankruptcy proceeding and your home will be released. However, you are still faced with sorting through the mess that is left in bankruptcy and will have to submit to a repayment schedule of your remaining outstanding debt. Fully two thirds of the people reaching a re-payment agreement with the bankruptcy trustee default shortly thereafter. The bankruptcy filing and disposition will remain on your credit report for a full ten years and in the public record for as long as 20 years. You are far better off to negotiate each and every debt you have and stick to the payments to avoid bankruptcy. This is what credit counseling services do for people with massive credit card debt.

If you ask a bankruptcy attorney about stopping your foreclosure,

he only makes money if you file for the bankruptcy. Keep that in mind because his work is simply filing standard forms, and Pro se actions are common in bankruptcy court – some local office supply stores even sell the forms.

Tip (#40) - VERY IMPORTANT– The impact on your credit report from a bankruptcy lasts ten years and is much more severe than a foreclosure. EVEN if you withdraw your bankruptcy filing, it will remain on your credit report that you filed. So, make this part of your thought process when you are making your final decision about filing a bankruptcy! Disclaimer – We and our related companies are NOT debt relief agencies and we DO NOT PROVIDE advice, bankruptcy filings or referrals to attorneys who do bankruptcy filings, debt or credit counseling, document preparation, information, or legal representation pertaining to any bankruptcy filing or pending case. Consult an attorney for advice on any of the above mentioned topics.


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Method #11 - Sign a Deed in Lieu of Foreclosure with your lender. This will transfer your home to your lender for the amount owed and will stop the foreclosure. You will have to leave the property and the lender will sell the property through a Realtor® as an REO (Real Estate Owned) property. It‘s important that you work out the terms of the agreement correctly, because any deficiency of money that they receive below what is owed will be charged to you on an IRS 1099C Form or as a forgiveness of debt or will be pursued as a deficiency judgment.

Have your Attorney negotiate the terms of the Deed so that the lender will not get a judgment against you if their sale price is below what is owed on the mortgage. This Deed in Lieu of Foreclosure will save the lender the costs to take your property to sale (average $43,000), will shorten their holding time, and reduce their total expenses involved with the property.

IMPORTANT NOTE – if your home has a second mortgage or other liens attached for whatever reason, it is unlikely the lender will take your deed because he will have to extinguish these loans or pay them off to sell the property to deliver either an insurable or clear title. The lender is much better off to go forward with the foreclosure and have them extinguished at the auction by judicial process. This means that if you have additional lenders or lien holders on title with your foreclosing lender, it is very unlikely they will take a Deed in Lieu of Foreclosure to halt your sale. A solution is to contact the junior lien holders and explain the bank is taking you to foreclosure and their notes or liens will be extinguished. Ask them to give you a ―Release of Lien‖ for a nominal sum ($500) so you can move forward. They will immediately ask, ―Why are you trying to help your lender foreclose?‖ The truth is powerful here – tell them your hardship and that the lender has offered to take back your deed if the other liens are extinguished, otherwise the lender will go to auction and have them extinguished. You should explain you feel responsible and you would like to see this lien holder get something back rather than nothing. If he asks to have you sign anything else – I used to say, ―DON‘T DO IT‖ because he is transferring the lien to you personally. However, in the past few years, I have not been afraid to have these loans against the homeowner because they are no more serious than credit card debt. Especially if you are contemplating bankruptcy, don‘t be afraid of these notes. If any one of the lien holders refuses to cooperate, which is quite common, don‘t pay anyone because you will be wasting your money. Another option here is to have a friend of yours call these lien holders and offer to


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purchase the liens so the lien holder gets something. There may even be equity in your home with these junior liens removed or extinguished. If the lender agrees to your offer for a Deed in Lieu of Foreclosure and you have equity in your home, ASK the lender for some money to help cover your moving expenses. If you truly have equity in your property, you should look at the other ways discussed in extracting your equity. If they say ―no‖ then you can ask them to assume any other liens you have on the property in exchange with your cooperating to give them your home and avoid the foreclosure process. If you don’t ASK, you will get nothing. Try it, you have nothing to lose and asking will not change their mind about offering you the deal.

HOT, HOT, HOT, Money Making Idea - The junior lien

holder(s) may be more agreeable to selling the note to another person (your friend) rather than you the homeowner. The huge benefit here is the lien buyer asks to have the note or lien transferred to them at full face. Now this person has a Credit to Bid at full face (amount owed), not the purchase price of the note, at the foreclosure auction. Huge money can be made doing this simple procedure of purchasing notes at substantial discounts and going to the auction to get much more money for them! Bonus Report #4 is devoted to exactly how to function at the foreclosure auction and take advantage of these ―note credits‖.

Tip (#41) – If you refinanced within the past six to nine months and are

already behind two or more months on your mortgage, the lender is probably very mad that you took money out of your property and immediately went into foreclosure. They are probably correct in believing that you have the extra cash somewhere and you used them to sell your property in a bad real estate market – otherwise you would have sold it yourself. They will not be very accommodating to taking a ―Deed in Lieu Of Foreclosure‖ without the lender trying to get a list of your bank accounts and personal assets. If you give this personal asset information to them, you can expect to have a judgment against you and a collection agency coming after you. They CAN NOT issue a 1099C Form AND get a judgment – it is either one or the other. Method #12 - If you are upside down, CONSIDER doing what many over-financed homeowners (14,000,000 as of this writing) are doing - walk away and let the lender take the property back. While this is an action of last resort, it is being done to save families and for the psychological well-being of the homeowners.

This process is known as a ―Strategic Default‖. It is also happening frequently when a declining real estate market is falling so quickly that a


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homeowner realizes he not only has no equity in his home, but he will owe the lender money even if he sells at FMV. The action of leaving your home behind is not ―credit‖ fatal and you could buy a new home within 3 years using conventional financing, but at a higher interest rate.

Stalling for time in some states is virtually impossible because of the

nature of their procedural laws and the recent bankruptcy law changes. So if someone, including an attorney, tells you that you can stay in your property indefinitely by filing bankruptcy, IMMEDIATELY seek other advice. A bankruptcy filing can be complicated, expensive and is a contract with the Federal Government (a higher authority than a lender) and must be taken seriously.

The attorney for the lender will file a motion to have your property

released from the bankruptcy and it will be granted. Now you will have a bankruptcy and a foreclosure on your credit report, even if you withdraw the bankruptcy. You should stay with the simpler solutions and sell your house or find a source for the funds you need if at all possible.

Since your foreclosure has become part of the Public Record, you will be, or have already been, approached by numerous Investors trying to ―help‖ you resolve your problem. Homeowners typically see between 50 to 200 letters, postcards, express mailers, and people literally knocking on their door to lend ―help‖ but whose motivation is to make money from your situation.

These investors are looking to make the difference of what they can buy

it for and what they can sell it for at full retail price. The most dangerous offerings you will see are the refinance solutions - for reasons mentioned elsewhere. The second most dangerous “remedies” are the lease-option proposals where you are told you can stay in the property if you deed your house to an investor who will lease it back to you for one or two years until you are financially O.K. and can get refinancing.

Investors know that statistically (85+%) of you will not be able to buy

your home back in the future. If you get lucky and come into some money and are able to purchase it back, you will pay much more for your same home just a few months later when you buy it back from an investor. If you are desperate enough to try this, have YOUR Attorney review all the documentation. Another reason they know you won‘t stay in the property is because some investor agreements stipulate that if you are one day late with your lease payment, you can be evicted. So much for your plan to get your home back!

Tip (#42) repeated - HUGE SCAM Never sign a Deed of any type, for any reason, except at the closing


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table with your Attorney. More homeowners have been scammed and have been unable to sell their home, or have EVEN lost their homes because of Investors using this strategy (sign a deed immediately!) to get control of the property. The Investors do this to make certain that another Investor, who has made you a higher price offer, can‘t get the property. If a homeowner signs any type of deed transfer document to an Investor, the ownership transfers to the Investor who now has the right to throw the homeowner out if he so chooses. The Investor also ―clouds‖ the property‘s title so a legitimate buyer can no longer take title.

DO NOT SIGN ANY DOCUMENT UNLESS YOU SIGN IT IN FRONT OF YOUR ATTORNEY!

Despite their greed motivation, investors can have great value - if YOU control the situation. Control means getting everything in writing, getting at least a 2 ½% deposit with any sales contract, making your contract NON-ASSIGNABLE, and having your attorney review everything.

Tip (#43) – You should know that your escrow agent will not give you, the seller, the escrowed funds if your Buyer defaults on the contract! Think about it this way, when an Attorney takes a side in the escrow payment argument by agreeing with either party, an attorney faces a lawsuit from the other side and possible judicial sanctions. Unfortunately, you usually find this out the hard way when it‘s too late and you‘ve lost valuable time!

THE SOLUTION is to have your attorney draft a document that

clearly stipulates what happens to the escrow deposit in the event of default by the buyer and gives the attorney authorization to release the escrow to the seller without further authorization from the buyer. Under normal circumstances, when there is a dispute, your attorney will send an authorization to both parties to release the funds with a notice that within ten days if the party to the disagreement doesn‘t answer, the attorney is automatically authorized to release the escrowed funds.

However, if the buyer won‘t sign, and his attorney replies that they

disagree, the closing agent will NOT release the escrow. At this stage, you are in a ―total standoff‖, with no one winning EXCEPT by going to court. Wait to see if the other party goes to court and after 10 days offer to give back ½ of the escrow if they sign off on the agreement for disbursement – this works almost all the time. But having the clause I mentioned above will get you the entire deposit.


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Reviewing your options regarding the escrow – 1.) If the buyer defaults on your Purchase and Sale Contract,

negotiate to release the same amount to each party, or if that fails, the attorney will hold the funds until the statute of limitations expires and pocket the money.

2.) If you are the Seller, get as large an escrow deposit as you

can, BUT have a “Kick-out Clause” in your sales contract so you can get rid of an unruly buyer. If everything goes well and you are able to close, resolve any differences at the closing table by credits or debits to the closing statement or, if necessary, give a check for a small amount (less than $1,000).

Changing the closing statement (HUD-1 Form) can stop the closing if

there is a lender involved who is financing your buyer and trading checks outside the closing documents can be construed as bank fraud. Try not to get in this position in the first place where you have to trade funds or credits at closing – do your homework first and stay in touch with the buyer continuously. Remember, no one gets paid unless the transaction closes so there is leverage on the seller‘s part at the table, but only if you don’t have to sell. Don’t bluff or play games, the stakes are too high. But also don’t disclose your desperation as the buyer may use this against you.

ANOTHER SOLUTION to keeping the escrow is to hold it yourself.

This is usually what we do, however, we do it in one of our corporations. The buyer still has the right to fight with you later - but at least you have the money. The issue of getting the buyer to make the check payable to you is that the buyer has to be motivated enough to trust you. In fluctuating markets, or if you are really desperate to sell, leave the deposit with your attorney, but have your attorney draft the document discussed above to insure you will get the escrow if there is a problem.

Even if it happens that you are extremely motivated to sell, don‘t let the

closing be extended indefinitely because of buyer‘s financing problems or you will lose your home. Financing for the buyer is the big issue in closing quickly and we suggest you have a mortgage broker review the buyer‘s credit report so you can get an unbiased opinion on whether they can close or not in 30 days.

Your attorney should put a clause in your contract that any extension

after 30 days requires a per day penalty of at least $100 to $150, AND that the escrow deposit is non-refundable for any reason including the


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inability of the buyer to get financing! We know it can be done because we do it all the time. The biggest problem with closing in 30 days is almost always the buyer not sending in documentation timely that is needed by the lender to complete the loan application package. This problem has gotten considerably worse lately with lenders tightening their document submission requirements.

BEWARE - Predatory Loans - Investors will come offering solutions of refinancing and outright purchase. If you are over 90 days late, refinancing, IF POSSIBLE, will be at very high rates and with high closing fees. Your first impression may be ―What difference does it make?‖ The actual statistics for reinstatement or refinancing is a staggering 85%+ default rate within six months. If you try to refinance, the amount the lender will give you is approximately 60% to 65% of a reduced fair market value of your property. These loans have high closing points, very high interest rates, and are called predatory loans because the private lender is expecting you to default and then foreclose on your home. These lenders know that you couldn‘t pay the old loan payments, and they aren‘t surprised when you default a few months later because of your increased mortgage payments.

Some very arrogant Investors prey on the gullibility of foreclosure victims by telling them stories about the eviction process with the Sheriff throwing all the homeowners’ possessions on the lawn. Unfortunately, that can be a reality so you must take immediate and dramatic action - NOW!

GREAT TIP (#44) - No matter how good your negotiation skills, or the perspective Buyers’ skills, let them make the proposal and politely say “Sounds OK to me but I don’t sign anything without my Attorney reading it first and giving me approval - you don’t mind do you?” This really levels the playing field with even the most highly trained salesperson. And it gives you time to think about what is best for you. DO NOT fall for the Investor offering to put in a clause in the contract that says something like “Your Attorney has 72 hours to review the contract.” Your attorney may take longer, especially if the investor uses a contract that has not been approved by the local Board of Realtors® or the local Bar Association. If you are interested in selling to this investor, have your Attorney read the document(s) and re-write it (them) in your favor. Very often the investor will not even prepare the documents because he knows what an attorney will say, so don’t be too surprised if he walks and doesn’t call you back. DON’T count on only one Investor. Always sign at least two back-up contracts when you deal with investors, and have your attorney review, or better yet, draft these contracts. There is nothing wrong in


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signing two or three or more contracts on your home, you must simply disclose to each buyer that they are “backup contracts”.

You will find dealing with investors an interesting game to play, but

remember they have nothing to lose and you will be evicted by the buyer if your home is sold at auction. You need to check with your attorney about how long after the sale you have to leave the property, but usually you have a few days (sometimes 10 days), but the exact amount of time varies by state.

You can also find out by checking with your local courthouse.

FORECLOSURE IN A PROBATE

Where there is a foreclosure on a property that is also in probate,

everything stated above applies, BUT your probate attorney will have to do double duty and stall the lender from taking the property to sale ESPECIALLY if there is equity in the property. Some Lenders will cooperate, but don’t count on it. Sometimes what a lender‘s representative tells you on the telephone and what actually happens can be worlds apart. Ask for everything in writing and if the lender requests any documentation, COMPLY IMMEDIATELY.

It is in your best interest to have your attorney call the lender on your behalf if you are uncomfortable doing it yourself. However, first, call the lender yourself, and if you encounter resistance from the lender‘s representative, ask for a Supervisor, and lastly have your attorney call on your behalf.

Language in the homeowner‘s mortgage usually stipulates that upon the death of the guarantor (whoever signed to be responsible) of the mortgage, the mortgage is immediately due and payable in full. However, if the mortgage payments continue to be made in a timely manner, the lender will probably be unaware of the owner’s death and will not “accelerate” payment of the mortgage.

So the issue becomes, who will continue to make the payments while

the property is in probate and who will reimburse whom for these payments? Work this out before you make the first payment and get it in writing even if there are only two beneficiaries. Multiple beneficiaries make for multiple headaches so don’t assume that just because they are related to you that they will be the same people during and after the probate. Money changes lives and not always with positive results………


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If the decedent did their financial planning properly and established a Living Trust, the new Trustee will have no probate to deal with and the only issue will be selling the property. As described above, the foreclosure process is the same so just keep making the mortgage payments. It doesn‘t matter that you are paying with a different checking account, because the lender is receiving their payment and crediting the mortgage account of the deceased (guarantor).

If there is substantial equity in the property, it may be in your best interest to reinstate the loan if it is seriously delinquent (3 – 6 months), if the lender will agree to the reinstatement. If the lender won‘t agree, just pay off the loan. It is easiest to just send in the reinstatement amount and not mention the issue of the guarantor’s death.

You may be able to refinance the property by guaranteeing the

mortgage, if you decide to keep the property for yourself or to facilitate a smoother sale later. The lender will need proof of the pending refinance and will usually postpone the foreclosure sale. If the lender knows what they are doing, they could offer to have you refinance through them. However, don’t assume anything, talk to the lender as soon as you are sure what you want to do.

Lenders will usually postpone the sale if you have a Contract for Sale from a buyer and occasionally they will postpone the sale if you have a signed Listing Agreement with a Realtor® for the property to do a short sale. But this varies with lenders, so DON’T assume anything.

ANOTHER WORD OF CAUTION - If a Realtor® approaches you to

list your property because he has a “buyer for your property”, only offer him a “single person” listing agreement. What is most important to remember is that if the Realtor® is not able to sell your home, he only loses a commission; you lose your home‘s equity! If he should find a Buyer, make certain that there is enough equity to cover his commission. Otherwise, you will have to come to your closing with CASH to pay him!

Unfortunately, coming to closing without realizing you owe money

happens quite often because the seller believes his credit is more important than his money and doesn‘t think through the costs to close. The seller‘s credit is already impacted because of the late mortgage payments so the question is ―Why even bother to close?‖ This is a good question that every seller should ask himself when he has to come to the closing table with money.

If you find yourself in this position, bring less money (or none) to

the closing table and tell the buyer that unless the Realtor® reduces his


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commission, the closing agent reduces his fees, or the buyer pays more, YOU CAN’T CLOSE. If the buyer is motivated and the realtor® isn‘t a fool, they will come to a happy meeting of the minds and the closing will take place. Otherwise, give the Realtor® a personal note for any of their commission not paid at the closing and pay it off when you move and get settled.

REAL ESTATE INVESTOR’S FORECLOSURE

If you are in foreclosure because you tried real estate investing and you

paid too much for the property, lost a tenant, under-estimated repairs, bought a pre-construction that couldn‘t be flipped, didn‘t foresee the Buyers‘ Market, or any other investor mistake(s), you must now make a BUSINESS DECISION about what to do. Your choices are to -

1.) hold on to your home and slow the financial bleeding by bringing in a tenant (lease option), 2.) bleed slowly until you sell or lose the home to foreclosure, 3.) or stop the bleeding altogether and walk away. Now is the time to carefully review your carrying costs and determine if

holding out for a year or two, or three makes sense if you can afford to lose your profit in the property and your cash besides.

No one can predict the future no matter what they say, or how much empirical data they have from historical archives. It‘s easy to base future decisions on the past and justify them with this data. The true challenge is when it‘s your money invested and fear and doubt become reinforced by looking at short term negative news while trying to make long-term life altering decisions. The best decision may well be to walk while you still have money in the bank. Yes, you will have to face the slings and arrows of credit issues, and have to pay higher interest rates on major financial purchases for a few years, BUT THESE ISSUES ARE NOT FATAL so don’t treat them as such. Nice people can have nasty problems that are not their fault, so don‘t punish yourself, just move on with your life.

If you can‘t sell your property for months and you don‘t want to carry it for three to six months longer, market it as a Lease Option or Rent to Own. We discuss this later, but it is the best way to carry a property with minimal negative cash flow, or possibly break even while you wait for better market conditions. We give specific examples of how to make money with lease options especially if your tenant doesn‘t buy the property. Don‘t want tenants? We understand, but take the time to read why this option works so well.


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HUGE TIP (#45) - We often advertise for “Rent to Own” or “Lease to Own” and look at these prospects with the intention of their buying our property immediately. We have all perspective ―renters‖ fill out our mortgage broker‘s pre-qualification form or Mini-Application as we call it. Your mortgage broker will supply you with one that authorizes him to pull the prospects‘ credit and tell you if they have a chance to qualify for a loan now or in one year. These perspective renters may have cash and a good job, but bad credit or they may have good credit and no cash. Either way they can generally be financed for close to, or even, 100% if they have a ―Non-inhabitant Guarantor‖ that has income and good credit. If they have little cash to close, it may require you give a Seller Concession at the closing, of 3% or 6% of the purchase price, for their closing costs to be paid by you. HOWEVER, the Seller, can mark-up the purchase price by the same 3% to 6% if the appraisal is adequate. Determine if you are going to do a Seller Concession BEFORE you have the appraisal done. This way the appraiser knows that the purchase price should be higher than it otherwise would have been!

ANOTHER HUGE TIP (#46) - NEVER sign a sales contract that stipulates the Buyer can cancel the contract if an appraisal is less than the asking price! This is another great scam because the Buyer will use his appraiser and get a lower value and threaten to cancel UNLESS you adjust your price! Don’t fall for this trick! Get an appraisal BEFORE the buyer signs the contract, then there is no reason for another appraisal that can get the buyer out of the contract or have him try to renegotiate your sales price.

IN SUMMARY: 1.) Determine if it is monetarily feasible for you to stay in your property if

your loan is reinstated and you have much higher payments for up to six months. Talk to the lender; they really do love to hear from you. The lender has the power to put the entire overdue amount on the end of your mortgage by extending the number of payments, so plead for this option. Have the lender send you a Reinstatement or Forbearance Agreement to see what your payments will be and for how long. If they are less than one year, go back as often as it takes and try to have them extended further so they are smaller monthly payments.

2.) If you have a condo, start talking to the HOA Board members and get any New Resident Application that may be required for a buyer - if you have to sell. Don‘t forget to ask the board if they know anyone who is looking to buy in your complex, AND if the HOA has a Right of First Refusal. The Right of First Refusal was common in the past, now


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HOA‘s are drowning in units and wouldn‘t consider it. Both of these questions should be answered in your HOA Manual (which you need for a buyer anyway), but ask because there may have been changes to the HOA regulations.

3.) Should you be forced to sell, make up your ―Sales Sheet‖ listing all the

attributes of your property. A sample form can be found in our Quick Start Manual at www.FSBOPowerSellingSystem.com

4.) Finalize your offering price using our ―Determining Value‖ Form. DO NOT ACCEPT neighbors‘ or Realtors‘® suggested offering prices unless they match yours.

Remember, your home will not appraise for more because you list it with a Realtor®.

5.) Work on staging your property and if you are taking furniture with you,

get it ready to move and start shipping or storing certain treasured items beforehand. We have an entire chapter devoted to Staging and Moving Tips in our FSBO Power Selling System at www.FSBOPowerSellingSystem.com

6.) Get working on choosing a real estate attorney at this time. 7.) Set up your advertising campaign. Should you choose to use a

Realtor®, now is the time to interview them. If you are highly motivated, stick to the 4% commission payable only to the Buyer‘s Agent and flat rate list on the MLS®.

Remember, we do not give legal or accounting advice since we are not Attorneys or CPA’s. Seek advice of these professionals for any legal or accounting questions you have.




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Summary of Homeowner Strategies

EQUITY Small Medium Large Est. % of FMV 0% - 9% 10% - 20% 21%+ Friends & Family X X X

Stocks & Bonds X X X

Second Home Refi X X X

Home Equity Loan- Your Home

X

Home Equity Loan- Not Your Home

X X X

Challenge Legality X X X

Forbearance Agmt. X X X

Small Second Mtg. X X X

Refi Delinquent Loan X X

Outside Funding X X X

Employee Advance X X X

Liquidate Assets X X

Rent a Room(s) X X

Rent Your Home X X

HUD, FHA, VA Loans X X

Credit Cards X X

401K Plan X X X

Cash Value Life Ins. X X X

Employer Hardship X X X

Sign a Contract X X X

Sell Modified Auction X X X

Short Sale X X X

Grant Money X X

Talk to Investors X X X

Lease Option* X X

Sell “Subject To” X X X

Equity Split X X

Combo of Strategies X X X

Chapter 13 Filing X X X

Died in “Lieu of” X

Last Ditch Method X

*A lease option can be used to keep or sell your home, see Bonus Report #3


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Chapter 6 Quick Start Check List

Some of these steps may seem unimportant, but all the parts of this

check list are very important and the information you collect and records could be critical in the future for you to get money back if your home is sold, taken by foreclosure, or to help you stay in your home.

[ ] Read this text AGAIN, and take detailed notes about the strategies you want to use. [ ] Pick at least 3 – 5 strategies that you can immediately begin working on in each of the two sections of ―Keeping Your Home‖ and ―Moving Out of Your Home‖ and replace the less desirable ones, or ones that are working, as you move along. [ ] Get organized for the deluge of paperwork that will be coming or you already have:

1. Set up folders for Legal Documents Notice of Service, Lis Pendens Summons or Default Notice Correspondence with Lender, Correspondence with Lender‘s Attorney Correspondence with Your Attorney All overdue bills including City or County related items

2. Set up a folder(s) for Investor Correspondence and a business card file that may be needed later – keep these in order so you can call them back. Always make notes on their correspondence whenever you speak to them so you know EXACTLY what promises they make. It is best to have a witness whenever you speak to them in person. Do not assume that your spouse is agreeing because he/she isn’t saying anything. Be clear about what your decision is or isn’t.

3. Setup an area in your home that is away from people who will be coming to visit so they don‘t see your files.

4. Get an inexpensive spiral bound notebook and make notes on

EVERYTHING you do and everything that is said about your


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foreclosure – by anyone including your attorney. This document may be critical in your monetary recovery or reinstatement of your loan.

[ ] Start a dialogue with your lender‘s representative as soon as you know you will default and stay in touch on a regular basis - but only as often as you get new information about what your next step will be – as long as the lender needs to know. Don‘t be afraid to ask ―What would YOU do?‖ because occasionally they may have an answer for you that could really help. [ ] Make sure you fully understand the timeline of your proceeding. The best way is to get advice from an attorney and READ everything you get from the court. In the final analysis, ask the County Clerk‘s office to confirm the timeline on the auction process, your redemption period, and your rights. [ ] Made a determination of whether or not you can afford to keep your home and whether you want to keep it. Once you know this you can work on two fronts, first get started on the economic solutions to reinstate or pay off your mortgage (or deed of trust), and secondly, start working on getting ready to sell your home using the other techniques in this text and look at the information at www.FSBOPowerSellingSystem.com [ ] Ask your loss mitigation representative rep for a Reinstatement Amount, info on a Forbearance Agreement (Repayment Agreement), Loan Payoff, and about a ―short pay‖. The representative you speak with may not know what a short pay is and think you are asking about a short sale. Explain the difference and persist that their bank does them. [ ] Everything must be FAXED or EMAILED and ASAP so you know your options. Your last monthly mortgage statement will not have the total you owe because it doesn‘t have the attorney‘s fees and expenses added yet. [ ] Take action on the methods of resolution of your foreclosure and don‘t think that because it appears you have money coming in or a buyer to purchase your home that you can afford to rest. It will be a continuous struggle until your problem is resolved completely.

Disclaimer – We and our related companies are NOT debt relief agencies and we DO NOT PROVIDE advice, bankruptcy filings or referrals to attorneys who do bankruptcy filings, debt or credit counseling, document preparation, information, or legal representation pertaining to any bankruptcy filing or pending case. Consult an attorney for advice on any of the previously mentioned topics.



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Day-by-Day, Step-by-Step Actions to End Your Foreclosure

Day # Est. Time Action Completed

1 4 hours Read the Text AGAIN completely and with specific

emphasis on the following:

1 30 minutes

Chapter 1 – Review the Foreclosure Process & Find Your Mortgage Documents and Review Them for the clauses that refer to your foreclosure. What type of

foreclosure is yours – this is very important!

1 15 minutes Chapter 2 – Can‘t Afford to Keep Your Home? This question is critical and must be addressed

honestly so you can move ahead quickly.

1 10 minutes If “YES” – go to Chapter 5, and Start with #1

1 10 minutes If “NO” – go to Chapter 5, Start with #1

1 1 hour Fill in & Use Contact List below and remember to review in the text What to Say to Each Contact.

2 3 hours Finish the Contact List and begin contacting each and everyone on your list. Whether you are primarily on

List 1 (Save) or List 2 (Sell) DO BOTH LISTS

2 1 hour Review the Quick Start Check List in Chapter 6, and

Complete this list – NOTE some items will be duplicated because of their importance.

2 2 hours Start making decisions based on the initial feedback

from the contacts you have made up to now.

3 2 hours Finalize Contacts and Make Strategic Decisions

About Your Specific Strategies in Each of the Categories.

3 2 hours Implement Your Decisions Even if the results will not

be forthcoming for days or weeks.

3 15 minutes If you decided to sell, get our Home Study Course

at www.FSBOPowerSelliingSystem.com

In Your Spare

Time

Review Bonus Report #1 – With emphasis on how to make money BEFORE you leave your home. Save the

rest for later when you have more time.

In Your Spare

Time Review Bonus Report #2 – Look at this info for an early major strategic move and line up your help.

In Your Spare

Time

Review Bonus Report #3 – Lease options are a good resort but you need good advertising to bring in tenants

or to find a buyer to rent your home back to you.

In Your Spare

Time

Review Bonus Report #4 – Powerful process but needs competent info on your local auction from

someone who knows so look early for info and a buyer.

In Your Spare

Time

Review Bonus Report #5 – Put off your Credit Repair until your problem is completely resolved and you are

staying in your home, or have moved to a new residence.

Do not get frustrated when you can‘t get people to call you back timely, especially your lender. Be persistent and belligerent to get things done. If you get the above actions done in the time

allocated or even close to it, you will be way ahead of 99.9% of other foreclosure victims. The IMPORTANT THING is to GET STARTED IMMEDIATELY!

http://www.fsbopowerselliingsystem.com/


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What to Say to Investors Within days of your being served your notice of default or lis pendens,

you have been bombarded by investors looking to buy your home and Realtors® looking to list it. Pre-qualify the investors who want to buy your home and the ones who want to flip it.

How should you qualify them? Simply ASK them ―What is your real

interest?‖ Your should work with the ones who want to buy it and hold it. However, if you become desperate the flippers are worth keeping in mind. The issue with the flippers is that their buyer may not come to closing and this would REALLY complicate your problem. Try to stick to people who really want your home.

Remember, if you have an investor willing to pay $XXXX for your home,

a retail buyer would probably pay 120% to 150% of that price. So you should carefully keep a list of the investors and the prices they offer you. Expect to get offers from 50% to 65% of After Repaired Value (ARV). The investors‘ offers should be 50% to 65% of After Repaired Value (ARV) less the repair and carrying costs to resell your home. Their presentations may be intense but mostly, they are nice people. Just keep thinking that if you have equity in your home, they want it, or as much as they can get!

Your response to these investors should be ―I am considering using an

investor like yourself, are you willing to make me a cash offer and close in 15 days or less?‖ If they ask why cash and why 15 days, explain that you are having a lot of offers and you want to compare ―apples to apples‖. You can always talk about other options later.

What to Say to Realtors®

Tell the Realtors® that you will pay a Buyer‘s Agent commission of 4% depending on your desperation and final decision about moving. Consider this, by giving up an extra percent you stand to get out before the competition grows and prices start to drop.

The persistent Realtors® will not take this offer and will try to tell you

their marketing ―machine‖ will sell your home in no time. Explain to them “I like the idea and that’s why I am willing to sign a single person sales agreement for the buyer’s agent commission of 4% (or 5%) – not an exclusive agreement for this agent only.” Ask, “Do you have any buyers now?” Stick to your guns because you are talking to a professional salesperson that probably has spent tens of thousands of dollars learning to overcome homeowners‘ objections. Move on to the next one if you have any problem with anyone of them!


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What to Say to Mortgage Brokers

Mortgage brokers may be calling you with offers to pre-qualify perspective buyers, to list your home FREE in their website, and refinance your home. Let‘s look at these offers one at a time because each is important.

1.) Pre-qualify your perspective buyers: The pitch is that they will

put a sign in your front yard directing the calls to them and they will pre-qualify each caller and screen out unsuitable leads. You are freed up from having to deal with callers or speaking to the investors and neighbors that call just taking up your time. Sounds great on the surface, but the reality is you are advertising for them and each lead coming in becomes a prospect for a mortgage where they can make tons of cash. Also, if they mess up the ―interview‖ with the prospect, you are the loser. Tell them “No thanks, I prefer to screen my callers myself (or my real estate agent will do it).” Tell him that if a perspective buyer comes without a mortgage broker you will be glad to refer them and ask for a card.

2.) List your home FREE on their website: This is true, he will list your home for free, BUT the calls come to his telephone numbers and are captured by his telephone system so he can call them back and get them as a prospect for a mortgage – not necessarily for your home. In this case, FREE is of little or no benefit to you. Tell him “Thanks, but I am not interested because I want to answer the calls and speak to the perspective buyers myself.” Remember that oftentimes a prospect is sitting out front looking at your sign and can come in immediately. If someone else is taking the calls and not calling back, critical time and prospects are lost!

3.) He can re-finance your home: He knows you are in foreclosure since it is part of the public record and probably his lead source. However, explain that you are 3 or more months behind on your mortgage or you have a sale coming up in two weeks – whichever the case. Then ask what he can offer you. You should know your credit score so despite his wanting to take a full application on you, he will know exactly what you will or will not qualify for.


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The major problem here is whether he can actually re-finance your home. You are in foreclosure and unable to make previous payments, why would a lender want to loan you more money? Simply because there are predatory lenders out there who will loan on the equity in your home – if there is enough equity. Why are they called ―predatory‖? Because these lenders know that at least 85% of the time you will default on your payments again and they will foreclosure and get your home‘s equity as a profit. If you are taken in by the sales pitch, don‘t pay any money for the application or any other up-front fees. All of these can be included in the loan‘s closing costs. A better alternative is to go to your local banker and ask him for an equity line if you have a large amount of equity because you can select an option to pay only interest monthly. If he says ―No‖, ask about permanent re-financing and you may get a ―Yes‖. Additionally, your closing costs will be greatly reduced by as much as $7,500 or more for a $250,000 loan. You have to make the case that you can make the monthly payments – proof is necessary!

You can work to save your home and sell it at the same time. To do this, if you sign a sales contract with a

prospective buyer, put a contingent clause about resolving your foreclosure. For example, “If the seller’s foreclosure

is resolved prior to the closing, this contract is null and void.”

If your situation goes unresolved, you now have a valid contract on which you can close and move on. If you resolve it, you can stay in your home and cancel the sales

contract.

Hint- If you are going to offer a second mortgage to a perspective lender let your attorney draft this mortgage or lien to protect yourself AND your lender. Don‘t go to an office supply store and buy the cheap forms. If anything goes wrong you could lose much more than the amount of the mortgage.


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Getting Started: 1.) Gather your information and contacts needed for the “Save Your

Home” Contact Checklist (below) where you find 20 workable solutions. It is likely in your best interest to save your home from foreclosure even if you will not be staying there because it will give you more time to get your home ready to sell at a higher price. If you are upside down, you still have the option of a short sale, short pay, or a deed in lieu of foreclosure.

2. Gather your information and contacts needed for the “Sell Your Home‖

Contact Checklist (below) where you will find 12 workable solutions, including the ―walk away‖ as a last resort, if you know for sure you will be leaving (unaffordable, divorce, death, etc.). Look at www.FSBOPowerSellingSystem.com for more information about selling your home.

3.) If you definitely know you will be leaving, re-read the text so you

have a good general knowledge of what to expect including the eviction process. Always confirm with the Sheriff‘s office and the county clerk what you can actually expect. This is important because we have seen evictions where the new owner threw the contents of the home into the street when the homeowner was at work and all the neighbors had picked everything up like piranhas feeding on a bleeding cow. This was a very sad statement about the nature of mankind. Don‘t let it happen to you because you can easily come back to fight later, so get your act together now!

Part 1. FIRST, forget your pride if you truly want to save your home and your

family. You are worthy of being in control despite any past mistakes. It is your life, live it with vigor and valor. Call each one of your contacts and if they do say ―No‖ ask for a referral to someone who “might need more income than they are getting on their CD’s or savings accounts”.

When necessary, stress the second mortgage as collateral and don‘t act

surprised if they say ―No‖. This is a common reaction when you are asking for money. To get money from these people you must be persistent and ask what it will take to have them LOAN you the money and a way that you will pay it back. Don‘t use this line until much later, after at least four ―No‘s‖ – “What would it take for you to say “yes” to my request?” and don‘t say anything else



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until he speaks because the first to speak loses! You will see how to overcome objections below.

It is critically important that you don’t call anyone before you plan

what to say. I mean actual scripting of your expected conversation. You have your contact list and you call the first name but don‘t expect rejection or it will happen. You must follow the script or you will be distracted since the prospect wants to steer away from your real issue for calling. Here is a typical example using ―Jim‖ as the perspective lender –

Hello Jim, I’m calling because we need some help”. Go right into what

caused your problem in 50 words or less and don‘t drone on and on. Write it down before you call and practice what you will be saying. It is really important that you stick to the script! If you get excited or befuddled, you will lose sight of the important point(s) you need to make – stay on the script.

Give him your proposal “I checked with the bank and we need $xxxx to

reinstate our loan. I know we can continue making payments on the mortgage after it’s reinstated because _____________________________________. End with “Please help us” and stop talking!

If Jim says “No” go right ahead and say –

“Jim, we have a lot of equity in the house that we can’t afford to lose, probably $XXXX” OR “We don’t have any place to go and we just need time to sell and find another place.” End with “Please help us” and stop talking!

If Jim says “No” again go right ahead and say – “Jim, we would be willing to give a second mortgage to a person like you to secure the money until we pay it off.” Say NOTHING and wait for Jim to speak no matter how long it takes! If Jim says “No” the third time, go right ahead and say – “Jim we are willing to give the second mortgage for $2,000 more than the money we borrow, sort of like points on a mortgage, would that help?” Say NOTHING and wait for Jim to speak no matter how long it takes!

If Jim says “No” for the fourth time, go right ahead and say –

“Jim, we are willing to pay 10% interest on the money and make it a one year note, does that work?” Say NOTHING and wait for Jim to speak no matter how long it takes!

If Jim says “No” for the fifth time, go right ahead and say – “Jim, the interest rate we are offering is much better than a CD or even a 401-K and both of these can be borrowed against. We are really desperate, what


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would it take to get you to loan us the money temporarily?” Say NOTHING and wait for Jim to speak no matter how long it takes!

If Jim says “No” for the sixth time, go right ahead and say – “Jim, I understand, would you mind referring me to someone you know who could help us and who needs to earn a high interest rate on a secured loan? I will gladly have the mortgage note prepared by an attorney so they are protected.” Say NOTHING and wait for Jim to speak no matter how long it takes!

If Jim says “No” for the seventh time, you are getting closer to a ―Yes‖ so go right ahead and say – Would you mind if I called you back in three days to see if you thought of anyone who can help us? Jim will say ―Yes‖ to get rid of you because it is non-threatening. HOWEVER, you should call him back in two days if he hasn‘t called you and say – Hi Jim, I am calling back as promised. Were you able to think of anyone who can help us just short term?” ABSOLUTELY say NOTHING and wait for Jim to speak no matter how long it takes! Do this same sales pitch for each of your prospects and line up at least two who say you can have the money. Who should you call or talk to? – everyone you come in contact with from your hairdresser or barber to your

good buddies and the guys or gals at work. Get over the embarrassment or you could be homeless! What’s more embarrassing then? Modify the above sales pitch to what you are comfortable with but use the person‘s name every time you speak to them because it shows respect. Also keep coming back after ―No‖ answers. Great salesmen know that 98% of all sales are lost because the salesperson takes one “No” and quits. The great ones NEVER take less than 6 or 8 “No’s” because 98% of the sales come AFTER the fifth “No”. Try it!! Somewhere in the deep dark recess of your mind, you may feel like you don’t like salesmen and don’t want to be one. Forget it, you have been one all you life as you convinced others to agree to your position – it started when you were a baby and you are still doing it every day.

Part 2.

Now that Jim has said ―No‖ a few times, you can go back to him with more creative scenarios such as a lease option, a short sale, or buying your home at auction. Don‘t try more than one ―idea‖ at a time and get your script


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together so it describes the benefits to him and the minimal risk. If you think there is risk, give him a way you will eliminate that risk. Following are some examples of conversations: “Jim, I found a way that we can possibly keep our home, would you mind if I explained it because I appreciate your opinion?” “We had some investors offer us a lease option where they would buy our house and lease it back to us until we could pay them back in a year. The problem we are having is they want to make $10,000 for doing it. If our attorney could do the paperwork for us, would you possibly be interested in looking at doing the lease option with us?” Re-read the Bonus Report on “Secrets of Lease Options for Homeowners” so you can answer his questions. If the issue of safety comes up at ANY stage of your conversations just say – “Jim, I am certain that our attorney can overcome that risk, would you mind if I asked him what to do tomorrow?” When you go back later to discuss the short sale and the auction say – “Jim, I hope I’m not bothering you but we really are desperate to save our home. I just wanted to pass another idea by you. We have learned that it is possible to buy our home directly from the bank BELOW our mortgage balance. It’s called a short pay and the banks routinely do it for investors but never with homeowners directly. The beauty is that you could buy our home below market value so your risk would be very, very low AND it is entirely LEGAL!” ABSOLUTELY say NOTHING and wait for Jim to speak no matter how long it takes!

If Jim asks why the lenders do this, explain that if they take it at foreclosure they have to carry the home, pay a realtor commission (5%), take a special hit on their accounting and they don‘t want to own property. So it is easier for them to take a discount and get the house off their books. All this is exactly the truth!

If you already have a second mortgage and liens, it may be better to do

the same thing at the auction so these junior liens are wiped out. Go through with Jim about how this works and don‘t mention the short pay unless you want to try to have Jim buy the junior liens at a discount. Show him the text (except for this part) and tell him “I’ll call your attorney and let you know what he has to say, is that OK?”

The practical reality is that if you believe you stand to lose a friend

by asking, you didn’t really have a friend in the first place. If they are


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truly a friend, you won’t have to work too hard to get the money. Everyone knows someone who has the money you need. All that needs to be done is KEEP GETTING “NO’s” UNTIL YOU GET A “YES”!

The most important thing you can do when speaking to people is

simply listen to what they have to say. They are saying what you hear for a reason which you must decipher as to their real problem. Is it fear of losing the money, they don’t trust you, the interest rate isn’t high enough, they don’t like you, or something else? Ask questions and listen to their response and react accordingly to make your request for money a win-win for you both.

It is critical that you make notes on everyone you speak to, unanswered calls, when and to whom you left messages, and everything that is said. This is important for two reasons. First, because later you will not remember what was said and when it was said. Secondly, if you need to pursue legal action you have evidence. In some states, you must have two-party consent to record a telephone conversation. What you can do is record anyway and transcribe the conversation to your notes.

If all else fails in your money raising efforts and the other ―Keep Your

Home‖ options aren‘t workable, now is the time to get started making emergency provisions for your moving and abandoning your home. I suggest you try going through your contact list ONCE AGAIN and make each an offer they can‘t refuse – as long as it benefits you.

You should review Bonus Report #1 about making money even if you

are losing your home. Take whatever action you think is appropriate and consider any options you have for a redemption period. If you have a redemption period and your home sold well below market value, you have a chance to get it back WITHOUT any attached liens that were extinguished at the auction.

This is an opportunity to go back to your Contact List and make them

another offer using the redemptive value you are entitled to. Once you have moved and are reasonably settled, review this Bonus Report again to see if there is further action you can take to get money back.

I acknowledge you for taking the effort to do the work up to this point. But now is the time to really get going! The resolution to your foreclosure is in your hands with the tools in this text. No one has ever brought together so many options and in such detail. Now the work begins and the best thing I can say, and the information I can give you at this stage is that “Persistence Wins!” so stick to it and don‘t give up – ever.


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Contact Checklist - Save Your Home Method # Person/Entity/Item Contact # Result Friends &

Family 1

Friends & Family

1

Friends & Family

1

Friends & Family

1

Friends & Family

1

Stocks & Bonds

2

Stocks & Bonds

2

Stocks & Bonds

2

2nd Home 3

2nd Home 3

Equity Line 4

Equity Line 4

Equity Line/Other

5

Equity Line/Other

5

Equity Line/Other

5

Legal - Attorney

6

Legal - Attorney

6

Forbearance Agreement

7

Small Second

8

Small Second

8

Small Second

8

Refi Del. Loan Only

9

Refi Del. Loan Only

9

Refi Del. Loan Only

9

Outside Funding

10

Outside Funding

10


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Method # Person/Entity/Item Contact # Result Employer Advance

11

Employer Advance

11

Liquidate Assets

12

Liquidate Assets

12

Liquidate Assets

12

Liquidate Assets

12

Liquidate Assets

12

Liquidate Assets

12

Liquidate Assets

12

Rent-a-Room

13

Rent-a-Room

13

Rent Your Home

14

Rent Your Home

14

Rent Your Home

14

FHA, VA, HUD Loans

15

Credit Cards

16

Credit Cards

16

Credit Cards

16

Credit Cards

16

401-K 17

401-K 17

Life Ins. 18

Life Ins. 18

Hardship Advance

19

Hardship Advance

19

Grant Money

20

Grant Money

20


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Contact Checklist - Sell Your Home

Method # Person/Entity/Item Contact # Result Investors 1

Investors 1

Investors 1

Investors 1

Investors 1

Investors 1

Lease Option

2

Lease Option

2

Lease Option

2

―Subject to‖ 3

―Subject to‖ 3

―Subject to‖ 3

―Subject to‖ 3

Wholesale/ Retail

4

Wholesale/ Retail

4

Wholesale/ Retail

4

Wholesale/ Retail

4

Equity Split 5

Equity Split 5

Equity Split 5

Equity Split 5

Sales Contract

6

Sales Contract

6

Sales Contract

6

Modified Auction

7

Modified Auction

7

Short Sale 8

Short Sale 8

Combo of Above

9

Chapter 13 10

Chapter 13 10

Deed in Lieu of

11

Last Resort 12


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Summary of Homeowner Strategies

EQUITY Small Medium Large Est. % of FMV 0% - 9% 10% - 20% 21%+ Friends & Family X X X

Stocks & Bonds X X X

Second Home Refi X X X

Home Equity Loan- Your Home

X

Home Equity Loan- Not Your Home

X X X

Challenge Legality X X X

Forbearance Agmt. X X X

Small Second Mtg. X X X

Refi Delinquent Loan X X

Outside Funding X X X

Employee Advance X X X

Liquidate Assets X X

Rent a Room(s) X X

Rent Your Home X X

HUD, FHA, VA Loans X X

Credit Cards X X

401K Plan X X X

Cash Value Life Ins. X X X

Employer Hardship X X X

Sign a Contract X X X

Sell Modified Auction X X X

Short Sale X X X

Grant Money X X

Talk to Investors X X X

Lease Option* X X

Sell “Subject To” X X X

Equity Split X X

Combo of Strategies X X X

Chapter 13 Filing X X X

Died in “Lieu of” X

Last Ditch Method X

*A lease option can be used to keep or sell your home, see Bonus Report #3


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Bonus Report #1 TOP SECRET

12 Ways to Make Money From Your Foreclosure, Even If You Have Already Lost Your Home

The following information contains many of the best kept secrets in the real estate investment community for obvious reasons. This information details ways that homeowners may be able to avenge themselves after being taken advantage of by unscrupulous investors, Realtors®, mortgage brokers, and even some attorneys. These methods may be called controversial but they work, and may be the only means for foreclosure victims to get back some or all of their lost equity. This Chapter is not disparaging fellow investors, Realtors®, or attorneys who work with homeowners in a moral, ethical, or legal manner. Rather, it is an attempt to inform homeowners who were unfairly taken advantage of that they may have rights they never knew they had.

None of the following information is to be construed as legal or accounting advice and any questions you have should be discussed directly with an

Attorney, CPA or your tax preparer in the case of IRS issues.

Disclaimer – We and our related companies are NOT debt relief agencies and we DO NOT PROVIDE advice, bankruptcy filings or referrals to attorneys who do bankruptcy filings, debt or credit counseling, document preparation, information, or legal representation pertaining to any bankruptcy filing or pending case. Consult an attorney for advice on any of the above mentioned topics.

The following suggestions are methods that we have actually used ourselves or have seen homeowners, investors, or attorneys use to get monies back for individuals who have lost their homes to foreclosure and later got money they did not expect from sources they didn‘t know were available to them. By way of introduction to our first Top Secret - investors play a valuable role in the transfer of real estate by buying, selling, rehabbing, and often frankly changing neighborhoods for the better. But as with any profession, a few bad apples can spoil the whole barrel and many states have taken steps


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to regulate how investors can interact with homeowners. Jail time and monetary penalties for investors will become more common and it is expected that within a few years most states will have legislation in place that regulates transactions between real estate investors and homeowners. Unfortunately, this well-meaning legislation will only serve to hinder or stop legitimate investors and not deter the unethical or criminal elements. Some states are actually construing that even if a property is not in foreclosure at the time of the sale, but the homeowner was considering going into foreclosure, the sale falls under the new ―Foreclosure Disclosure‖ regulations. Potentially, this type of legislation gives homeowners an opportunity to virtually sue any buyer of their property by saying they were contemplating foreclosure and discussed it with the buyer. Because of this potentially excessive extrapolation of the regulations, shrewd investors are getting signed disclosures from any sellers where they purchased their home. Again, well-meaning legislation carried to an extreme.

Twelve Ways to Make Money Even If You Lose Your Home

1.) You may have a legitimate cause to sue the investor that purchased your home or, if he assigned your contract to another buyer, sue the investor, the title company, and the end buyer. The core of your case is non-disclosure of all material facts, possible fraud, and the excessive profit the investor made on the sale of your property.

If the investor does an Equity Split, mentioned in the Chapter 5, the legal

issue is the non-disclosure of material facts and the excessive profit he made at your personal expense since your mental judgment was hampered by the emotional pressure of the foreclosure process. Additionally, it may be that the investor gave you false or misleading information that helped make your final decision to sell to him.

If you cannot afford an attorney, get help from Legal Aid Services. If

they won‘t help, then go to the State‘s Attorney‘s Office. You may have action for a civil suit and also a criminal suit. If the State‘s Attorney takes your case, you will not have to pay attorney‘s fees. Later your attorney will advise you to bring a civil suit that could result in damages in excess of your original personal financial loss.

Some attorneys will take contingent suits if you show how you were not

properly disclosed, how much money the investor made, and how little you got. There are even attorney groups that look for homeowners that have had investors buy their property and they sue the investors. Always tell the truth so you are not counter-sued by the investor. It is very powerful in any lawsuit


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if you have kept a log with whom you spoke, when you spoke to them, and what was said and promised.

Some investors will have carefully planned for a law suit by using

corporations, LLC‘s (limited liability companies), and layered ownerships in an attempt to disguise the real ownership of their assets. Don‘t let this slow you down as the authorities and your attorney will know exactly how to ―pierce the corporate veil‖ to get to these individuals. This process includes using what is known as the RICO Act, wherein the guilty party can lose every asset he has ever accumulated, as well as serving jail time for a ―continuing criminal enterprise‖.

Very few investors are criminals even though it may bother you that

someone profited from your personal problem. Investors are within their legal bounds to make a profit from buying and selling homes. The problem is when investors intentionally mislead sellers into believing that they are transferring their home ―temporarily‖ and will be able to buy it back later. Then the former homeowner, who is now a tenant, is unceremoniously evicted.

With regard to the idea that you would rather let the bank have your home instead of an investor, I understand your feelings. However, the bank is who caused your problems and allowing the bank to get your home to profit again in your misery makes no sense at all.

SUPER POWERFUL INFORMATION – the statute of limitations is as

much as fifteen (15) years in some states! This means that with proper documentation, you have an opportunity to get money back for years to come.

2.) When an investor halts your foreclosure by reinstating your

delinquent loan and assuming the payments on your existing mortgage, he is technically and legally lending you money until such time as the property can be sold.

A number of shrewd attorneys have picked up on this form of

transaction and realized that the investor or ―lender‖ must be a licensed mortgage broker, have made specific legal disclosures regarding loans, and the investor may have charged an excessive interest rate on the ―borrowed reinstatement‖ money because the profit from the sale of your home is included in the return on the loan.

One attorney that confided about his practice, said he targeted these

specific investor transactions, had a 100% success rate in court, and had gotten judgments in all cases before he turned the cases over to state


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authorities for further prosecution. However, he slowed his pursuit of these investors in civil court because the judgments were uncollectable in most cases.

3.) If the reason for your foreclosure is because of “predatory

lending practices” which is essentially getting a mortgage that you could not afford, you possibly have a case for mortgage fraud. For example, we just reviewed a case when a homeowner was charged 10 points for his closing costs which violates the Home Ownership Preservation Initiative (HOPI) legislation. The outcome of the following lawsuit (free to homeowner) was the lender had to pay the homeowner $30,000 MORE than the original loan!

If your mortgage broker told you to falsify loan documents regarding

your income, length of time on the job, or any other material fact, you may have a case for mortgage fraud. This is especially true if you were given an adjustable rate mortgage (ARM) and told to pay the minimum interest rate and ―not worry‖ about the coming jump in interest rates and monthly payment because your mortgage broker would ―refinance‖ you before it happened.

There are legal aid services in every city or county that will handle your

case at no cost to you. It is the job of these governmental agencies to stop predatory lending practices in their communities. Because there are too many agencies to list here, start searching online or ask neighbors and family members for a referral.

4.) If you are a senior citizen, or the relative of one, most states

have specific regulations about taking advantage of the elderly that you may be able use to your advantage.

Unfortunately, taking advantage of the elderly is an all too common

occurrence and most states have formulated specific regulations that require ―salesman‖ to be more than fair in dealing with the elderly. In most cases these laws carry strict monetary penalties and in severe cases, jail time.

If you believe you or a relative may have been taken advantage of,

contact the local state‘s attorney for guidance about what to do to file a complaint. If your case is prosecutable, the state will pay for prosecution of the case.

If you believe that any of these transactions may have happened to you,

DO NOT go to the investor and threaten him with prosecution. If you do, he may now have a case for “EXTORTION” against you! Call an attorney as we suggested and do it correctly from the start.


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5.) Certain states give a foreclosure victim the opportunity to regain his property (“Right of Redemption”) for as much as two years. Even if you can‘t get enough money together to get your property back in the redemption period, you might be able sell your ―right to re-purchase‖ to an investor or another person who will allow you to live in the property or pay you for exercising your redemption rights.

The states that have this Right of Redemption are listed in Chapter 1 in

the table listing the various states and their foreclosure procedures. We strongly suggest that you first search on the internet for topics related to ―State Foreclosure Law‖ and from the legal information you get from these sites, determine in detail if you have a redemption period at all, and if so, how long you have and what your rights are.

The various state laws are complex and are also a function of your

specific mortgage document or deed of trust, so we have not tried to list them in this text. If it appears you have a right of redemption after reading these laws, contact an attorney to explain your options.

6.) The best kept Investor secret that has taken hundreds of

millions of dollars from unsuspecting homeowners is called “overage”. If a home is sold at auction for more than the amount owed to the lien holders, the amount in excess is called ―overage‖. This amount, which can be a few dollars to hundreds of thousands of dollars, goes into the state‘s treasury until the proceeds of the sale are disbursed.

All lien holders must make a formal claim to the court to get their liens

satisfied and anything left over SHOULD LEGALLY GO TO THE HOMEOWNER. Sometimes the homeowner moves before the eviction or sale and doesn‘t leave a forwarding address so the notification process doesn‘t work. The funds will sit in the state‘s treasury until someone claims them or the state will keep them after a certain number of years.

TIP (#47) - In many states it is a prosecutable offense for someone to

solicit a homeowner and charge him a fee to get their overage after the homeowner has had their home sold at auction and are then due overage from the auction sale.

While in other states, the regulations allow a former homeowner to use

such a ―finder‖ but imposes a maximum commission of varying amounts up to 10%. How much work is there? JUST FILL out a form and show your proof of identification at the court house. You can determine if you are due overage by going to the auction and seeing what your home sells for, or by calling the County Clerk and getting a Request for Proceeds Form from him.


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Often the second, third or other lien holders don‘t know about the overage and do not make a claim for their liens. So, here is an opportunity to make some money to which you are entitled by law to receive. If your home is upside down before the auction, you will not have any overage unless a bidder who wants your property for another reason pays over what is due as the final judgment.

Tip (#48) --- SCAM ALERT--- Homeowners are often amazed that an

investor would pay them for a deed to their home the day before an auction, especially knowing that the auction will void the deed. However, the investor has already checked to see that there will most likely be ―overage‖ after the sale. The investor will make a claim for this overage which could be hundreds, thousands or tens of thousands of dollars and since the investor was the owner of the property just before the sale, he gets the overage!

DON’T SIGN A DEED OVER TO ANYONE FOR

ANY REASON UNLESS YOUR ATTORNEY SAYS IT IS O.K.!

7.) You have an opportunity at the auction to make money if there is a second mortgage in place, and you own it (or a person that you trust owns it). This is done by bidding on your property to push the price higher than what is owed on the first mortgage. The idea here is that you have a ―credit‖ to bid on your own property for the face amount of the second mortgage.

For example, if your first mortgage is for $150,000 and you have equity

in the property of ANOTHER $100,000, but were unable to sell quickly enough, then if there is a second mortgage holder of $100,000, he could bid up to $100,000 for the property at auction and only have to pay off the first mortgage of $150,000 to get your home.

This is because the second $100,000 mortgage is a credit against the

bidding process. Now follow the rest of this reasoning – let‘s assume that an investor(s) wants your home and knows there is $100,000 of equity above the first mortgage. He will start the bidding at $150,000 plus $200 because the first mortgage lender will begin the bidding at $150,100. Seldom will the first mortgage holder bid above the additional $100 because they do not want to speculate in real estate so they will stop quickly.

If there were no other bids above $150,100, the first mortgage lender

would get the property at auction and make a nearly $100,000 profit when they sell it. However, for every dollar over $150,000 bid by the persons at the auction, that money goes to the second mortgage holder – THAT COULD BE YOU! And here is the really neat part - if there is another bidder who really wants the property, he may well go to nearly the full equity ($100,000) to get it.


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The key to knowing what to do next is to bid in the minimal increments

only (usually $100) until another bidder gets aggravated and starts jumping the bid in thousand dollar increments. This ―bid jumping‖ signals you have an unsophisticated investor that really wants your property!

He will stop bidding somewhere and at that moment you can stop

bidding and ―renege‖ on your last bid. The auction process does not go back to the beginning but rather drops your last single bid and he pays his previous high bid for your former property. Your risk, if you have ―pushed‖ him too much, is that he may also renege so do it graciously and as if you are very frustrated. The bidding will start all over without either of you since you have both been disqualified from bidding if he also reneges.

Since you still have the second mortgage, any amount over the

$150,000 will be paid to you. If you think you want to try this technique, get a copy of the Bidding Procedures from your County Clerk and study them before you go to your auction. Check with your attorney about your state‘s legal requirements for issuing a lien or mortgage against your property.

Go to other auctions so you can register early and get the ―feel‖ of the

process first hand. You could possibly recover a good amount of your equity using this technique. If necessary, find someone who goes to the auctions all the time and explain to him that you have a second mortgage and you want his expertise in bidding to get as much equity out of your second mortgage as possible.

Your property will be sold to the last bidder and the amount he will be

paying should be well into your second mortgage amount. This technique is extremely powerful in getting equity out of second mortgages that would have normally been worthless had the mortgage owner not come to the auction. It is used by professional investors who actually purchase existing second or third mortgages at 5% to 10% on the dollar because these second and third lien holders believe they will have their liens “extinguished” at the auction.

These investors next go to the auction and use these discounted

mortgages as full face credits to bid against other investors. It doesn‘t matter if the investor loses the auction because once he gets past his 5% cost for the mortgage he is getting pure profit back from the sale! Think of this as buying a gift card with a face amount of $50 for $5 because the seller doesn‘t eat at that restaurant – but you do!

8.) There is another opportunity with junior liens to make money

or save a great deal of money. Once you stop making payments on your


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junior liens (second or third mortgages) they will immediately realize they are in trouble because the senior lien holder will be shortly filing a foreclosure.

This means that for the junior lien holders to get their money back, they

will have to go to the foreclosure auction and bid enough money to buy out the first lien. Unless you have huge equity in your property and they want to take a huge chance on selling your home themselves, they will sell that loan for a substantial discount.

You have the opportunity to have a friend or family member call the

lender directly and offer to buy their loan for 5% of the face amount. Usually the lender will haggle but most likely will take between 10% and 15% of the amount due on the loan. Remind the junior lien holder the foreclosure sale is coming and you are taking a chance on collecting a few dollars more from what is left – IF THERE IS ANYTHING LEFT!

When the lender‘s representative finally agrees to sell you the loan,

have him transfer the loan at face amount and you can use the loan for bidding at the auction. If you get your home back, you will have no second mortgage or have a bidding credit at the auction for the full face amount. Either way you can make money from this procedure.

9.) In many states, you can sell everything in the house before

you are evicted. This may include, kitchen cabinets, appliances, light fixtures, bathroom fixtures, etc. – everything. In these states, you have no obligation to the buyer of your property, be it the lender or an investor who buys it at auction. However, in other states, you have the legal obligation to leave the house “intact”.

Check with your attorney as to what is legal in your state. I would guess

that we encounter ―stripped‖ houses about 70% of the time when we inspect REOs (―Real Estate Owned‖) which are bank owned properties. At least half of these stripped properties also have lost their copper electrical wiring, copper water lines and the air conditioner ―radiators‖ in the air handlers and compressors.

Frankly, it isn‘t the amount of money homeowners make on these sales

that is important to them, it the seeming revenge they are inflicting on the bank. The bank doesn‘t really care because they have hundreds or thousands of homes just like these – it is just another case to them.

10.) A number of states have Victims’ Funds for people that have

been victims of crime. This isn‘t just for street crimes but also for white-collar crimes such as mortgage and deed fraud. Again, go to your local Legal Aid Services, your State Attorney, or online for more information on this possible


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source of getting some of your money back by making application to the state agency that oversees these funds, if you have been defrauded IN ANY MANNER, and lost your home through foreclosure. Some recovery amounts are limited to $10,000 but others may not be, so do your homework since it could be well worth your time.

11.) Request a 1099C Form in lieu of a Judgment against you

when you are working with your lender. While this may seem strange, let‘s review the consequences of each.

Let‘s assume the actual LOSS your lender incurs on your sale is $50,000. A judgment in this amount against you would be on your credit report for about seven years and somewhere in the future you might have to pay it off. I know that it may sound impossible now, but trying to buy anything, especially another home, will cause you to have to pay it off, take a much higher interest, or have you give a larger down payment. So you may wind up paying $50,000 plus interest AND much higher interest rates for many years to come.

However, if the lenders issues a 1099C Form, for $50,000, the most you

would owe are the taxes on the $50,000 – depending on your tax bracket this could be as low as $1,000 or as high as $15,000. Better you have to pay back $15,000 than $50,000+. However, we mentioned above how to request a hardship exemption, which means you would owe NOTHING when the IRS grants it. Also, your credit report is almost unaffected by the 1099C Form while the judgment is a negative mark for seven years!

UPDATE - Until December 31, 2012, homeowners who get a 1099C

from a foreclosure against their primary residence will have it “written off” by the IRS and not counted as the phantom income it actually is.

12.) If your lender sends you an IRS 1099C Miscellaneous Income Form for the year you lost your home, you will be able to save paying income taxes on this amount. Lenders will more often send you the 1099C Form rather than getting a judgment and trying to collect it, because it is simple and affects their accounting better.

However, you are responsible for paying the taxes on this ―Phantom

Income‖ which you didn‘t actually receive. In many cases the IRS has been reasonable about forgiving this fictitious income if you received no money from the closing. However, sometimes you need to plead your case and prove it was a true ―hardship‖ situation, AND that you made no money on the sale of your property.


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As noted above, until December 31, 2012, homeowners who get a 1099C from a foreclosure against their primary residence will have it “written off” by the IRS and not counted as the phantom income it actually is.

NOTE - being a real estate investor who invested in too many

properties, and suffered multiple foreclosures, is not likely to be viewed as a hardship case. But you never know so try anyway. Most often lenders are getting deficiency judgments to collect against investors in the future. In this case, bankruptcy may be a viable option since it will also ―erase‖ your credit card debt.

UNIQUE OPPORTUNITY THAT COULD APPLY TO YOU –

Increasingly we are seeing investors who purchased multiple properties going into foreclosure. Since these homes are not their primary residences, they are renting the properties. The sometimes problematic issue is leasing to tenants and not using the rent money to pay their mortgages.

I understand they may be desperate for cash but the renter can be

caught in the mess by having to be evicted by the new landlord (the lender) with minimum notice. It is also unlikely that the investor will be giving back the tenant‘s deposit or last month‘s rent. One would hope that investors would have the integrity to inform tenants of their decision to lose the property to foreclosure. Besides the moral value of this decision, we have been successful in selling the tenant the property, through a short sale or a lease option if it was applicable. Try it, you may be very surprised!

If you haven’t done so already, NOW is the time to GET MAD! GET ANGRY!

BUT DON’T GIVE AWAY YOUR RIGHTS!

Stay In Your Home, Get Your Home Back, or Get Your Equity Out Before

You Leave!


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How to Get Your Home Back at 50% to 90% of Your Loan Value

As promised, here is the second bonus chapter where you can find out

how it is possible to keep your home and reduce the amount owed on your mortgage by 30% to 60%. Lenders will seldom or never offer this option directly to a homeowner in default, and will swear that it is impossible for a homeowner to get his mortgage reduced. However, follow the flow of how the process works and think about whether or not you could do this ―short sale process‖ or a totally different process of a ―short pay‖ and working with someone you know. First we will look at a short sale and later a short pay, the two are vastly different!

When the short sale is completed at a reduced mortgage price, this

friend or family member will then sell, option, or lease back the property to you. Some state laws and many lenders do not allow a person who has lost their home by foreclosure to repurchase it. However, if you have not lost your home to a foreclosure sale; this is a negotiated transaction with the lender while you still have title to your home.

More and more we are seeing the lenders bring an ―Arms Length

Transaction Disclosure‖ form to the closing for all the parties involved to sign. These parties include the seller/homeowner, Realtor® and the end buyer. It states that under the penalty of perjury, all the parties to the transaction are not related in any way financially or legally. This definitely stops the average seller from thinking he will ever get his home back or even be able to live in it.

This may not be the case if the seller carefully interviews the end-buyer

and determines that he may be able to lease back his home or even buy it back in time. This may violate the intent of the Disclosure and could result in the lender rescinding the deed and reinstating the mortgage months or years after the short sale. .

HUGE TIP (#49) - SCAM ALERT – Some investors prospect for

foreclosure victims who want to keep their homes (85% to 95% of all homeowners) by calling the following transaction a Lease Option. The investor purchases your home at below fair market value from you, or by doing


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a short sale with the lender, and promises you that you can buy it back in the future for a set price, called the ―Option Strike Price‖ or OSP.

The OSP can be slightly above your current mortgage or it may not be

for a specific amount, but it actually matters very little because the investor knows that the chance of your exercising your option is virtually zero. To make certain you don‘t exercise, some investors write in lease clauses that cancel your option if your lease payment is as little as ONE DAY late!

Numerous states have been taking action against unscrupulous

investors to end this practice but it still abounds. Have your attorney review any documents BEFORE you sign them and report any issues to your Legal Aid Services or State’s Attorney, if you have any issues, problems, or major surprises with your new landlord.

The process of ―Short Selling‖ entails the lender reducing the principal or face amount of their mortgage so a buyer can purchase the property at the current market value.

The discount can range from 30% to 60% of the remaining balance due

on your mortgage. The lender gives the discount to the buyer because they are led to believe that the property will sell for less than they are discounting the loan for. This is because of the cost of a foreclosure (averaging $43,000 per property), paying a Realtor‘s® commission and losing the carrying costs and interest on the principal they invested in your mortgage. In addition, and more importantly, the lender receives economic advantages by not having a defaulted mortgage on their books.

As an example, let‘s say you have an adjustable rate mortgage that has

had its interest rate escalated to a point where you can no longer afford to pay your monthly payment. You are behind on your mortgage payments, and you are contacted by the lender‘s agent to find out what you are going to do about it.

If you had a $250,000 mortgage and the lender agrees to do a short

sale, they will reduce the amount of the ―payoff‖ of the mortgage to somewhere between $100,000 (60% discount) and $150,000 (30% discount). The exact amount of this discount will be determined by a local Realtor® doing a BPO (―Broker‘s Price Opinion‖) that is his best guess of the value of your home. He should take into account the condition of your property and the sales in your neighborhood.

Once the lender sees this BPO he will have an idea of what the property

is worth and what he can discount the mortgage to make it attractive to a


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buyer. Probably the best kept secret in the short sale industry is that lenders will take 80% of the BPO in a flash – no hesitation. Some lenders through their Loss Mitigation Representatives will try and negotiate a higher number than 80% of the BPO, but will sell at as little as 40% if the condition of the property warrants.

If you have a condition problem in your home, make sure the Realtor®

doing the BPO inspection comes inside and sees the damage. Most BPOs are called ―drive bys‖ and sometimes Realtors® don‘t even drive by to get their estimate. Frankly, they are only paid $40 - $75 for each BPO and they are really most interested in closed sales in your neighborhood – which they can see in the Multiple Listing Service® or MLS®.

What this means is that when you can find a buyer for your home, and

this buyer can come to closing with cash (actually a certified check or wired funds), or he will get conventional financing if the lender agrees, he will pay the reduced price the seller and the lender have agreed to and there will be a closing with the buyer owning your home for the amount the lender is willing to discount your mortgage.

Let‘s assume the lender agrees to $200,000 as the payoff. The new

owner would pay $200,000 and own your home free and clear. This new owner now has the right to sell or rent the property at will to anyone he chooses, including you. Unless you have signed the Disclosure I mentioned above. The additional beauty of this sale is the new mortgage rate your buyer is paying is probably a fixed rate and at a more reasonable interest rate than you were paying, so hence a lower monthly mortgage payment if you are able to work something out with the buyer.

Real Life Example – We looked at a home in foreclosure that the

mortgage was $209,000 and the homeowner was trying to sell the property for $459,000. FMV was about $355,000 so I asked the homeowner how she got a figure of $459,000. She explained she also had a lien on the property for $250,000, hence $459,000 due.

I explained that I couldn‘t take over her first and give her moving money

because too much was owed and I was better off to bid on the property at auction so the second lien would be extinguished. I also explained that if I won the property at the auction and she left the property in ―broom swept condition and with all the appliances in place, I would give her $1,000 for her trouble. I also explained that she may be able to get additional money from the sale and I would explain that later.

Anyway, I won the property at auction for $270,000 and sold it for

$353,750 two weeks later. The interesting part was the second lien on the


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property. This lien was from a former employer of hers who found she had embezzled $250,000 over a three year period. So, the ―overage‖ in this case $270,000 - $209,000 = $61,000 would normally go to the second mortgage or, in this case, the lien holder.

As is sometimes the case, the second lien had no merit and was

incorrectly filed. Incorrect filings can be the simple omission of the return address of the creditor! In her case, she was not going to trial until two months later so no judgment had been issued and the lien was invalid. She readily admitted she had taken the cash by writing her husband and two sons pay checks when they didn‘t work for the company. Ironically, she received the ―overage‖ of $61,000 at the end of the 10 day right of redemption period. I never found out how long she went to jail for……..

Tip (#50) - If you happen to have other liens, second mortgages, or

judgments against your property, another way to have these liens extinguished or greatly reduced is to have your buyer purchase the mortgage note from your lender and continue the foreclosure.

Contact these ―junior‖ lien holders before the auction date and they will likely discount their liens because they face getting nothing at the foreclosure auction. Typical offers that we make to these lien holders are 5% - 10% of the face amount of the loan (i.e. for a $20,000 lien, we offer $500 as a first offer and will pay as much as $2,000 to have it transferred to us at face value). Transferring ownership to us allows us a ―credit‖ at the foreclosure sale of 100% of the amount of the lien – NOT THE AMOUNT WE PAID!

If the lien holder won‘t transfer the lien, you will need to get the lien

holder to issue you a ―Release of Lien‖ that can be recorded in the public record. The release of lien, or payoff, must be reported to the credit reporting agencies if it was on your credit report. This lien elimination process also insures that your credit will be less impacted.

When the short sale is completed, the lender has taken a loss on the

loan and they are looking to get either a judgment against you for the amount lost, or issue you an IRS 1099C Miscellaneous Income Form that generates a ―phantom income‖ on your income tax return.

If it hasn‘t occurred to you as yet, the reason for the specific mortgage

discount is based on the market conditions in your area and VERY IMPORTANTLY, the condition of your property. The bottom line is the better the condition of your home, the smaller the discount and vice versa, the worst the condition, the larger the discount. Sometimes homeowners say they are going to clean and paint their home before the Realtor® for the BPO or an appraiser arrives! DO NOT DO THIS! Leave your property in the condition it


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is in so the inspector gets a true picture of the problems with the property and the lender can make a fair assessment of what discount to give.

The lender may come back with a reduction of $25,000 off your loan

amount but this is NEVER their best offer and the lender‘s representative (Loss Mitigation Representative) is given a bonus for getting the least reduction possible! Remember, the homeowner is NOT the person doing the negotiation with the lender. The person asking for the short sale should always do all the negotiations and ask for a larger discount than the lender offers. You must give substantiating reasons to justify your request – such as other sales in the neighborhood, mold in the walls because of a roof leak, bids from contractors to fix the damage to your home, etc.

Tip (#51) – Even if you know that you have a good amount of equity

in your property, ask the lender’s loss mitigation representative for a larger discount. If you don’t ask, you will get nothing. Talk is cheap, but it can bring you mountains of money! The lender knows that it will cost him at least 12% to market the property, but the big loss they take is in the cash reserve required to cover the foreclosure or Real Estate Owned (REO) property in their portfolio and the foreclosure court costs.

They are not being kind by giving you this discount, but rather making a

practical business decision about the aggravation of selling your property, and having to maintain Federal Reserve cash requirements for properties that are taken back at the auction. These cash reserves can be as little as five (5) times to as much as ten (10) times the amount in default. For example, if the loan default is for $200,000, the lender may be required to keep from $1,000,000 to as much as $2,000,000 in a CASH reserve account that cannot be used to loan out on other mortgages.

So the urban legend that banks are looking to steal your property

is just that in MOST cases – a myth, unless you have substantial equity in which case they want the entire amount of their loan and the costs to get their money back.!

Lenders absolutely LOVE to get properties with equity so the home can

be sold for a profit, because they may get to keep the profit as part of their doing business. The lenders will try to get a Deed in Lieu of Foreclosure from the homeowner so they can take over the property and sell it at full retail value. If they had taken it at the auction, they would have had to outbid investors and would only have gotten their final judgment amount if they lost the auction!

For years lenders with mortgages in the Midwest lost money on

foreclosures because of a terrible real estate market, but in the southeast and


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far west, it was a common place occurrence to make large profits in the rapidly rising markets of the early 2000‘s. However, the profits from some parts of the country generally did not offset the larger number of losses elsewhere. Some aggressive lenders even bid at the foreclosure auction to buy properties for retail sale because of the hot sellers‘ markets.

The process of a short sale starts by either the lender offering the

homeowner a reduced mortgage payoff if the homeowner can find an investor or finding a retail buyer to purchase his home and close quickly for cash. Closing quickly means within two weeks but occasionally a lender will offer a great deal and they request to close in three days! The lender knows this is impractical and if you find a buyer, they will generally relent to closing in about two weeks. Sometimes, a lender is willing to actually finance a new buyer if their credit is strong enough. This ―new owner financing‖ was very common in the early 1990‘s and is still used by lenders today to facilitate a quicker closing. The lender wants to get your home off his foreclosure list As Soon As Possible so his financial reserve requirements are not increased by the Federal Reserve. The lender is very attuned to getting the property out of their portfolio before the end of each month and especially before the end of each fiscal quarter!

As soon as your mortgage is late enough to start the foreclosure

process, your lender turns over your account to an internal department called ―Loss Mitigation‖. The clerk who is responsible for your account is probably handling as many as 300+ other files. They have no time to make small talk and will always want to get to the bottom line immediately.

THEY DO NOT CARE about your personal problems so don’t waste

your time or theirs with your problems. This clerk does not make the decision on whether, or how much, the lender will discount your loan. This decision is made by his Supervisor if the amount is over 20%. Just be businesslike and give them even more than they ask for and more timely than they expect. Have everything faxed so there is no time delay waiting for mail that may not come.

The short sale process involves the following process:

1.) The homeowner asks the lender‘s agent in the Loss Mitigation Department if the bank is willing to do a ―short sale‖ by saying something like ―An investor approached me and said he was interested in buying my home and closing quickly but my mortgage is in excess of what he is willing to pay – will you consider a short sale?‖. You, as the homeowner, should do this, but you can have the individual who is interested in purchasing your home call for you by giving the investor a ―Letter of Authorization to Release Information‖ to speak to your lender about your mortgage account.


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2.) The Lost Mitigation representative, who is handling your file, knows

exactly what you are inquiring about and if you ask them, they will send a document package (―Request for Short Sale Payoff Information‖) for you to fill out.

The package includes a ―check list‖ that must be done correctly and returned with everything the lender is asking for, and it should be done quickly! This filing of forms tactic is not stopping the foreclosure process but, if your short sale is accepted, the foreclosure process will be postponed until you close and sell your home to the ―investor‖.

Two of the most important parts of this package are the Financial Statement and the Hardship Letter. Both of these documents are just as they sound and I suggest that you be entirely truthful when filling them out.

You should know that the Financial Statement you fill out will be

used against you in the future to determine where to look for assets to collect a deficiency judgment or to ask you to bring money to the closing so the lender’s losses are reduced.

In addition, if you are requested to give an Authorization to the IRS

to allow the lender to look at your past tax returns, you better be very careful. The lender does not need anything more than your past two years returns. The reason for this is not to look at your past two years returns to see if you are hiding assets. It is to look at your tax return the year you applied for their mortgage to see if you falsified your mortgage application – a Federal crime!

What is the Difference Between a Short Sale and a Short Pay?

I am going to mention what a ―short pay‖ is here once again. This is

essentially a short sale except, your lender agrees that you can stay in the property. The caveat is that you have to pay off the reduced loan balance within two weeks and close with cash. In addition, the lender stipulates that you have to be the owner at the closing, not another individual, such as an investor. This is rather hard to police so it is sometimes overlooked as non-enforceable. The issue is ―Who is on title in the public record?‖

The process of the short pay paperwork is nearly identical to a short

sale except it happens very quickly! In the following information on the short sale process, you can insert the term ―short pay‖ for short sale.


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What Comes in Your Short Sale package and What You Can Expect to Supply to the Lender:

a.) A Cover Letter that will be signed by all parties on the loan describing

your financial situation and requesting a ―short sale payoff‖ with your contact information in the daytime and evening.

b.) A Personal Financial Statement that the lender will supply which will

be used to reveal your assets so they can determine if they can collect a judgment.

c.) An ―Authorization and Acknowledgement Form‖ that certifies that the

information you are sending is true and accurate. You are authorizing them to pull your credit at least one or two times, get a title search done, and verify the information on your Financial Statement as well as your current employment.

d.) A Third Party Authorization Form that allows the perspective buyer or

someone else to get information from the lender (some lenders require these to be notarized).

e.) A Negotiation Agreement that effectively binds you to a new set of

standards in negotiating with the lender, and acknowledges the enforceability of the lender‘s documents.

f.) A Purchase and Sale Contract with your buyer (don‘t get crazy with

―weasel‖ or escape clauses as the lender will probably reject the contract) that shows the purchase price, closing date, any stipulations in the contract, and the usual and general legal clauses in a real estate contract. It is strongly suggested that your buyer submit a ―real‖ contract and not some homemade contract he purchased at a seminar or the office supply store.

g.) Pay stubs for one or two months, which will show how much income

you have. If you are unemployed, this may be a special consideration for postponing your sale.

h.) Two years tax returns (they look at your interest income to determine where you had your money and how much you had in savings accounts and checking accounts.

i.) A ―Hardship Letter‖ documenting why you aren‘t making payments (the usual question here is ―where has all the money gone that you saved by not making your mortgage payments?‖ It is very powerful to handwrite your letter.


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j.) A ―Net Sheet‖ or HUD-1 Closing Statement that shows the exact

amount of money that the lender will receive at the closing. This net proceeds to the lender should include a 5% commission to a Realtor®, all closing costs that the lender must pay, taxes, attorney‘s fees and title insurance (your attorney should do this unless your investor/purchaser has software to do it).

k.) DO NOT supply ―bits and pieces‖ of information to the lender – send in

your completed package so the processor isn‘t going into your file all the time.

l.) DO NOT supply anything that is not requested by the lender, as it

could be used against you later. m.) If you feel you or your buyer is incapable of doing this entire process,

you should go online and search for ―Short Sales‘ to find a company that does these for a FLAT FEE. This service can range from $350 to $3,000, but do not get trapped into having pay a percentage of the discount to the short sale processor. We suggest that your attorney do the paperwork as he may be able to get his fee paid as part of the closing costs ($300 - $700 range). Alternatively, you can go to local investment clubs (find them online at www.REIClub.com) and ask for referrals to individuals who do short sale processing full time. This is also an ideal place to get a referral to an attorney who works with investors on a full-time basis.

n.) Every lender has a different Short Sale package so it is impractical to

give examples of each in this text. The packages are designed for homeowners to be able to fill out on their own. DO NOT be intimidated when you see the package, rather take it apart piece by piece and get it done.

o.) The most important part of a short sale is the perspective buyer and

yourself speaking with your loss mitigation representative on a continuing basis. This sounds simple but often the representative has his phone on voice mail so he can get work done. Be PERSISTENT about calling and leaving distinct messages or questions so you are constantly moving toward a conclusion.

After you have returned the package, the lender‘s representative will

confer with a Supervisor who reviews the package and orders a BPO (Broker‘s Price Opinion) and/or an appraisal, and sometimes both. The lender probably

http://www.reiclub.com/


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has already ordered one or the other as soon as you went into foreclosure because they are judging the risk exposure in your foreclosure.

Anyway, they will order another one and YOU MUST GET THE

individual doing the analysis to come into your home to see the interior so that any damage can be used to further reduce the lender‘s offering. This is extremely important and you MUST walk around with him and show him the specific ―problems‖ your home has – mold is a very high priority, electrical and mechanical issues rank a close second.

If your home is in pristine condition, the lender may not offer very much

of a discount – usually 10% since that is the estimated cost to sell your home in the open market. If your short sale offer is rejected because the BPO or appraisal is too high, request another BPO or get one yourself to reinforce your position of a larger discount!

DO NOT accept anything that is told to you unless it is in writing. Explain that the buyer wants it faxed so he sees what is actually happening. Have your fax number prominently displayed in all your correspondence. Always follow-up by telephone on faxes you sent to make sure the representative gets them.

The lender‘s representative will come back with a price that the lender

has offered as a first round. Usually the lender expects to make at least one and most often, two other offers. There is no absolute guideline for this but you must be prepared to counter offer and have a specific reason for your request for a larger discount. This usually includes lower closed sales in a ½ mile radius of your home or any property deficiency that helps you get a larger discount. These large discounts are important to get a buyer for your property. If you don‘t find one, your home will go to foreclosure and you will lose control of the process.

The biggest issue we find with the Broker‘s Price Opinion (BPO) is the

value of your property is too high. Even a professional appraisal can be too high for a reasonable short sale offer to the lender. We always challenge the BPO‘s and appraisals and show comparable lower sales in the neighborhood to support ours. The agents and appraisers doing the price estimates get paid for whatever value they submit and have no benefit for spending more time and getting a better resale price for your home. Lenders may have a hand in the prices if the BPOs and appraisals come in too high to give themselves a better negotiating position.

Because of the huge increase in foreclosures in the past few year and with many more expected to come, many lenders have gone out of business. The remaining ones are much more serious about completing


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short sales with buyers and giving larger discounts at the same time. This can vary by the area of the country you are in because in some areas the real estate market has recovered or wasn‘t hurt as much as some others.

After your ―investor/buyer‖ negotiates the loan amount due and accepts the lender‘s final offer (usually there are at least two offers and rejections before an approved price is agreed upon), the lender will set a closing date. The lender will not stop the foreclosure process just yet, but will simply not move forward to get a final judgment. He may even ask the court for an extension, which will always be granted.

At the closing, the buyer will come with cash (a funded mortgage, cashier‘s

check, or certified funds) and the closing will have the homeowner (you) transfer the property to the new buyer by signing a warranty deed. The mortgage will be forgiven (released from the property) with the bank getting the buyer‘s money.

The result is that you will USUALLY receive NO money from the closing. This is very often a term or condition of the short sale and you will be required to leave ASAP or you will be evicted by the new owner. Many investors offer the homeowner some money for signing and call this a ―purchase of property‖ and often provide a receipt for the money. However, this simple ―buying property‖ transaction can be construed as bank fraud and is extremely serious.

For years, some lenders have been offering a ―cash for keys‖ program.

This means the homeowner leaves the property in ―broom swept‖ condition and at closing they receive a sum of money from the closing. This amount can range from $1,500 (smallest I have seen) to $30,000 (largest I have seen). Even investors are getting cash from some lenders for their short sales and even deeds in lieu of foreclosure. Be ―pushy‖ about getting some money – ask and you may well receive it! I have seen recently that some lenders are making the buyer, as part of the approval process, pay the homeowner this money on the HUD-1 Statement at closing.

The lenders usually realize a judgment is not collectable (―trying to get blood from a turnip‖) so they issue the 1099C to save themselves aggravation and for a better position on their corporate finances. However, if you are belligerent and uncooperative, they have that option to get a judgment which will stay on your credit report for years, and it could be collected by court order by the lender when you least expect it. You will not be served a summons to appear in court. The money will simply disappear from your bank account. When you ask what happened, the banker will show you a court order to release the funds to your former lender.


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So the net result of your perspective short sale is that you have sold your home for less than is owed, still have a debt obligation (judgment or IRS Form 1099C) coming, and you have no place to live unless you made other plans. On the positive side, your credit report will not have a foreclosure against you for the next seven years, the IRS may forgive your phantom income liability from your Form 1099C, and you will be able to finance a new home in as little as a 2 or 3 years!

The interest rate and down payment for a new home may be ―relatively‖

high, but you can restart your life very quickly. Add to this the fact that the person who bought your home may be willing to lease option it back to you and after a couple of years of paying timely, you even have a chance to ―refinance‖ your home.

This ―refinance‖ strategy is allowable by many lenders when the renter

shows a timely payment schedule – and the actual loan is in the name of the new homeowner (your landlord). None of this is a guaranteed proposition, but it does offer you the opportunity to stay in your own home. Whatever you decide, you should have an attorney on your side to help with decisions that must be made timely and correctly. Always seek legal advice for your situation if you try this strategy or any of the other ideas that have been presented or will be presented later in this text.


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Secrets Homeowners Should Know About Lease Options

A lease option is the contractual combination of a standard lease agreement and an option to purchase a property being leased for a specific property. A lease option can also be two distinctly separate contracts that are a lease and an option to purchase the same property. There is an important distinction between the two types of contractual obligations just mentioned and will cover which one you, as a homeowner, want as your lease-option agreement and why.

The lease-optioned property can be your home and the landlord can be

someone who has purchased your home and stopped your foreclosure. Often times we see homeowners that for various reasons have been unable to make three or four mortgage payments but have recovered financially and can continue forward – if the lender would allow them to do so.

Unfortunately, the lender‘s foreclosure volume doesn‘t allow certain

exceptions to their rules such as partial mortgage payments because they are governed by a higher authority, the Federal Reserve. Consequently, the homeowner is forced into foreclosure and is at the mercy of sometimes unscrupulous individuals who appear to ―help‖ the homeowner resolve his problem. This will happen if YOU DON’T KNOW YOUR RIGHTS AND OPTIONS.

Investors will come offering a Lease Option Contract, Lease Purchase

Contact, or Contract for Deed with the promise that once the homeowner has gotten back on his feet, he can repurchase the home in the near future at a slightly higher price than the price he sold it to the investor. For example, let‘s say the investor purchases the home, pre-foreclosure, for $200,000 and gives the homeowner an option to repurchase it for $220,000 in one year.

Sounds like a reasonable repayment for his buying your home and

taking the personal risk of your making future payments on the mortgage for which he is not actually responsible for because the homeowner‘s loan is still in place in most cases. In fact, the investor knows that over 85% of the time, the lessee (you) will default again and either go into foreclosure or


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default on his lease and he will own the house with you being put out into the streets!

So, if all goes as planned for the homeowner, in a year the homeowner

has gotten his credit back together by working on making all his payment obligations on time, especially the lease payments. He would next send written notice to the investor (landlord) that he wishes to ―exercise‖ his option agreement and cancel his lease.

According to the agreement(s) the homeowner and landlord (current

owner) would schedule a closing date and the homeowner would have gotten a loan from another lender to pay the investor his option price. In the above case we used $220,000 as the new purchase price or 10% above the amount the investor purchased the property for originally.

However, this amount could be much higher and if the investor knows

how to write his contract, he could escalate the option price higher each 12 months. Typically this might look like:

First Year Strike Price = $220,000 Second Year Strike Price = $230,000 Third Year Strike Price = $240,000

Three years is the end point because this is usually the maximum amount of time an option is issued for, but it could be any amount of time. The important thing to remember is that if you close one year and one day after the dated option agreement, your strike price goes to the second year’s price ($230,000)!

Two Ways to Keep Your Home Using Lease Options

1.) LEASE OPTION OUT – This is where you lease option your home to

a buyer who has enough money to reinstate your loan by paying you an Option Consideration and he pays a lease payment that you use to pay your mortgage payment. Your chance of his getting your home at the option price is a function of the real estate market a year or two later, his ability to borrow what he needs to finance your home‘s purchase, and where he is in his life.

If he decides to exercise his option, and he can get financing, he will purchase your home. Remember that 85% of the time the homeowner doesn‘t exercise. That is true when the homeowner is trying to come out of foreclosure and carries a bad credit history with him. In general the exercise rate for lease options is about 50%. If he exercises, the Option Consideration


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he gave you will become a credit at closing – and you have already received this money.

While I mentioned it, the Option Consideration is NOT a deposit on the

lease and don‘t ever refer to it as such. It is a non-refundable consideration for the homeowner granting the prospective buyer the right to control the ability to purchase his property for a specified time (one year). This amount of money should be 3% minimum to 5% of the option strike price in the option agreement. Anything less and your buyer isn‘t serious about purchasing your home. If he doesn‘t have 3%, he shouldn‘t be allowed to option your property as he likely won‘t be able to buy it in a year!

If he doesn‘t exercise, the option consideration is lost and you get to

keep it! Your risk in this transaction is that you have about a 50% chance of losing your home but you have stopped your foreclosure and can get a handle on straightening out your financial situation.

Tip #52 – As you advertise your home as ―rent to own‖ it is extremely powerful to have your signage or print advertising say: ―Rent to Own, 100% Credit to Purchase Price, Call xxx-xxx-xxxx‖. The power of this ad is that the renter will believe that he has to pay rent anyway, so why not get a credit against the purchase of your home.

The important aspect of this agreement is that the full rent credit is only

done for a one year lease and not on renewals. The next important issue is the ―agreed to‖ purchase price. Make certain that the ―strike price‖ of the option is such that you can reduce it by the first year‘s rent and still come out ahead or break even at the closing.

If the tenant moves out before buying your home, you will have kept the

rent (lease) money and have gotten your mortgage paid while the tenant was there. The lease payment should be an identical amount to what his mortgage payment will be when he finances your home so he gets accustomed to that amount. He will get the rent credit back at closing so it is a

win-win for him and you – whether or not he buys your home.

If his credit is not good enough to finance your home at the end of his

lease, give him a 50% rent credit for the second year and none if he goes into his third three year. If your home has declined in market value enough that he doesn‘t want to purchase it, have him leave or evict him if necessary and find another rent to own or lease option candidate. Some landlords have lease optioned the same property as many as nine times. P.S. Always collect an option consideration that is yours to keep.


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Very Important - the option consideration is NOT a lease deposit, and to make this clear to your tenant, take a second small deposit for the lease!

In this situation where you will not be living in your home, you want a two-part contract from the lessee (your tenant), so he can be evicted without your having to foreclose. If you have a single document with the lease and the option contract together, the courts have ruled in the favor of the tenants that the lease payments were a principal reduction of the purchase price or that the lease payments were refundable.

2. LEASE OPTION YOURSELF - In this case you find an investor, family member, or friend who is willing to purchase your home to stop the foreclosure. If he doesn‘t have the cash, he can finance it as a second home. Preferably, he does a short pay or short sale to get a better price.

He then closes with your former lender and lease options the property back to you. You likely will never even have to vacate the property. An ideal situation would be where you are in agreement on the option price, and you make your mortgage payments timely to get your credit repaired. If he is reasonable, you may only need a minimal option consideration ($100) instead of the large one (3% - 5%) we suggested you request as your option consideration from a prospective buyer.

Tip (#53) – The key to getting a “good” Lease Option contract is to have the landlord (new owner) give you one agreement that is both a lease and an option. As I mentioned above, it’s “good” for you as the homeowner because the courts have ruled in the favor of the homeowner when the question arises of whether the lease payments made were for a lease or an equity pay down of the purchase price.

If there are two documents, a lease and an option agreement,

there is no question that the landlord can evict you using the lease and your option consideration will be completely lost. As always, have your attorney review any contract you intend to sign.


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Buying a Home (Possibly Yours) at a Foreclosure Auction

It may sound implausible in your financial situation that you could

somehow buy back your home at an auction, especially if you have to pay cash if you win your house back. Don‘t let this deter you from reading this chapter and keeping the process in the back of your mind. If you remember, it was mentioned that you could use a second mortgage as a source of ―bidding credit‖ at an auction. You have the option of finding a benefactor to do your bidding for you and selling the home back to you. This is an arrow in your quiver of methods.

While it may sound formidable to go to an auction and bid for a home, it

is much simpler than most people think. Every year hundreds of thousands of properties are transferred by ―open outcry‖ auctions conducted by federal, state, county, or city governmental agencies.

Some counties have gone to online auctions to reduce the amount of

fraud inherent in the foreclosure auction system. Literally every city of any size has a group of individuals that are full-time real estate investors that simply purchase properties at auction and resell them to other investors or homeowners like you. This is a billion dollar+ annual business that anyone can become prolific at with practice.

The specific auction in your county may be slightly different than what

will be described here but in essence, it will follow very similar guidelines. For example, in some states the money due for the purchase can be paid in as much as 30 days later while in other states the funds are due the same day.

It is easy for you to find out about the actual process by first calling your

county clerk and asking how to get the information on the foreclosure auction process. If they don‘t conduct the actual sale themselves at the courthouse, they may refer you to the entity that conducts the sales or even the Sheriff as he may be the actual auctioneer. Either way, get the information about how often the auction is conducted (weekly, biweekly, or even monthly), and EXACTLY where and when it is held.


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Tip (#54) – HUGE SECRET of Professional Investors – If you go to the foreclosure auctions you will mostly find people who actually buy homes as a profession. If you want to market your home directly to someone who can actually pay cash and close in just days, these perspective buyers could be your answer.

Circulating at the auction with a flyer discussing your home will get

interest but your sale price must be competitive with local investor offerings. If anyone complains about your flyers, come back wearing a T-shirt that has the same details that are on your flyer (costs about $20 at a T-shirt shop).

Go to the auction at least twice before you actually decide to try and bid

on any property, especially your own. The following are ―generalized‖ rules regarding auction procedure:

1.) Contact the people handling the actual auction and get the written ―Rules‖. Once you have these rules, read them thoroughly and ask any questions that you have BEFORE you go to the auction. 2.) Go to the auctions at least two times before the sale you want to observe and register as a bidder. You do not have to have any credit checks or have any deposit on hand to come to the auctions. Register early because sometimes an auctioneer only allows registrations in advance of that day‘s auction. 3.) Your home will not be identified by street address and usually not by the parties in the foreclosure proceeding. It is usually identified by the ―folio number‖ or tax identification number of your property. You can get this number online or at your County Clerk‘s office. 4.) The clerk will post all properties that are expected to sell that day in a place in public view that you can check when you arrive at the auction. Try to make friends with the county employees as they are there for support but don‘t ask questions that you can find out the answers to yourself or you will not make friends. They should not give you a legal opinion so don‘t ask for one. 5.) In addition to the winning bid, the winner will be required to pay auction fees, transfer taxes, document taxes, liens due, back taxes, and other liens related to government agencies. Remember the liens that creditors have recorded or placed against you and your home will be extinguished at the auction. They may even get some money depending on how much ―overage‖ (sale price) there is above the first mortgage.


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Ask the clerks what additional amount will be added to the sale price if you win the bid. Preface your question with, ―If this property sold for $250,000, how much additional monies will I need to pay for the house?‖ Otherwise, they will say they can‘t tell you without a price. The first home I ever purchased at auction had additional $9,360 transfer costs due that I didn‘t know about before the auction! 6.) Determine an EXACT MAXIMUM PRICE that you will be able to pay (with cash) the day of the auction. DO NOT EXCEED THIS AMOUNT FOR ANY REASON. REPEAT - DO NOT EXCEED THIS AMOUNT FOR ANY REASON. This is how an amateur gets stuck at an auction when the fury of the bidding ends with someone paying way too much for a property. The pros at the auction are especially good at taking advantage of investors who make this mistake by making them over-bid for a specific property the new investor wants.. 7.) Most auctions allow the buyer to make a 5% or 10% or less, non- refundable deposit and the rest of the amount due can be brought in by day‘s end. DON’T GET BACK LATE OR YOU STAND TO LOSE YOUR DEPOSIT. The auction you won will be ―overruled‖ and re-scheduled if you don‘t make it back in time. It will not go to the next highest bidder. 8.) Assuming you bring back the monies due timely, the Clerk will give you a receipt and the property will enter into a ―redemption period‖ which varies dramatically from state to state. It can be as short as ―0‖ days to as much as 2 years! If it is zero days, the sale at auction is FINAL and you have lost your home if you aren‘t the high bidder.

The court has this redemption period (if applicable) for the homeowner to make a claim against the sale and/or pay off the final judgment in full. If there are no claims against the sale or no redemption by the homeowner, the court will issue a certificate of deed, deed of trust, or whatever title instrument your state requires.

If the redemption period is lengthy – 6 or 12 months or even two years,

the deed issued to the new homeowner can be ―reversed or rescinded‖. For these very long redemption periods, the returning homeowner has to reimburse the ―new‖ homeowner for any rehab, taxes, interest and the purchase price of the property.

Tip (#55) – Foreclosed homeowners who live in a state where there is an extended redemption period have the right to get their homes back. An industry secret that is seldom, if ever revealed is that these homeowners can sell their redemptive rights to an investor if the situation warrants. To warrant a sale, the property would have had to be rehabbed nicely and the market in


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real estate would have had to increase over the 6 months to two year period – which isn‘t uncommon! How much is the redemptive right worth? Remember you have TWO potential buyers – an investor and the homeowner in the property. Start the bidding!

As always check with your attorney so you do it legally.

The actual bidding at the auction takes the following form: The property is ―introduced‖ to the audience, but not generally described

and any liens against the property are not disclosed. There is usually not a description called out because of lengthy legal descriptions involved and to avoid mistakes. YOU MUST DO YOUR OWN HOMEWORK – but it is your home so all you need is the ID number to listen for it to come up for sale.

The auctioneer will open the bidding and the first bid will be from the first

mortgage holder or his representative (usually an attorney) for $100 in excess of the final summary judgment. His open cry will be ―$100‖. The Clerk will announce the first note holder‘s total bid of $100 plus the summary final judgment he owns, say ―bid is $217,390.23‖.

The Clerk will then say ―are there any other bids?‖ and if there are none,

the Clerk will call three times this bid (―going once for $217,390.23, going twice for $217,390.23, and going one final time for $217,390.23 – gone to XYZ Corporation for $217,390.23‖) as the final bid. If no one raises the bid, the Clerk will ―gavel down‖ the last bid and the home will have a new owner, subject to the redemption period.

For example: The mortgage amount originally was $200,000 but the

final summary judgment is $217,290.23. The first bid would be $100 by the lender. NOT $217,390.23 which is the mistake first-timers make, the actual bid if you said ―$217,390.23 would mean that you are offering $434,780.46!

Go to the auction a few times to see who the big players are and how

they bid. Remember, they may make as much as $100,000 a week so they have a plan that works – they WILL NOT SHARE as there is too much at stake. They can be identified by the notes they carry on each property, who is actually doing the bidding for them, and their familiarity with the other big hitters at the auction.

It is a common practice to have a secretary do the actual bidding and

the ―hitter‖ will signal her by nods or hand signals as to whether to go higher with their bids. The single most outstanding feature is their bidding increments – they almost always bid the minimum increment of $100. So if a property has a fair market value of $200,000 and the lender is owed $100,000 the lender


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bids $100 ($100,100) and the pros start with ―Plus One Hundred‖ ($100,200) for what seems like forever until it is sold. Along comes a frustrated investor who wants the property for $150,000 so he starts bidding in increments of a thousand or five thousand dollars.

The ―hitter‖ continues to bid ―Plus One Hundred‖ until the investor stops

in frustration and the ―hitter‖ doesn‘t say another word! The investor has overpaid for the property and the ―hitter‖ knew it. If the ―hitter‖ continues to bid and further suck the investor into the process, and the investor stops, the ―hitter‖ reneges on his last bid and the investor again gets stuck with the property. The ―hitter‘ can renege on his bids just so many times and he gets barred from bidding – sometimes just for that day. If the bid suspension is for a longer time, the ―hitter‖ will use another corporation or employee and start bidding again the very next day!

Ironically, the investor bidding against the ―hitter‖ probably doesn‘t know

that the ―hitter‖ went to the second and all other lien holders and bought them at 5 to 10 cents on the dollar and had these notes transferred into his name at full face value.

For example, if a second mortgage holder was owed $20,000 by the

homeowner, his chance of getting it back at the foreclosure auction could be zero. So let‘s say this second note-holder, agrees to take $2,000 from a staff member of the ―hitter‖ for his mortgage. Now the ―hitter‖ can bid up to $20,000 over the first mortgage and it costs him only $2,000!

With a $20,000 credit to bid, the ―hitter‖ can stop bidding anywhere into

his second mortgage amount and he will get the amount over his $2,000 cost as a pure profit. For example: in the above first mortgage where the final judgment was $217,290.23, assume the first bid was by the lender for $217,390.23 and the second was by the ―hitter‖ for $217,490.23. Next the investor bids $3,000 for a total of $220,490.23, the ―hitter will bid ―plus $100‖ or $220,590.23.

Next the investor goes for it with a bid of $5,000 for a total of

$225,590.23 and the ―hitter‖ returns with ―plus $100‖ for a total of $225,690.23. The investor gets frustrated and bids $10,000 for a total of $235,690.23. The ―hitter‖ now has an actual profit on his $20,000 second mortgage of $235,690.23 - $217,290.23 (first mortgage) = $18,400 - $2,000 cost = $16,400 profit!

But it doesn‘t stop here because the ―hitter‖ can still bid another $1,600

before he actually starts to come out-of-pocket with cash for the property. So let‘s say the ―hitter‖ decides to take his $18,400 payoff on the second mortgage and he pockets a profit of $16,400. He has probably never seen the


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property, will never do a rehab, and goes quickly on to the next home for sale. By way of disclaimer, the ―hitter‖ will occasionally purchase a property that has a title ―defect‖ or serious physical problem and he may have to sell it at below his cost, but that‘s why he has a staff to determine what properties to bid on! He will lose money on some properties but it is a cost of doing business for these pros.

It is not above the ―hitters‖ to run up the bidding if they see a novice

trying to get a specific property. You could do this if YOU held a second mortgage – bid the auction up to get equity back from your second mortgage. It happens all the time to homeowners who know how to get their equity out at the auction! Is it that simple? Yes it is – you just need to find private money lenders to work with you – friends, family members, local medical professionals or investors.

Tip (#56) – As a homeowner bidding on a single property, stick to the maximum amount you determined before you came to the auction. Most importantly, bid in minimum increments (“plus $100”) and do not get frustrated as other people in the audience give you dirty looks about speeding things up – it’s not their money!


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Do-It-Yourself Credit Repair for Homeowners It may feel like it, but it is not the end of the world if you lose your

home through foreclosure. Using the following techniques you will be able to refinance a new home within a year or two if you are really diligent at following these instructions. You should also be able to get your credit score up a couple hundred points or more within the same period to get a substantially better mortgage rate.

The credit repair industry is so full of individuals trying to take advantage

of the public that complaints from consumers about the credit repair process is very high on state fraud complaint lists. There are plenty of good people trying to help individuals but you must be careful when dealing with anyone involved in credit repair that is not nationally recognized, a law firm, or an attorney.

Your credit score is important because it costs you dearly for every 25

points it is lower than the national average of approximately 680. Usually anyone with a 760 or higher FICO is charged the lowest prevailing interest rate available from that specific lender. There is an urban legend, started by an uninformed individual, that some people have credit scores of 900+, when in fact the highest FICO® (Fair Isaac Corporation) credit score is 850.

More than 58% of the people in the United States have credit scores of

650 or higher. The cost of a low credit score is higher financing costs on every purchase you make that is financed – auto, home, major appliances, credit cards, etc. Insurance carriers calculate your insurance rate based partially on your credit report and many employers screen perspective employees‘ credit histories.

How much of a difference does it really make? Unfortunately, in your

lifetime if you do not get back on track and get your credit score straightened out, it will cost you possibly hundreds of thousands of dollars in additional interest expenses! For example, if your home mortgage rate is 8.5% (lower FICO score) versus 6.5% (higher FICO score) the difference over the life of your mortgage will be over $75,000+ – just for having a 25 to 50 point lower credit score!


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When doing restoration of your credit, you must focus on the history of why your credit score is what it is and not the score itself! The score will come when the history is repaired or removed. Your FICO score changes whenever you have a change to your credit report but these changes are seen only when your credit report is pulled by yourself or an authorized party.

Tip (#57) – You may have heard that a bankruptcy stays on your credit

report for 10 years. This is true, but more importantly it stays on the public records for 20 years! Besides bankruptcies, any tax liens and judgments will also stay on your public record for 20 years. Most importantly, think carefully about jumping into bankruptcy just to get out of a financial problem. A growing number of financial firms will not hire anyone who has had a bankruptcy and these firms have their background checks done from the public records!

Another exception to the length of time on a credit report is where an

individual has filed a Chapter 13 and has proceeded to make the required payments for the court specified time period of 36 to 60 months (depends on amount and personal income). In this case, the remaining time is four years after the final discharge (payoff) which could make the total time on your credit report as little as seven years (36 months plus four years) or as much as nine years (60 months or five years plus four years). If this happens to you, make certain that you contact the credit bureaus as soon as you get your discharge and ask to have this negative information removed. However, your bankruptcy will still remain in the public record for twenty years depending on which state you live in.

The FTC set limits on how long negative information and some other

items can stay on credit reports. These include student loan defaults (seven years after final lender action), information reported in reference to a job application for a salary of more than $75,000 (No limitation), Information on an application for life insurance or a credit application of $150,000 or more (No limitation), charge-offs (seven years), and judgments or a law suit can only stay on seven years unless the statute of limitations is longer (3 to 15 years depending on your State). You can see why it might be easy for a credit bureau to ―forget‖ to remove negative items timely.

Getting Started If you are going to fix your credit history and score, it requires two

things. First, the personal commitment that no matter how discouraging it looks or how long it takes, you must stay with the process. Secondly, you need a copy of your credit report to begin the process. You can get a copy at www.AnnualCreditReport.com which is provided free because of US Government intervention into the credit reporting industry.



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Your credit report is free only ONCE every year. The site offers you the ability to get your report by mail or online instantly, and we suggest you get the free instant download they offer. The only caveat is this free report does not have a credit score. You will have to pay one of the services to receive this information.

Your credit score is affected quickly by adverse information such as

late payments. However, the restoration of your credit takes time and is challenging, but well worth the reward. You should definitely pull your credit about 4 months before you plan to make a large purchase – home or auto. You also have the power to better ―shop‖ a prospective loan the higher your credit score.

Tip (#58) FRAUD ALERT – Make certain you type in the correct

spelling of the above sites because of impostor sites that collect your personal info and sell it for credit fraud! Copy and paste the link above if you don‘t want to take a chance!

After you arrive at the www.AnnualCreditReport.com -

1.) Put in your State and keep going through the steps they request. 2.) Fill in the form that comes up and Click the box that says “the

report will only show the last four digits of your social security number!

3.) Check mark all three (3) services for your credit report so your will get a ―combined report‖

4.) Answer the security questions that come up on the next page 5.) Print Your Credit Report quickly so you aren‘t timed off of the site 6.) At the end of your credit report is a listing for your rights within

your State, copy the website‘s address (‖ URL ―) and save it so you can use it later if necessary to see if what someone tells you is true.

7.) While there are six places to go, in the Index, all of these are listed on the same page that you will be printing. Your Credit Report Summary will contain the some or all of the following categories:

Applicant Information Score Information (if a paid report) Employment Information Trade Information (All Types of Accounts) Collection Information Public Records Information (Up to 20 Years Back) Additional Employment Information Additional Address Information Inquiries Credit Information List (Contact Information)



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Sources of Information Alerts and Validation A/K/A‘s Reported And Other Info that you should glance at AFTER you print your report

8.) Print TWO (2) copies of your report because you will be using one copy as a work copy. At the very end of your report is a list of every state‘s specific credit laws affecting your credit report. Here is an example of the URL for Florida: http://www.experian.com/consumer/help/report/fcra_fl.html Find your own state and print the page for future reference.

9.) If you are married, pull your spouse‘s report using the steps above, and proceed from there.

10.) Make a complete list of all items that you know to be incorrect AND all negative information that you want challenged – even if you know it to be accurate. While the credit bureaus cannot remove verified negative information, if they can‘t verify the information, they MUST remove it!

11.) Download Dispute Letter forms from the credit bureau(s) and send the completed forms to the bureaus by certified letter. You should have a response in 30 days as required by law.

12.) When the responses come back, analyze the results for each claim and if you aren‘t satisfied, go at them again!

13.) When you resubmit your claims in groups of 3 to 6 at a time wait 45 - 60 days for resubmitted items to get returned. On the resubmissions make your case for it being urgent or it will just be another claim. Above all, be persistent and document everything you do, such as everyone you speak to, and what happens with each submission. Accurate records will help you keep everything straight and could become evidence in a future law suit!

Ironically, your free credit report doesn‘t show your credit score – which

is very important as a ―measuring tool‖, so to be expected, one of the links on the site will take you to a sales page where you can for a monthly fee join Experian® credit report service and get unlimited reports.

The value of this service is that the credit bureaus are shown side-by-

side with the information from the other two credit reporting sites – Equifax® and Transunion®. If you are serious about getting your credit fixed, this is a cheap investment. We use the actual full credit reports from Experian® to show perspective lenders our credit so they don‘t have to pull it and lower our score further by increasing the number of inquiries in a specific time period. Their plans may change without notice so look at the options on their homepage:

http://www.experian.com/consumer_online_products/tribureau.html

http://www.experian.com/consumer/help/report/fcra_fl.html

http://www.experian.com/consumer_online_products/tribureau.html


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Your Credit Report will come up and get it printed first so if you are

disconnected from the site, you don‘t go through a hassle later to get it. I also suggest that you ―surf‖ their site for other valuable information that could benefit you later. One important thing to notice is the warning about Credit Repair Services and how, by federal law, they are not allowed to collect their fee UNTIL your credit has been restored or they have met their obligation to you.

Tip (#59) – There are exceptions to the one per year free credit reports.

These exceptions include: if you are a welfare recipient; were turned down for credit, insurance or employment in the past 60 days (must have written proof); a victim of credit card fraud; or you claim to have been charged a higher interest rate on a loan because of your credit report, or you are or are about to be unemployed.

Tip (#60) - If you have your Credit Report pulled by someone such as a

mortgage broker, his actual cost to pull the report is between $3.00 and $12.50 depending on his monthly volume. If he charges you much more it may be an indication of high loan costs to come. Ask him before he pulls it because it should be free if he thinks he will be doing your mortgage.

Many mortgage companies will not allow you to have a copy of your

credit report mostly for fear that you will go somewhere else with it to get your mortgage. Whoever pulls your credit report will know that you have been mortgage shopping and with whom because it will be on the report – don‘t get caught lying to him about this! I next suggest that you go to: www.AnnualCreditReport.com/cra/helpfaq and click on their menu item ―Frequently Asked Questions‖ and review any of these that you have questions about. You will find the credit reporting agencies telephone numbers, addresses and websites. They have an online error reporting system that is helpful for smaller dispute items. This is not the same credit report that lenders and collection agencies pull. Your free report isn‘t nearly as complete and doesn‘t contain much of the information you will need to complete your credit restoration. Tip (#61) - If you have had an identity theft problem, it is critical that you report it to the police in your city because you will want to have a ―fraud alert‖ put on your account which lasts for 90 days. However, if you have a police report, the fraud alert can be changed to an ―extended alert‖ that will last for seven years. You can find more information at http://www.consumer.gov/idtheft and at http://www.ftc.gov/credit

http://www.annualcreditreport.com/cra/helpfaq

http://www.consumer.gov/idtheft

http://www.ftc.gov/credit


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With your Credit Report in front of you, start going from the top and carefully review EACH and EVERY piece of information on your report. EVERY error you find is potentially an opportunity to make a change that will increase your credit score! It is important that you challenge every item that has had a negative impact on your credit report, because the reporting companies will often not respond to the credit bureaus’ inquiries and the item will be deleted and not reinstated if creditors do not respond.

Every credit report is different so we are now going to go into a general

overview of what your credit report is all about. Your credit is made up of five distinct parts, in their order of importance: payment history (35%), outstanding debt (30%), length of credit history (15%), types of credit lines in use (10%), and the number of recent credit inquires (10%). All of these areas need work if you are going to raise and maintain good credit.

How the Credit Scoring System Works

The best way to better credit is to pay your bills on time! Sounds simple but it is not uncommon to send in a bill and it be logged into the lender‘s system a day late. With some credit cards this triggers a late penalty, accelerated interest rate (up to 33% ARP), and is reported to the credit bureaus as a late pay – instantly dropping your credit score (as much as 40 points) the next time it is pulled. If you really intend to get out of your ―credit trap‖ you must commit to a self-help budget and a commitment to paying your bills timely – NO EXCUSES! Congress enacted legislation in 1970 called the Fair Credit Reporting Act (FCRA) whose purpose was to bring about fair standards of credit reporting and allow individuals to challenge their credit reports for completeness and accuracy. This legislation contains strict guidelines and penalties that credit bureaus must offer the public – such as a ―reasonable period of time‖ for replying and correcting errors. Lenders review your credit by looking most closely at the past two to three years and will ―mentally re-score‖ your report by not putting as much weight on three to five+ year old items. This is the lenient approach, but if you go into the lender with current late payments and judgments, the lender will review you credit even more closely. The lender views “challenged” credit as an opportunity to make more money from you – especially if you have collateral for the loan (i.e. an auto or home).


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42 Ways to Improve Your Credit Score or Get Even!

It has been estimated that as high as 80% of all credit reports contain errors. Most of these mistakes can be corrected by your doing the work directly. Here are some examples of simple solutions to improving your credit score quickly (30 to 90 days):

1.) The most common errors, and most easily fixed, can be found in unverifiable information, inaccurate or misleading information, specifically in the areas of late payments that were paid timely, paid debts that are shown as open, and accounts that aren‘t yours (spouse‘s or someone else‘s altogether), old bad debts over seven years old.

2.) The best fix as I already mentioned, while not short term, is to ALWAYS pay your bills on time and don‘t go into the grace periods if at all possible. This is a gradual but strong restoration of your credit score. One late pay can instantly reduce your score by as much as 40 points!

3.) FAST FIX – check the limits on your credit cards and pay down

any balances that are above 50% of the credit limit and you will score higher immediately. EVEN BETTER, ask your credit card company to increase your limit because you are going on a trip and may spend some extra money.

The result is the same if your open balances drop below 50% of your new limit. If your card companies won‘t cooperate, spread the amount(s) due over a few cards to reduce each one to below 40% of the card‘s limit. Maxing out your credit cards will drop your credit score by 70 points or more!

4.) It takes some courage to ask, but if a friend or relative will allow you to be an ―authorized user‖ on one or two of their credit cards, the reporting bureaus will give you credit for the good report of the other person. It is a double-edged sword if the other person gets into credit problems because your credit can be adversely affected. DO NOT allow yourself to become a joint card holder because you will be assuming the primary card holder‘s liabilities on that card!


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5.) See if you can determine the cycle that your credit cards report and when your credit bureaus update - because sometimes when you make a payment the bureau doesn‘t show it as paid until the next month and on, and on, and you will show outstanding payments due.

6.) If you can‘t afford to pay down the card(s), transfer part of the balance to new cards – the best ratio is less than 40% on each of your cards – if you need that much credit.

7.) If you have a credit card that doesn‘t have a limit showing on your

credit report, the credit bureaus(s) assume your card limit is maxed out – ask the credit card company for a limit to be shown on your credit report.

8.) If your credit bureau says they are not going to investigate a claim

for any reason (such as ―frivolous‖), send back a letter explaining that the FTC requires they investigate all claims and forward a copy to the FTC.

9.) The credit bureaus are only allowed to keep derogatory

information for seven years, but unless you tell them to remove it after that time, it may not be removed timely. However, if the derogatory information is in the public record, it could be on your credit report for a maximum of 20 years. You can appeal for it to be removed if after 7 to 10 years.

10.) If you declared a bankruptcy and you have items on your credit

report that were ―included in the bankruptcy‖ they should be removed from being listed individually as open accounts or as written off (double indemnity).

11.) Mortgages that have been paid off are often shown as open

accounts with zero balances. However, have the account show as closed so it doesn‘t affect your ratios.

12.) If you are trying to get a mortgage and you need help

immediately, the quickest way is to ask for ―rapid rescoring‖. This process is only done by lenders who are part of the rescoring system and they charge about $50 per credit account that will be re-scored.

The rescoring can only be done when you pay off a balance or dispute negative information. Changes can be seen as quickly as 72 hours, with the possible result of saving tens of thousands of


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dollars of mortgage interest payments. The difference between a poor credit score (500 – 560) and a high score (700+) can be as much as $625 PER MONTH on a $250,000 loan!

13.) Minimize the number of times you have your credit report pulled by lenders inquiring about your credit. Show them a copy that you have instead and ask what your rate will be if you go with them. The two worst offenders of this are when people go car shopping and shopping for home loans online where a company submits your loan request to multiple lenders and each one pulls your credit. The risk of many lenders pulling your credit results in ―excessive inquiries‖ within a six month period. At three to four points a pull, you can lose 40 to 50 points in seconds. Unknown to most people outside the credit industry is what is called a ―Risk Score‖. This score is calculated from the number of lender inquiries in a given period, as well as good and bad credit history, and any write-offs. This score determines the amount of interest you will pay on a mortgage even if you have a good credit score. In recent years the bureaus have set up filters to adjust for auto loan pulls within a 30 day period and mortgage pulls that are reduced to a few from many, however, the system is not fool-proof so be careful how often you allow your credit to be pulled.

14.) Disputing inaccurate addresses, date of birth or employment will not affect your credit score unless you become retired (-50 points) and ask to have that added to your bureau‘s information, or you become self-employed but are not an officer of the company.

15.) If you have an open account with a creditor, you will have a more difficult problem disputing any claims. However, if it is paid off completely, the credit bureaus generally will not do much, if any, research into the creditor‘s claim and will usually remove the negative item.

16.) If a collection agency has purchased your account from your

original creditor, they probably paid less than ten cents on the dollar. Often they will accept 20% of the amount due – without interest or penalties, as a settlement offer. Interest and penalties are added by the collection agency and are not real.


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For amounts over two years old, offer them 15% of the total. Expect a ―No‖ answer but stick to your guns and they will most likely call you back and take your offer or make a counter offer. Never, ever, accept any offer unless you see it in writing – Don‘t send money because they tell you they will do something. GET EVERYTHING IN WRITING FIRST and remember time is your best friend in this situation as the negative information is already on your report. If you agree to a settlement make certain that they include in writing that they will have the original listing removed, otherwise it won‘t help your credit. The original creditor may have to do this but the collection agency can request it and it CAN BE DONE, despite what they say. If you can‘t get them to do this, default to getting them to agree to report the account as ―Paid‖ and with no other negative connotations.

17.) If you had a settlement with a creditor (paid in full) and your credit bureau calls it a charge-off, you credit score will be negatively impacted. A settlement is an agreement between the creditor (―Will you settle for less?‖) and the client wherein the debt is paid off, even if there is a discount involved. A charge-off is where the creditor closes the account because they believe they are unable to collect any monies due. If your credit bureau says these are the same – THEY ARE NOT, ask for a supervisor immediately and get it straightened out.

18.) Die-hard individuals have been known to get the names and addresses of executives in the credit bureaus and send them copies of their correspondence to get attention. For your contacts with the staff, never, ever send a letter to ―Whom it may concern‖ – get a real human involved so there is proof for future use and personal responsibility.

19.) Historically a 620 credit score was considered good enough to get a reduced rate on mortgage financing. In 2010 this score has been moved higher to 690 and even 710 with some lenders. So your goal to get your credit score to should now be 700+.

20.) Your credit score will increase as you challenge (dispute)

negative items, however, if these items are later verified by the creditor, they will come back onto your credit report. So you may


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see your credit score rising and falling from one day to the next – don‘t be surprised and re-dispute the items that came back.

21.) If you notice that a landlord, the phone company or your utility

company are not reporting your timely payment history, call and get them to report this valuable part of your credit history to help offset negative reports elsewhere.

22.) NEVER tell a collection agency where you bank or work because

they could use this information to collect a judgment against you and never pay with a personal check for the same reason.

23.) Medical billings of all types can be negotiated, and individuals

have had as much as a 70% success rate with hospital bills. There are professional negotiation services that only charge a percent of the amount saved if you don‘t want to do this yourself.

Check online for these services under ―negotiate medical bills‖. These professionals could substantially reduce or eliminate your medical bills even if they have gone to collection.

Tip #62 – In many states, it is legal for a person to pay a minimal

amount on a monthly basis to stop collection or a judgment for any sized medical bill. The hospital cannot charge interest or penalties once you have started making payments of as little as $20 per month. The medical facility knows this and tries to frustrate the hapless victim into believing the bill must be paid in full and quickly! Don‘t fall for this underhanded tactic, start making minimal payments, get your medical bill reviewed, and then try to get them to negotiate a settlement of the ―revised‖ billing!

24.) Canceling a credit card you don’t use will hurt your credit

score because your credit-utilization ratio could rise quickly with the result of your credit score dropping as much as 35 points. This is especially true when you cancel a card with a zero balance that you have had for a long time – you get the double whammy of losing a ―historic‖ account and your utilization ratio is increased. If you have a particularly bad experience with a credit card company, the best revenge is to keep the card with a zero balance and don‘t use it!

25.) Too many credit cards can hinder your credit score. It is advisable that you only have as many credit cards as you


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absolutely need. You can determine this by keeping your monthly balances on all your cards below 40% and paying them timely. I know it is tempting when you go to a new department store and they offer an additional 10% to 25% discount off your purchase for opening one of their store cards. It is OK to get the card, just pay it off timely and/or keep the balance below 40% while you are paying it off.

26.) Depending on your involvement in a bankruptcy, or your position in the company (if corporate), you may be able to have a bankruptcy removed from your credit report. If you feel you were ―caught up‖ in the proceeding (co-signor, not in charge of decision making, etc.) consult an attorney, or an attorney owned credit repair company who can give you an answer to whether or not you qualify for relief.

27.) The best way of contacting the credit bureaus is by certified letter because you have to do it in writing anyway and you will have proof if you have to sue in the future.

28.) Make certain that your account is credited with any payment you

make. If the lender posts it to a wrong account and later corrects it, your credit bureau account may continue to reflect a late payment.

29.) To save money, many creditors do not report your credit history to

the credit bureaus. They will however, report chronic late pays and charge offs. You should ask them to report your good payment history (if you have one).

You should also ask them if they report good credit behavior BEFORE you open an account. Likewise, convenience cards, like retail stores and gas cards have little impact on your credit - except negatively if you encounter a problem.

30.) Even fully secured credit cards will help your credit score – if your payment history is timely! Getting a secured card(s) with as high a limit as you can afford and making your payments timely will greatly help with your credit restoration. Ask BEFORE you get the card if it will become an unsecured card if you pay timely and how long that will take. If it won‘t become an unsecured card, find another card issuer.


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31.) Whenever you fill out an application for credit, make certain the lender can read your application. If he can‘t read it, he will make a credit bureau inquiry with an incorrect spelling or social security number and these inquiries can affect you score.

32.) Use your same name on all your credit cards and loan

applications – preferably your legal name with your middle initial and suffix (II, III, Jr., Sr., etc.).

33.) Attempt to resolve any credit card or other debt with the original

creditor BEFORE they send it to collection because of the complicated issue of dealing with collection agencies.

Don’t be afraid of these collection agencies as you have many more rights than they have – under federal laws!

34.) Collection agencies will threaten to get a judgment against you and garnish your wages. This is a threatening action that can get the agency in as much trouble as threatening physical abuse. In some states a garnishment is possible but it is unlikely that they will take the time, effort and spend the money to get a judgment unless it is a significant amount. The best way to deal with collection agencies is to request ―debt validation‖ in a registered letter to them. Often times they cannot get this from the original creditor and will stop the collection as they are required to do so by law.

35.) Check how long ago the negative information was entered on your credit report because it may be outside the statute of limitations in your state and will have to be removed from your credit report!

36.) Review your credit report on a regular basis specifically if you are in the process of trying to improve your score – or even if someone else is working on it for you. This is why the monthly service I mentioned above is an ideal investment unless your ―repair service‖ supplies it. New problems will occur despite your best efforts so being on top of the situation will reduce your recovery time.

37.) If you have a collection on your credit report, the FCRA (Fair

Credit Reporting Act) stipulates that if the debt cannot be validated, it cannot be put on your credit report.


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Challenge all collections and ask for: proof the collection agency owns the debt; account statements from the original creditor; complete payment history, and even a copy of the original signed loan or credit card agreement. This works very well with old collections to get them removed.

38.) If you can pay off some old lingering bills, ask your creditor to reduce the amount owed if you pay it off all at one time. They will do this about 60% of the time and the reduction can be 15% to 50% depending on the size of the balance with the larger balances getting the smaller reductions. You want to make sure they are not ―writing off‖ the balance or the IRS will be sent a 1099C Income Form when you have the amount written off reported as ordinary income to you.

39.) As I mentioned above, pay your bills timely – do not go into the additional time allowed (grace period) because of potential mailing problems and if you don‘t have the money, borrow it and repay it as soon as possible.

40.) Pay your bills electronically by draft, BUT balance your checking account frequently. We suggest you balance your account every time you write a check so you don‘t have an overdraft. If you are going to become responsible, you must be able to handle a checking account!

41.) If you decide to hire a credit repair person or company, remember

that by federal law, they should not charge you the full amount due until the work has been completed.

42.) Because of strict regulation by the FTC (Federal Trade

Commission) you may well be able to sue your creditors, collection agencies and the credit bureaus for their ―lapses‖ or ―abuses‖ of the laws.

While this action should only be taken by an attorney, so many people do this through Small Claims Court that there are ―How to Books‖ on the subject. What is very exciting is you have a very reasonable chance for recovery – if the above entities violated the law. Look for an attorney who specializes in credit law or credit restoration to help, or search online for ―suing collection agencies‖ to get a How to Book to try it yourself. Remember, the statute of


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limitations gives you plenty of time and if you kept GOOD notes, you have time to go for it and you have evidence.

Tip #63 - If you are involved in a divorce you should know that this is one of the biggest problem areas for credit issues. Here is what to do as a pre-emptive action because both parties are responsible for joint credit cards and as co-signers on loan documents. Your choices are to either sell your home and have the spouse who will be staying in the house, refinance the mortgage in his/her single name. If you can‘t do this, keep BOTH names on title to protect both spouses‘ interests. If one spouse is the guarantor have all the mortgage statements or coupons sent to that spouse‘s address who is guarantor of the loan. Negotiate a limit on how long the remaining spouse can stay in the property and stick to this (put it in writing).

Either sell the car(s) that are in both names or have the person keeping a car immediately refinance that car. If this isn‘t possible, keep BOTH names on title, determine the length of time to when it must be sold, and notify your finance company(s) to send statements to both addresses.

Pay off the joint cards and together close out the accounts. Request the card issuer give you a new card (or two new cards). If one spouse cannot qualify for a new card have that spouse find a new co-signer and transfer open balances that weren‘t paid off.

Why is it important to take the above ―harsh‖ actions in a divorce? Because despite what a divorce decree says, the decree does not relieve one spouse from the financial obligations of joint debt. Even worse, the divorce decree does not protect either spouse‘s credit from credit abuse by the other spouse.

Seek advice of a divorce attorney IMMEDIATELY if you are

contemplating a divorce or you are already in a divorce. Mediation will save you a great deal of money and has been used by everyone including billionaires to keep attorneys from getting much of the couple’s assets. Think about it!

General Information on Credit Report Codes Your credit report may contain generic code that you need to interpret.

Here are the most common ―codes‖: Account Type – I = Installment (monthly payments for a fixed amount, mortgage, auto)


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O = Open (Entire amount due monthly, Amex) R = Revolving (Variable payment amount, credit card) Payment History – 0 = Approved, No Rating 1 = Paid as Agreed 2 = 30+ Days Late 3 = 60+ Days Late 4 = 90+ Days Late 5 = 120+ Days Late 7 = Making Regular Payments under Work-out Plan 8 = Repossession 9 = Charged Off as Bad Debt General Terms – A = Authorized User B = On Behalf of Another Person C = Co-signer I = Individual J = Joint M = Maker or Signatory S = Shared T = Terminated U = Undesignated

The information in this chapter is designed to give the reader enough information to better understand his rights regarding credit repair or restoration. It is not designed to be a complete self-serve credit restoration course. This would take more time and space than is available here.


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The Bankruptcy Myth

There has always been confusion about how bankruptcy works and if it can benefit a homeowner facing foreclosure. As a homeowner, some dramatic event or series of events have caused you to be at a point in time where you have to make critical financial decisions to save what money you have left, or perhaps even save your family.

The usual things that trigger these events are divorce, death of a wage

earner, job loss, severe injury, bad investments, or any number of other things that account for more than two million families going into foreclosure in the next year. The myth is that bankruptcy stops or ends a foreclosure. I mention foreclosure because it is likely that more than 35% of foreclosure victims will try bankruptcy as an alternative to paying their mortgage debt.

Unfortunately nearly 100% of these unfortunate souls will soon find that

their home has been quickly discharged from their bankruptcy filing and they are left to suffer the severe consequences of bankruptcy. New bankruptcy laws went onto effect October 17, 2005. This legislation were strongly supported by lending institutions, especially credit card companies, because the former bankruptcy laws favored individuals who were able to literally get out of debt ―free‖. This new legislation is often said to be the worst ever single blow to consumers from the banking industry.

The previous bankruptcy laws were enacted years ago to help individuals who got into financial problems and were able to escape and start over by filing bankruptcy. The legislators‘ intent was to help families survive in times of crisis and give anyone a ―return to sanity‘ regarding their personal finances.

Naturally there was abuse and it was not uncommon to see individuals

re-filing for bankruptcy every seven years. A particularly common abuse was when individuals in multiple level marketing programs (MLM‘s) would purchase product on credit cards and then no payments were ever made to repay the card balances. The product was later sold for cash and kept by the former card holder. This scam wasn‘t as hard as it sounds because many sub-prime credit card issuers would literally send credit cards in the mail to people who had completed their bankruptcies.

The reasoning was that these individuals couldn‘t file for bankruptcy for

another seven years and they would want to regain their credit. However, these individuals gradually increased their credit limits and eventually (just before seven years) ―hit‖ the credit card companies again for large losses. Is it


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illegal, but prosecution is time consuming and costly for lenders so they reverted to the next best solution – penalize everyone for the sins of a few! As you begin looking for ways to stop your foreclosure, you will be solicited by attorneys recommending bankruptcy. Bankruptcy is only a TEMPORARILY solution for stopping foreclosure. Having said that, the problem is that you will get a much worse hit to your credit report from a bankruptcy filing than a foreclosure, you have to pay for the bankruptcy filing up front, and your “relief” is very short lived.

In this short summary of the topic, I cannot give you all the intricacies of the process, however, if you need absolute dept relief and you can‘t negotiate a settlement with your creditors, contact a bankruptcy attorney for an explanation of the process. Negotiating with your creditors directly is very workable but you can expect tremendous resistance to giving discounts from your debts. It can be done and is all the time, but it requires real persistence.

Types of Bankruptcies

There are three types of bankruptcies – Chapter 7, Chapter 11, and Chapter 13. A Chapter 11 bankruptcy is essentially for corporations and will not be discussed here.

Chapter 7 Bankruptcy is known as a ―liquidation proceeding‖ because

the debtor turns over all his non-exempt property to the trustee who sells these items at market value to settle creditor claims. When the proceeding is completed, the creditor will receive a discharge of all his dischargeable debts.

The non-dischargeable debts are student loans*, criminal fines and

penalties, spousal and child care support, tax liens and taxes due, judgments from willful or malicious misconduct, prior bankruptcies, DUI liabilities, and others which you need to discuss with an attorney for your specific filing.

* There is a little known exception to the student loan rule that allows discharge for the student loan - if repayment causes an undue hardship!

Chapter 13 Bankruptcy provides the individual filing the opportunity to

repay his creditors over an extended time period (36 to 60 months) and immediately stops all collection efforts by lenders and collection agencies. To qualify for Chapter 13, the petitioner (debtor) must have a regular income and owe less than $250,000 in unsecured debt and less than $750,000 in secured debt.


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The benefits of this filing are the individual gets to keep his personal belongings, real estate, and have reduced payments and frozen interest over a extended period of years. The petitioner must keep his secured debt payments (auto and mortgage) current through the entire period. If the petitioner stays with the payment schedule and eventually pays off the outstanding debt, it is easier for him to repair his credit. This is because the credit reporting information for Chapter 13 filings is for seven years or only four years if he timely pays off what he owes.

Remember, the public records information is maintained for up to 20

years. The beauty of the Chapter 13 bankruptcy is that if the trustee determines you can only pay $500 a month, the maximum time allowed by law for repayment is 60 months, but the typical repayment plan is for 36 months.

At the end of this repayment period, the petitioner (debtor) is

discharged from the rest of the debt - even if the creditors are not fully paid. Before you try filing Chapter 13, check with the local office of Consumer Credit Counseling Services. If they can’t present a workable plan to pay off your debt, or they won’t take your case, filing Chapter 13 may be an option. If they can develop a workable plan, you will avoid the black “credit mark” of filing a bankruptcy.

One last word on bankruptcy – If you decide it is the only way out, you

should know that the bankruptcy court‘s Trustee can ―unwind‖ any transactions for the previous nine months that he deems ―fraudulent‖ or which he believes had ―preferential‖ treatment. So if you sell your sister your home for $1, the trustee will reverse the transaction (void the deed) and bring your home into the bankruptcy‘s pool of property to be sold. Your best action is to see an attorney to determine your rights and the impact of bankruptcy on your future.


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US Department of Housing and Urban Development - Foreclosure Information

U.S. Department of Housing and Urban Development 451 7th Street S.W., Washington, DC 20410 Telephone: (202) 708-1112 TTY: (202) 708-1455

You Can Avoid Foreclosure and Keep Your Home

Losing a home can be financially and personally devastating. Here's information to help you keep your home. Relief may be available.

People facing money problems: If you are facing unemployment or have money problems, you may be able to keep your home if you know the right steps to take. Read on for important information and links to local organizations that

can help you get through difficult times without losing your home. Government organizations and the mortgage industry worked together to provide this information to help you keep your home.

Disaster area victims: If you live or work in an area declared a disaster by the President and the hurricane, tornado, flood, wildfire, or other natural or man-made event damaged your home or reduced your income, your lender will provide disaster relief:

o For 90 days on an FHA-insured loan. Go to the Disaster Help from the button on the left of

this page.

o In most cases for other loans.

Military personnel and spouses:

If you or your spouse is on active military duty, you may qualify for a reduction in your interest rate resulting in lower payments. Read how the Servicemembers Civil Relief Act of 2003 (formerly the Soldiers' and Sailors' Civil Relief Act of 1940) affects military homeowners.

Facing Money Problems: - Financial problems are most often associated with major life

changes like:

Job loss

Cuts in work hours or overtime

Retirement

Illness, injury, or death of a family member

Divorce or separation

If your family is facing any of these issues and you can't pay your bills, look closely at what you owe and what you earn. Eliminate unnecessary spending and reach out for help if you still can't make ends meet. Taking action right away can help you protect your family from the loss of your home.

Steps To Take When You May Not Be Unable To Pay Your

Mortgage:

1. Contact your lender as soon as you have a problem - Many people avoid calling lenders about money troubles because we:

Feel embarrassed discussing money problems with others

http://www.hud.gov/

http://www.hud.gov/

http://www.homeloanlearningcenter.com/ConsumerHelpDesk/DisasterRelief.htm

http://www.fha.gov/foreclosure/SCRA.cfm


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Believe that if lenders know we are in trouble, they will automatically rush to a collection agency or foreclosure (seize property for failure to pay a mortgage debt)

But lenders want to help borrowers keep their homes because:

Foreclosure is expensive for lenders, mortgage insurers and investors

HUD and private mortgage insurance companies and investors like Freddie Mac and Fannie Mae require lenders to work aggressively to help borrowers facing money problems

Lenders have workout options (choices) to help you and:

These options work best when your loan is only one or two payments behind

The farther behind you are on your payments, the fewer options are available

Don't assume that your problems will quickly correct themselves:

Don't lose valuable time being overly optimistic

Contact your mortgage lender to discuss your circumstances as soon as you realize that

you're unable to make your payments

Look forward to your lender being willing to explore many possible solutions, without guaranteeing any one particular solution Finding your lender Check the following sources to contact your lender:

o Your monthly mortgage billing statement

o Your payment coupon book

Information to have ready when you call To help you, lenders usually need:

o Your loan account number

o A brief explanation of your circumstances

o Recent income documents:

Pay stubs

Benefit statements from Social Security, disability, unemployment,

retirement, or public assistance

Tax returns or a year-to-date profit and loss statement, if self-employed

A list of household expenses

Expect to have more than one phone conversation with your lender. Typically, your lender will mail you a "loan workout" package. This package contains information, forms and instructions. If you want to be considered for assistance you must complete the forms fully and truthfully and return them to your lender quickly. Your lender will review the complete package before talking about a solution with you.

CALL YOUR LENDER TODAY! The sooner you call, the sooner help is available.

Don't ignore mail from your lender

If you don't get in touch with your lender, your lender will try to contact you by mail and phone soon after you stop making payments. It is very important that you respond to mail and phone calls offering help. If your lender doesn't hear from you, they will have to start legal action leading to foreclosure. This will greatly increase the cost to bring your loan current.

Information for families with FHA loans


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The FHA provides many alternatives and ways for borrowers to get help. These may include mortgage modifications (changes), special forbearances (allowances), and other actions you can take to avoid foreclosure.

FHA works closely with customers who have FHA-insured loans. Do you feel your lender is not responding to your questions? Do you need help contacting your lender? The FHA is ready to help! Contact us at (800) CALL-FHA.

2. Talk to a housing counselor - If you don't feel comfortable talking with your lender, you should

immediately contact a housing counseling agency and make an appointment with a counselor. Most FHA counselors are free or cost very little. A counselor can help you:

Review your financial situation, determine what options are available to you, and negotiate with your lender

Learn which of the various workout arrangements lenders consider makes the most sense for

you and your family, based on your circumstances

Call the lender with you or on your behalf to discuss a workout plan

Protect you from future credit problems before you get too far behind on mortgage payments

Give you information on services and programs in your area that provide financial, legal, medical or other assistance

A good counselor will help you create a monthly budget plan to ensure you meet all your monthly expenses, including your mortgage payment. Your personal financial plan will clearly show how much money you have available to make the mortgage payment. This analysis will help you and your lender determine whether a reduced or delayed payment schedule could help you.

To find out more about HUD-approved housing counseling agencies and their services, please call toll free (800) 569-4287 on weekdays between 9:00 a.m. and 5:00 p.m. Eastern Standard Time (6:00 a.m. to 2:00 p.m. Pacific Time). The same number can give you an automated referral to the three housing counseling agencies located closest to you.

Many of these local housing counseling agencies are connected with national and regional housing counseling intermediaries (mediators). The website for HUD-approved National and Regional Housing Counseling Intermediaries describes the full range of assistance offered and provides maps showing their member's locations.

3. Prioritize your debts (rank them by importance) - You will need a new, tightened budget if

you lose a job. Prioritize your bills and pay those most necessary for your family: food, utilities and shelter.

Failing to pay any of your debts can seriously affect your credit rating, but if you stop making your mortgage payments you could lose your house. Try these suggestions to keep your home:

Whenever possible, use any income available after paying for food and utilities to pay your

monthly mortgage payments.

If your employment income has stopped or been reduced, first consider getting rid of or

cutting back on other expenses (such as dining out, entertainment, cable, or even telephone services).

If you still do not have enough income, consider cashing out other financial resources like

stocks, savings accounts, or personal property that may have value like a boat or a second car.

Take any responsible action that will save cash.

Besides speaking with your lender, you may want to contact a nonprofit consumer credit counseling agency that specializes in helping restructure credit payments. Credit counselors can often reduce your monthly bills by negotiating lower payments or long-term payment plans with your creditors. Trustworthy credit counseling agencies provide their services free of charge or for a small monthly fee tied to a repayment plan. Beware of credit counseling agencies that offer counseling for a large upfront fee or donation.

For consumer debt advice, contact www.debtadvice.org/

http://www.hud.gov/offices/hsg/sfh/hcc/hcs.cfm

http://www.hud.gov/offices/hsg/sfh/hcc/nrhci.cfm

http://www.hud.gov/offices/hsg/sfh/hcc/nrhci.cfm

http://www.debtadvice.org/


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When you call a credit counseling agency, they will ask you to provide current information about your income and expenses. Make sure you ask if the agency has a charge before you sign any documents!

Preserve your good credit

Do not underestimate (misjudge) how important it is to keep your good credit. Your future ability to purchase items, rent or buy a home, and do other things often requires a credit check. Consumer credit agencies and your lender can help you explore solutions to keep your credit rating from getting blemished.

Maintaining good credit is even important for job hunters. When you apply for a job, the employer probably will check your credit report to determine whether:

You have been sued

You have filed for bankruptcy

You have trouble paying your bills

4. Explore loan workout solutions with your lender - First and foremost, if you can keep your mortgage current, do so. But if you find you are unable to make your mortgage payments, you might qualify for a loan workout option. Check with your lender to see which option may be available. Some options may not apply to your loan if it is not insured by FHA.

If your problem is temporary - call your lender to discuss these possibilities:

Reinstatement: Your lender is always willing to discuss accepting the total amount owed in a

lump sum by a specific date. Forbearance may accompany this option.

Forbearance: Your lender may allow you to reduce or suspend payments for a short period

of time and then agree to another option to bring your loan current. A forbearance option is often combined with a reinstatement when you know you will have enough money to bring the account current at a specific time. The money might come from a hiring bonus, investment, insurance settlement, or tax refund.

Repayment plan: You may be able to get an agreement to resume making your regular

monthly payments, plus a portion of the past due payments each month until you are caught up.

If it appears that your situation is long-term or will permanently affect your ability to bring your account current - call your lender to discuss options:

Mortgage modification: If you can make payments on your loan, but don't have enough

money to bring your account current or you can't afford your current payment, your lender may be able to change the terms of your original loan to make the payments more affordable. Your loan could be permanently changed in one or more of the following ways:

o Adding the missed payments to the existing loan balance.

o Changing the interest rate, including making an adjustable rate into a fixed rate.

o Extending the number of years you have to repay.

Partial Claim: If your mortgage is insured, your lender might help you get a one-time

interest-free loan from your mortgage guarantor to bring your account current. You may be allowed to wait several years before repaying this loan. You qualify for an FHA partial claim if:

o Your loan is between 4 and 12 months delinquen

o You are able to begin making full mortgage payments again

When your lender files a partial claim, HUD will pay your lender the amount necessary to bring your mortgage current. You must sign a promissory note, and a lien will be placed on your property until the promissory note is paid in full.

The promissory note is interest-free and is due when you pay off the first mortgage or when you sell the property.

If keeping your home is not an option - call your lender to discuss these possibilities: -


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Sale: If you can no longer afford your home, your lender will usually give you a specific

amount of time to find a purchaser and pay off the total amount owed. You will be expected to use the services of a real estate professional who can aggressively market the property.

Pre-foreclosure sale or short payoff: If you can't sell the property for the full amount of

the loan, your lender may accept less than the amount owed. Financial help may also be available to pay other lien holders and/or help towards some moving costs. You may qualify if:

o The loan is at least 2 months delinquent

o You (or your real estate professional) can sell the house within 3 to 5 months

o A new appraisal (obtained by your lender) shows that the value of your home meets

HUD program guidelines

Assumption: A qualified buyer may be allowed to take over your mortgage, even if your

original loan documents state that it is non-assumable.

Deed-in-lieu of foreclosure: As a last resort, you "give back" your property and the debt is forgiven. This will not save your house, but it is less damaging to your credit rating. This option might sound like the easiest way out, but it has limitations:

o You usually have to try to sell the home for its fair market value for at least 90 days

before the lender will consider this option

o This option may not be available if you have other liens, suc h as other creditor judgments, second mortgages, and IRS or state tax liens

Resources for finding a real estate agent and selling your home

If you need to sell your home, you'll have to answer many questions. You'll need to find how much your house

is actually worth, and you'll have to find a real estate agent you are comfortable with. The following resources may help:

National Association of Realtors

National Association of Real Estate Brokers

International Real Estate Digest

National Association of Hispanic Real Estate Professionals

The Home Store

If you have an FHA-insured loan and your lender is not responsive

Your lender has to follow FHA servicing guidelines and regulations for FHA-insured loans. If your lender is not cooperative, contact FHA's National Servicing Center at toll free (888) 297-8685 or via email [email protected]. HUD does not oversee VA or conventional loans.

Beware of predatory lending schemes - Most mortgage lenders are trustworthy and provide a valuable service by allowing families to own a home without saving enough money to buy it outright. But dishonest or "predatory" lenders do exist and engage in lending practices that increase the chances that a borrower will lose a home to foreclosure. Beware especially of those who make high risk second mortgages. Other abusive practices include:

Making a mortgage loan to an individual who does not have the income to repay it

Charging excessive interest, points and fees

Repeatedly refinancing a loan without providing any real value to the borrower

Borrowers facing unemployment and/or foreclosure are often targets of predatory lenders because they are desperate to find any "solution".

Homeowners receive many refinance offers in the mail saying they are "pre-approved" for credit based on the equity in their homes. Borrowing against your house may seem attractive when you are struggling to pay your mortgage and other bills. But stop and think about this: if you can't make your current payments, increasing your debt will make it harder to keep your home, even if you get some temporary cash. Beware of scams

Equity skimming: In this type of scam a "buyer" approaches you offering to repay the mortgage or sell the property if you sign over the deed and move out - usually leaving you with the debt and no house. Signing over your deed does not necessarily relieve you of the responsibility of paying the loan.

http://www.realtor.org/

http://www.nareb.com/

http://ired.com/buymyself/canale/art3.html

http://www.nahrep.org/

http://www.move.com/

mailto:[email protected]

mailto:[email protected]


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Phony counseling agencies: charging for counseling that is often free of charge. If you have any doubt

about paying for such services, call a HUD-approved foreclosure housing counseling agency toll free at (800) 569-4287 or TDD (800) 877-8339 before you pay anyone or sign anything.

Do not sign anything you do not understand. It is your right and duty to ask questions

Information is your best defense against becoming a victim of predatory lending, especially for a desperate homeowner

Where to report suspected predatory lending

Homeowners can either visit the Stop Mortgage Fraud website or call toll free (800) 348-3931 to get information on what steps to take to file a complaint. Homeowners who call will also receive a booklet containing information found on the website.

For more information about predatory lending go to:

Freddie MAC's Predatory Lending

Freddie MAC's "Don't Borrow Trouble"

Common Questions -

What happens when I miss my mortgage payments? - Foreclosure may occur. This means your lender can legally repossess (take over) your home. When this happens, you must move out of your house. If your property is worth less than the total amount you owe on your mortgage loan, a deficiency judgment could be pursued, meaning you would not only lose your home, you also would owe HUD money.

Both foreclosures and deficiency judgments could seriously affect your ability to qualify for credit in the future. So you should avoid foreclosure if at all possible.

What should I do? -

Do not ignore letters from your lender. If you are having problems making your payments, call or write to your lender's loss mitigation department immediately. Explain your situation. Be prepared to provide financial information, such as you-r monthly income and expenses. Without this information, they may not be able to help.

Stay in your home for now. You may not qualify for assistance if you abandon your property.

Contact a HUD-approved foreclosure housing counseling agency. Call toll free 1-800-569-4287 or

TDD (800) 877-8339 for the housing counseling agency nearest you. These agencies are valuable resources. They have information on services and programs offered by government agencies and private and community organizations that might be able to help you. The housing counseling agency may also offer credit counseling. These services are usually free of charge.

Who is my lender? How do I make contact?- Look at your monthly mortgage coupons or billing statements for the lender's name and contact information.

I don't remember what type of mortgage I have. How can I find this information? - Look on the original mortgage documents or call your mortgage lender.

Do I need to keep living in my house to qualify for assistance? - Usually yes, but call your lender to discuss your specific circumstances and get advice on options that may be available.

My employer has already announced layoffs in the coming month. What can I do now? - You have started learning about available options here. Now, figure out if a layoff will make it hard for your family to make your mortgage payments. If so, consider other resources you have to pay your mortgage. Review your spending habits and see where you can reduce spending. If you have a lot of other debt, consider contacting a nonprofit, consumer credit counseling agency. Take advantage of any help your employer offers. If you still believe you will have trouble making your mortgage payments, contact your lender right away.

What are the key points to remember? - Don't lose your home and damage your credit history

1. Call or write your mortgage lender immediately and be honest about your financial situation

http://www.fha.gov/sf/counseling/index.cfm

http://www.stopmortgagefraud.com/

http://www.freddiemac.com/corporate/buyown/english/mortgages/lenders/avoiding_predlend.html

http://www.dontborrowtrouble.com/



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2. Stay in your home to make sure you qualify for assistance 3. Arrange an appointment with a HUD-approved housing counselor to explore your options toll free at

(800) 569-4287 or TDD (800) 877-8339 4. Cooperate with the counselor or lender trying to help you 5. Explore every alternative to keep your home 6. Beware of scams 7. Never sign anything you don't understand. And remember that signing over the deed to someone else

does not necessarily relieve you of your loan obligation 8. Act now. Delaying can't help. If you do nothing, you will lose your home and your good credit rating!

What precautions can I take? - These precautions can help you avoid being "taken" by a scam artist:

Don't sign any papers you don't fully understand.

Make sure you get all "promises" in writing.

Beware of any sales contract that assumes the loan where you are not formally released from liability

(responsibility) for your mortgage debt.

Check with a lawyer or your mortgage company before entering into any deal involving your home.

If you're selling the house yourself to avoid foreclosure, check to see if there are any complaints against the prospective buyer. You can contact your state's Attorney General, the State Real Estate Commission, or the local District Attorney's Consumer Fraud Unit for this type of information.

Will I be responsible for any out-of-pocket expenses if I am approved for a workout option? - You may have to pay expenses such as recording fees for a loan modification. Because every situation is different, contact your lender for more information. But, if a lender has no contact with you and has to start foreclosure, you may have to pay very high legal fees. To avoid this, call your lender as soon as you realize you might have trouble.

Mortgage lenders

The mortgage lenders listed below have voluntarily joined the federal government to assist homeowners who are concerned about the future or have suffered due to recent changes in the economy. If your lender is listed here, you can help protect your home by contacting them immediately!

Lender Phone #1 Phone #2

Bank of America (800) 846-2222 (716) 635-2264

Chase Home Finance (800) 848-9136

Chase Home Finance (800) 526-0072 ext. 533

(800) 527-3040

CitiMortgage (800) 926-9783

Countrywide (800) 219-7773 (800) 669-4576

HSBC Mortgage Corporation (800) 338-6441 (888) 648-3124

Irwin Mortgage Corporation (888) 444-6446

James B. Nutter & Company (800) 315-7334

Midland Mortgage (800) 552-3000 (800) 654-4566

Mortgage Service (800) 449-8767

National City Mortgage (800) 367-9305

Principal Residential Mortgage, Inc. (800) 367-6448 (800) 962-4450

Wells Fargo Mortgage (800) 766-0987

Wendover Financial Services Corporation (888) 934-1081 (800) 436-1022

Washington Mutual Home Loans, Inc. (866) 926-8937 (800) 254-3677


http://www.us.hsbc.com/1/2/3/personal/home-loans/mortgage/existing/when-payment-difficulties-arise

http://www.nationalcitymortgage.com/root/service_assistance.asp


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This information is provide for you by the joint efforts of HUD/FHA, Department of Veterans Affairs, Department

of Labor, Fannie Mae, Freddie Mac, members of the Mortgage Industry-at-large, and other industry participants.

Servicemembers Civil Relief Act (SCRA) Common Questions

Reservists, guardsmen and other military personnel can find answers to questions about mortgage payment relief and protection from foreclosure provided by the Servicemembers Civil Relief Act of 2003 (formerly The Soldiers' and Sailors' Civil Relief Act of 1940).

Who is eligible? - The Act applies to active duty military personnel who had a mortgage obligation before enlistment or before being ordered to active duty. This includes:

Members of the Army, Navy, Marine Corps, Air Force, Coast Guard

Commissioned officers of the Public Health Service and the National Oceanic and Atmospheric

Administration engaged in active service

Reservists ordered to report for military service

People ordered to report for induction (training) under the Military Selective Service Act

Guardsmen called to active service for more than 30 consecutive days.

In limited situations, dependents of servicemembers are also entitled to protections.

Am I entitled to debt payment relief? - The Act limits interest that may be charged on mortgages taken out by a servicemember (including debts incurred jointly with a spouse) before he or she entered into active military service. At your request, lenders must reduce the interest rate to no more than 6% per year during the period of active military service and recalculate your payments to reflect the lower rate. This provision applies to both conventional and government-insured mortgages.

Is the interest rate limitation automatic? - No. To ask for this temporary interest rate reduction, you must submit a written request to your mortgage lender and include a copy of your military orders. The request may be submitted as soon as the orders are issued, but no later than 180 days after the date of your release from active duty military service.

Am I eligible even if I can afford to pay my mortgage at a higher interest rate? - If a mortgage lender believes that military service has not affected your ability to repay your mortgage, they have the right to ask a court to grant relief from the interest rate reduction. This is does not happen very often.

What if I can't afford to pay my mortgage even at the lower rate?- Your mortgage lender may let you stop paying the principal amount due on your loan during active duty service. Lenders are not required to do this but they generally try to work with servicemembers to keep them in their homes. You will still owe this amount, but will not have to repay it until after you complete active duty service.

Most lenders also have other programs to assist borrowers who can't make their mortgage payments. If you or your spouse finds yourself in this position at any time before or after active duty service, contact your lender immediately and ask about loss mitigation options. If you have an FHA-insured loan and are having difficulty making mortgage payments, you may also be eligible for special forbearance and other loss mitigation options.

Am I protected against foreclosure? - Mortgage lenders may not foreclose while you are on active duty or within 90 days after military service without court approval., A lender would be required to show in court that your ability to repay the debt was not affected by your military service.

What information do I need to provide to my lender? - When you or your representative contacts your mortgage lender, you should provide the following information:

Notice that you have been called to active duty

A copy of the orders from the military notifying you of your activation

Your FHA case number

Evidence that the debt precedes your activation date

HUD has reminded FHA lenders of their obligation to follow the SCRA. When notified that a borrower is on active military duty, an FHA lender must inform the borrower or representative of the adjusted payment

http://www.hud.gov/offices/cpd/about/hudvet/library/scra.cfm


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amount due, provide adjusted coupons or billings, and ensure adjusted payments are not considered insufficient payments.

Will my payments change later? Will I need to pay back the interest rate "subsidy" at a later date? - The change in interest rate is not a subsidy. Interest in excess of 6% per year that would otherwise have been charged is forgiven. However, the reduction in the interest rate and monthly payment amount only applies during the period of active duty. Once the period of active military service ends, the interest rate will revert back to the original interest rate, and payments will be recalculated accordingly.

How long does the benefit last? Does the period begin and end with my tour of duty? - Interest rate

reductions are only for the period of active military service. Other benefits, such as postponement (delaying) of monthly principal payments on the loan and restrictions on foreclosure, may begin immediately upon assignment to active military service and end on the third month following the term of active duty assignment.

How can I learn more about relief available to active duty military personnel? - Servicemembers who have questions about the SCRA or the protections they may be entitled to, can contact their unit judge advocate or installation legal assistance officer. Dependents of servicemembers can also contact or visit local military legal assistance offices where they live. A military legal assistance office locator for each branch of the armed forces is available at www.legalassistance.law.af.mil/content/locator.php

Servicemembers Civil Relief Act (SCRA)

Common questions and answers for reservists, guardsmen and other military personnel about mortgage payment relief and protection from foreclosure provided by the Servicemembers Civil Relief Act (formerly known as The Soldiers' and Sailors' Civil Relief Act of 1940).

Who is eligible?

The provisions of the Act apply to active duty military personnel who had a mortgage obligation prior to enlistment or prior to being ordered to active duty. This includes members of the Army, Navy, Marine Corps, Air Force, Coast Guard; commissioned officers of the Public Health Service and the National Oceanic and Atmospheric Administration engaged in active service; reservists ordered to report for military service; people ordered to report for induction (training) under the Military Selective Service Act; and guardsmen called to active service for more than 30 consecutive days. In limited situations, dependents of servicemembers are also entitled to protections.

Am I entitled to debt payment relief?

The Act limits the interest that may be charged on mortgages incurred (or acquired) by a servicemember (including debts incurred jointly with a spouse) before he or she entered into active military service. Mortgage lenders must, at your request, reduce the interest rate to no more than 6% per year during the period of active military service and recalculate your payments to reflect the lower rate. This provision applies to both conventional and government-insured mortgages.

Is the interest rate limitation automatic?

No. To ask for this temporary interest rate reduction, you must submit a written request to your mortgage lender and include a copy of your military orders. The request may be submitted as soon as the orders are issued but no later than 180 days after the date of your release from active duty military service.

Am I eligible even if I can afford to pay my mortgage at a higher interest rate?

If a mortgage lender believes that military service has not affected your ability to repay your mortgage, they have the right to ask a court to grant relief from the interest rate reduction. This is not very common.

What if I can't afford to pay my mortgage even at the lower rate?

Your mortgage lender may let you stop paying the principal amount due on your loan during active duty service. Lenders are not required to do this but they generally try to work with servicemembers to keep them in their homes. You will still owe this amount but will not have to repay it until after you complete active duty service.

http://legalassistance.law.af.mil/content/locator.php


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Additionally, most lenders have other programs to assist borrowers who can't make their mortgage payments. If you or your spouse finds yourself in this position at any time before or after active duty service, contact your lender immediately and ask about loss mitigation options. If you have an FHA insured loan and are having difficulty making mortgage payments, you may also be eligible for special forbearance and other loss mitigation options.

Am I protected against foreclosure?

Mortgage lenders may not foreclose (seize property for failure to pay a mortgage debt) while you are on active duty or within 90 days after military service without court approval. In court, the lender would be required to show that your ability to repay the debt was not affected by your military service.

What information do I need to provide to my lender?

When you or your representative contacts your mortgage lender, you should provide the following information:

Notice that you have been called to active duty

A copy of the orders from the military notifying you of your activation

Your FHA case number

Evidence that the debt precedes your activation date

HUD has reminded FHA lenders of their obligation to follow the Act. If notified that a borrower is on active military duty, the lender must advise the borrower or representative of the adjusted amount due, provide adjusted coupons or billings, and ensure that the adjusted payments are not returned as insufficient payments.

Will my payments change later? Will I need to pay back the interest rate "subsidy" at a later date?

The change in interest rate is not a subsidy. Interest in excess of 6% per year that would otherwise have been charged is forgiven. However, the reduction in the interest rate and monthly payment amount only applies during the period of active duty. Once the period of active military service ends, the interest rate will revert back to the original interest rate, and payments recalculated accordingly.

How long does the benefit last? Does the period begin and end with my tour of duty?

Interest rate reductions are only for the period of active military service. Other benefits, such as postponement (delaying) of monthly principal payments on the loan and restrictions on foreclosure may begin immediately upon assignment to active military service and end on the third month following the term of active duty assignment.

How can I learn more about relief available to active duty military personnel?

Servicemembers who have questions about the SCRA or the protections that they may be entitled to may contact their unit judge advocate or installation legal assistance officer. Dependents of servicemembers can also contact or visit local military legal assistance offices where they reside. A military legal assistance office locator for each branch of the armed forces is available at legalassistance.law.af.mil/content/locator.php

http://legalassistance.law.af.mil/content/locator.php


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In Closing Dear Reader,

Thank you for purchasing this text. It has become one of the best selling texts on stopping foreclosure in America. It was not designed to give you step-by-step legal motions and defenses to go to hearing and submit motions Pro se. It was designed to help you with the fundamentals of the foreclosure process, what you will face and actions to take as quickly as possible.

The regulatory environment is changing on almost a daily basis and there will be dramatic changes coming in 2012 or 2013 – if politicians, lenders and attorneys for the various states can come to compromise. If they don’t all make some concessions, our country will again be faced with another mortgage crisis.

Personally, you need to take care of yourself immediately and do what is in your best interest. Please don’t hold out hope for change that may take years or never come at all. There are often active groups in your area that can be contacted online that have the value of what worked or didn’t work for each of the participants. Be careful these bloggers are not “shills” being paid by local law firms to do advertising that would otherwise be illegal.

Plan what action steps you’ll need to take and go for it! I wish you and your family the very best in your struggle and hope I have contributed in some small way to your path to conclusion of your problem.

GENERAL DISCLOSURES

This Manual is subject to change without notice and without liability to the parent or affiliate companies of its maker. This manual is not a contract between any parties and should not be construed as such. The program will work better in some parts of the country than others. We cannot say where this will happen and it will vary with local economic conditions and your local regulations. Consequently, no guarantees should be construed from any test results that the parent company or any of their affiliate sales persons have achieved.

Dave Dinkel P.O. Box 4806, Hollywood, FL 33081-4806

Contact me at [email protected]

I have included a limited Glossary in this text, if you have any questions about terminology go to www.Wikipeda.org for any definitions you need.

I have also not included a state-by-state review of the foreclosure laws pertaining to each state again to save you time. You can easily find the specific regulations that pertain to your state

and situation by searching online for “State Foreclosure Laws”.

http://www.wikipeda.org/


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The Real Estate Marketplace Glossary: How to Talk the Talk

The Federal Trade Commission, the agency that promotes competition and protects

consumers, has prepared this glossary to help you better understand the terms

commonly used in the real estate and mortgage marketplace.

Federal Trade Commission ftc.gov

A

Annual Percentage Rate (APR): The cost of a loan or other financing as an annual rateThis

The APR includes the interest rate, points, broker fees and certain other credit charges a

borrower is required to pay.

Appraiser: A professional who conducts an analysis of the property, including examples of

sales of similar properties in order to develop an estimate of the value of the property. The

analysis is called an ―appraisal.‖

Annuity: Payments for a fixed period or until a stated age, and then annuitant receives annuity payments Appreciation: An Increase of the market value of a home due to changing market conditions and/or home improvements. Application Fee: The fee that a mortgage lender or broker charges to apply for a mortgage to cover processing costs

Arbitration: A process where disputes are settled by referring them to a fair and

neutral third party (arbitrator). The disputing parties agree in advance to agree with the

decision of the arbitrator. There is a hearing where both parties have an opportunity to be heard, after which the arbitrator makes a decision.

Asbestos: A toxic material that was once used in housing insulation and fireproofing.

Because some forms of asbestos have been linked to certain lung diseases, it is no longer

used in new homes. However, some older homes may still have asbestos in these materials.

Assessed Value: Typically the value placed on property for the purpose of taxation.

Assessor: A public official who establishes the value of a property for taxation purposes.

Asset: Anything of monetary value that is owned by a person or company. Assets include

real property, personal property, stocks, mutual funds, etc.

Assignment of Mortgage: A document evidencing the transfer of ownership of a mortgage

from one person to another.


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Assumable Mortgage: A mortgage loan that can be taken over (assumed) by the buyer

when a home is sold. An assumption of a mortgage is a transaction in which the buyer of real

property takes over the seller‘s existing mortgage; the seller remains liable unless released

by the lender from the obligation. If the mortgage contains a due-on-sale clause, the loan

may not be assumed without the lender‘s consent.

Assumption: A homebuyer‘s agreement to take on the primary responsibility for paying an

existing mortgage from a home seller.

Assumption Fee: A fee a lender charges a buyer who will assume the seller‘s existing

mortgage

.

Automated Underwriting: An automated process performed by a technology application

that streamlines the processing of loan applications and provides a recommendation to the

lender to approve the loan or refer it for manual underwriting.

B Balance Sheet: A financial statement that shows assets, liabilities, and net worth as of a

specific date.

Balloon Mortgage: A mortgage with monthly payments often based on a 30-year

amortization schedule, with the unpaid balance due in a lump sum payment at the end of a

specific period of time (usually 5 or 7 years). The mortgage may contain an option to ―reset‖

the interest rate to the current market rate and to extend the due date if certain conditions are

met.

Balloon Payment: A final lump sum payment that is due, often at the maturity date of a

balloon mortgage.

Bankruptcy: Legally declared unable to pay your debts. Bankruptcy can severely impact

your credit and your ability to borrow money.

Before-tax Income: Income before taxes are deducted. Also known as ―gross income.‖

Biweekly Payment Mortgage: A mortgage with payments due every two weeks (instead of

monthly).

Bona fide: In good faith, without fraud.

Bridge Loan: A short-term loan secured by the borrower‘s current home (which is usually for sale) that allows the proceeds to be used for building or closing on a new house before the current home is sold. Also known as a ―swing loan.‖

Broker: An individual or firm that acts as an agent between providers and users of products or services, such as a mortgage broker or real estate broker. See also ―Mortgage Broker.‖


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Building Code: Local regulations that set forth the standards and requirements for the

construction, maintenance and occupancy of buildings. The codes are designed to provide

for the safety, health and welfare of the public.

Buydown: An arrangement whereby the property developer or another third party provides

an interest subsidy to reduce the borrower‘s monthly payments typically in the early years of

the loan.

Buydown Account: An account in which funds are held so that they can be applied as part

of the monthly mortgage payment as each payment comes due during the period that an

interest rate buydown plan is in effect.

C

Cap: For an adjustable-rate mortgage (ARM), a limitation on the amount the interest rate or

mortgage payments may increase or decrease. See also ―Lifetime Payment Cap,‖ ―Lifetime

Rate Cap,‖ ―Periodic Payment Cap,‖ and ―Periodic Rate Cap.‖

Capacity: Your ability to make your mortgage payments on time. This depends on your

income and income stability (job history and security), your assets and savings, and the

amount of your income each month that is left over after you‘ve paid for your housing costs,

debts and other obligations.

Cash-out Refinance: A refinance transaction in which the borrower receives additional

funds over and above the amount needed to repay the existing mortgage, closing costs,

points, and any subordinate liens.

Certificate of Deposit: A document issued by a bank or other financial institution that is

evidence of a deposit, with the issuer‘s promise to return the deposit plus earnings at a

specified interest rate within a specified time period.

Certificate of Eligibility: A document issued by the U.S. Department of Veterans Affairs

(VA) certifying a veteran‘s eligibility for a VA-guaranteed mortgage loan.

Chain of Title: The history of all of the documents that have transferred title to a parcel of

real property, starting with the earliest existing document and ending with the most recent.

Change Orders: A change in the original construction plans ordered by the property owner

or general contractor

.

Clear Title: Ownership that is free of liens, defects, or other legal encumbrances.

Closing: The process of completing a financial transaction. For mortgage loans, the process

of signing mortgage documents, disbursing funds, and, if applicable, transferring ownership

of the property. In some jurisdictions, closing is referred to as ―escrow,‖ a process by which a

buyer and seller deliver legal documents to a third party who completes the transaction in

accordance with their instructions. See also ―Settlement.‖

Closing Agent: The person or entity that coordinates the various closing activities, including

the preparation and recordation of closing documents and the disbursement of funds. (May


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be referred to as an escrow agent or settlement agent in some jurisdictions.) Typically, the

closing is conducted by title companies, escrow companies or attorneys.

Closing Costs: The upfront fees charged in connection with a mortgage loan transaction.

Money paid by a buyer (and/or seller or other third party, if applicable) to effect the closing of

a mortgage loan, generally including, but not limited to a loan origination fee, title

examination and insurance, survey, attorney‘s fee, and prepaid items, such as escrow

deposits for taxes and insurance.

Closing Date: The date on which the sale of a property is to be finalized and a loan

transaction completed. Often, a real estate sales professional coordinates the setting of this

date with the buyer, the seller, the closing agent, and the lender.

Closing Statement: See ―HUD-1 Settlement Statement.‖

Co-borrower: Any borrower other than the first borrower whose name appears on the

application and mortgage note, even when that person owns the property jointly with the first

borrower and shares liability for the note.

Collateral: An asset that is pledged as security for a loan. The borrower risks losing the

asset if the loan is not repaid according to the terms of the loan agreement. In the case of a

mortgage, the collateral would be the house and real property.

Commission: The fee charged for services performed, usually based on a percentage of the

price of the items sold (such as the fee a real estate agent earns on the sale of a house).

Commitment Letter: A binding offer from your lender that includes the amount of the

mortgage, the interest rate, and repayment terms.

Common Areas: Those portions of a building, land, or improvements and amenities owned

by a planned unit development (PUD) or condominium project‘s homeowners‘ association (or

a cooperative project‘s cooperative corporation) that are used by all of the unit owners, who

share in the common expenses of their operation and maintenance. Common areas include

swimming pools, tennis courts, and other recreational facilities, as well as common corridors

of buildings, parking areas, means of ingress and egress, etc

.

Comparables: An abbreviation for ―comparable properties,‖ which are used as a comparison

in determining the current value of a property that is being appraised.

Concession: Something given up or agreed to in negotiating the sale of a house. For

example, the sellers may agree to help pay for closing costs.

Condominium: A unit in a multiunit building. The owner of a condominium unit owns the unit

itself and has the right, along with other owners, to use the common areas but does not own

the common elements such as the exterior walls, floors and ceilings or the structural systems

outside of the unit; these are owned by the condominium association. There are usually

condominium association fees for building maintenance, property upkeep, taxes and

insurance on the common areas and reserves for improvements.


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Construction Loan: A loan for financing the cost of construction or improvements to a

property; the lender disburses payments to the builder at periodic intervals during

construction.

Contingency: A condition that must be met before a contract is legally binding. For example,

home purchasers often include a home inspection contingency; the sales contract is not

binding unless and until the purchaser has the home inspected.

Conventional Mortgage: A mortgage loan that is not insured or guaranteed by the federal

government or one of its agencies, such as the Federal Housing Administration (FHA), the

U.S. Department of Veterans Affairs (VA), or the Rural Housing Service (RHS). Contrast with

―Government Mortgage.‖

Conversion Option: A provision of some adjustable-rate mortgage (ARM) loans that allows

the borrower to change the ARM to a fixed-rate mortgage at specified times after loan

origination.

Convertible ARM: An adjustable-rate mortgage (ARM) that allows the borrower to convert

the loan to a fixed-rate mortgage under specified conditions.

Cooperative (Co-op) Project: A project in which a corporation holds title to a residential

property and sells shares to individual buyers, who then receive a proprietary lease as their

title.

Cost of Funds Index (COFI): An index that is used to determine interest rate changes for

certain adjustable-rate mortgage (ARM) loans. It is based on the weighted monthly average

cost of deposits, advances, and other borrowings of members of the Federal Home Loan

Bank of San Francisco.

Counter-offer: An offer made in response to a previous offer. For example, after the buyer

presents their first offer, the seller may make a counter-offer with a slightly higher sale price.

Credit: The ability of a person to borrow money, or buy goods by paying over time. Credit is

extended based on a lender‘s opinion of the person‘s financial situation and reliability, among

other factors.

Credit Bureau: A company that gathers information on consumers who use credit. These

companies sell that information to lenders and other businesses in the form of a credit report.

.

Credit History: Information in the files of a credit bureau primarily comprised of a list of

individual consumer debts and a record of whether or not these debts were paid back on

time or ―as agreed.‖ Your credit history is called a credit report when provided by a credit

bureau to a lender or other business.

Credit Life Insurance: A type of insurance that pays off a specific amount of debt or a

specified credit account if the borrower dies while the policy is in force.

Credit Report: Information provided by a credit bureau that allows a lender or other

business to examine your use of credit. It provides information on money that you‘ve

borrowed from credit institutions and your payment history.


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Credit Score: A numerical value that ranks a borrower‘s credit risk at a given point in time

based on a statistical evaluation of information in the individual‘s credit history that has been

proven to be predictive of loan performance.

.

Creditor: A person who extends credit to whom you owe money.

.

Creditworthy: Your ability to qualify for credit and repay debts.

D Debt: Money owed from one person or institution to another person or institution.

Debt-to-Income Ratio: The percentage of gross monthly income that goes toward paying for

your monthly housing expense, alimony, child support, car payments and other installment

debts, and payments on revolving or open-ended accounts, such as credit cards.

Deed: The legal document transferring ownership or title to a property.

Deed-in-Lieu of Foreclosure: The transfer of title from a borrower to the lender to satisfy the mortgage debt and avoid foreclosure. Also called a ―voluntary conveyance.‖

Deed of Trust: A legal document in which the borrower transfers the title to a third party (trustee) to hold as security for the lender. When the loan is paid in full, the trustee transfers title back to the borrower. If the borrower defaults on the loan the trustee will sell the property and pay the lender the mortgage debt. Default: Failure to fulfill a legal obligation. A default includes failure to pay on a financial

obligation, but also may be a failure to perform some action or service that is non-monetary.

For example, when leasing a car, the lessee is usually required to properly maintain the car.

Delinquency: Failure to make a payment when it is due. The condition of a loan when a

scheduled payment has not been received by the due date, but generally used to refer to a

loan for which payment is 30 or more days past due.

Depreciation: A decline in the value of a house due to changing market conditions or lack of

upkeep on a home.

Discount Point: A fee paid by the borrower at closing to reduce the interest rate. A point

equals one percent of the loan amount.

Down Payment: A portion of the price of a home, usually between 3-20%, not borrowed and

paid up-front in cash. Some loans are offered with zero down-payment.

Due-on-Sale Clause: A provision in a mortgage that allows the lender to demand repayment

in full of the outstanding balance if the property securing the mortgage is sold.


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E Earnest Money Deposit: The deposit to show that you‘re committed to buying the home.

The deposit usually will not be refunded to you after the seller accepts your offer, unless one

of the sales contract contingencies is not fulfilled.

Easement: A right to the use of, or access to, land owned by another.

Employer-Assisted Housing: A program in which companies assist their employees in

purchasing homes by providing assistance with the down payment, closing costs, or monthly

payments.

Encroachment: The intrusion onto another‘s property without right or permission.

Encumbrance: Any claim on a property, such as a lien, mortgage or easement.

Equal Credit Opportunity Act (ECOA):

A federal law that requires lenders to make credit equally available without regard to the

applicant‘s race, color, religion, national origin, age, sex, or marital status; the fact that all or

part of the applicant‘s income is derived from a public assistance program; or the fact that the

applicant has in good faith exercised any right under the Consumer Credit Protection Act. It

also requires various notices to consumers.

Equity: The value in your home above the total amount of the liens against your home. If you

owe $100,000 on your house but it is worth $130,000, you have $30,000 of equity.

Escrow: An item of value, money, or documents deposited with a third party to be delivered

upon the fulfillment of a condition. For example, the deposit by a borrower with the lender of

funds to pay taxes and insurance premiums when they become due, or the deposit of funds

or documents with an attorney or escrow agent to be disbursed upon the closing of a sale of

real estate.

Escrow Account: An account that a mortgage servicer establishes on behalf of a borrower

to pay taxes, insurance premiums, or other charges when they are due. Sometimes referred

to as an ―impound‖ or ―reserve‖ account.

Escrow Analysis: The accounting that a mortgage servicer performs to determine the

appropriate balances for the escrow account, compute the borrower‘s monthly escrow

payments, and determine whether any shortages, surpluses or deficiencies exist in the

account.

.

Eviction: The legal act of removing someone from real property.

Exclusive Right-to-Sell Listing: The traditional kind of listing agreement under which the

property owner appoints a real estate broker (known as the listing broker) as exclusive agent

to sell the property on the owner‘s stated terms, and agrees to pay the listing broker a

commission when the property is sold, regardless of whether the buyer is found by the

broker, the owner or another broker. This is the kind of listing agreement that is commonly

used by a listing broker to provide the traditional full range of real estate brokerage services.


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If a second real estate broker (known as a selling broker) finds the buyer for the property,

then some commission will be paid to the selling broker.

Exclusive Agency Listing: A listing agreement under which a real estate broker (known as

the listing broker) acts as an exclusive agent to sell the property for the property owner, but

may be paid a reduced or no commission when the property is sold if, for example, the

property owner rather than the listing broker finds the buyer. This kind of listing agreement

can be used to provide the owner a limited range of real estate brokerage services rather

than the traditional full range. As with other kinds of listing agreements, if a second real

estate broker (known as a selling broker) finds the buyer for the property, then some

commission will be paid to the selling broker.

Executor: A person named in a will and approved by a probate court to administer the

deposition of an estate in accordance with the instructions of the will.

F Fair Credit Reporting Act (FCRA): A consumer protection law that imposes obligations on

(1) credit bureaus (and similar agencies) that maintain consumer credit histories, (2) lenders

and other businesses that buy reports from credit bureaus, and (3) parties who furnish

consumer information to credit bureaus. Among other provisions, the FCRA limits the sale of

credit reports by credit bureaus by requiring the purchaser to have a legitimate business

need for the data, allows consumers to learn the information on them in credit bureau files

(including one annual free credit report), and specifies procedure for challenging errors in

that data.

Fair Market Value: The price at which property would be transferred between a willing buyer

and willing seller, each of whom has a reasonable knowledge of all pertinent facts and is not

under any compulsion to buy or sell.

Fannie Mae: A New York stock exchange company. It is a public company that operates

under a federal charter and is the nation‘s largest source of financing for home mortgages.

Fannie Mae does not lend money directly to consumers, but instead works to ensure that

mortgage funds are available and affordable, by purchasing mortgage loans from institutions

that lend directly to consumers.

Fannie Mae-Seller/Servicer: A lender that Fannie Mae has approved to sell loans to it and

to service loans on Fannie Mae‘s behalf.

Fannie Mae/Freddie Mac Loan Limit: The current 2006 Fannie Mae/Freddie Mac loan limit for a single-family home is $417,000 and is higher in Alaska, Guam, Hawaii, and the U.S. Virgin Islands. The Fannie Mae loan limit is $533,850 for a two-unit home; $645,300 for a three-unit home; and $801,950 for a four-unit home. Also referred to as the ―conventional loan limit.‖

Federal Housing Administration (FHA): An agency within the U.S. Department of Housing

and Urban Development (HUD) that insures mortgages and loans made by private lenders.

FHA-Insured Loan: A loan that is insured by the Federal Housing Administration (FHA) of

the U.S. Department of Housing and Urban Development (HUD).


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First Mortgage: A mortgage that is the primary lien against a property.

First-Time Home Buyer: A person with no ownership interest in a principal residence during

the three-year period preceding the purchase of the security property.

Fixed-Period Adjustable-Rate Mortgage: An adjustable-rate mortgage (ARM) that offers a

fixed rate for an initial period, typically three to ten years, and then adjusts every six months,

annually, or at another specified period, for the remainder of the term. Also known as a

―hybrid loan.‖

Fixed-Rate Mortgage: A mortgage with an interest rate that does not change during the

entire term of the loan.

Flood Certification Fee: A fee charged by independent mapping firms to identify properties

located in areas designated as flood zones.

Flood Insurance: Insurance that compensates for physical property damage resulting from

flooding. It is required for properties located in federally designated flood hazard zones.

Foreclosure: A legal action that ends all ownership rights in a home when the homebuyer

fails to make the mortgage payments or is otherwise in default under the terms of the

mortgage.

Forfeiture: The loss of money, property, rights, or privileges due to a breach of a legal

obligation.

Fully Amortized Mortgage: A mortgage in which the monthly payments are designed to

retire the obligation at the end of the mortgage term.

G General Contractor: A state licensed person who oversees a home improvement or

construction project and handles various aspects such as scheduling workers and ordering

supplies.

Gift Letter: A letter that a family member writes verifying that s/he has given you a certain

amount of money as a gift and that you don‘t have to repay it. You can use this money

towards a portion of your down payment with some mortgages.

Good-Faith Estimate: A form required by the Real Estate Settlement Procedures Act

(RESPA) that discloses an estimate of the amount or range of charges, for specific

settlement services the borrower is likely to incur in connection with the mortgage

transaction.

Government Mortgage: A mortgage loan that is insured or guaranteed by a federal

government entity such as the Federal Housing Administration (FHA), the U.S. Department

of Veterans Affairs (VA), or the Rural Housing Service (RHS).

Government National Mortgage Association (Ginnie Mae): A government-owned

corporation within the U.S. Department of Housing and Urban Development (HUD) that


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guarantees securities backed by mortgages that are insured or guaranteed by other

government agencies. This agency is popularly known as ―Ginnie Mae.‖

Gross Monthly Income: The income you earn in a month before taxes and other

deductions. It also may include rental income, self-employed income, and income from

alimony, child support, public assistance payments, and retirement benefits.

Ground Rent: Payment for the use of land when title to a property is held as a leasehold

estate (that is, the borrower does not actually own the property, but has a long-term lease on

it).

Growing-Equity Mortgage (GEM):

A fixed-rate mortgage in which the monthly payments increase according to an agreed-upon

schedule, with the extra funds applied to reduce the loan balance and loan term.

H Hazard Insurance: Insurance coverage that compensates for physical damage to a property

from fire, wind, vandalism, or other covered hazards or natural disasters.

Home Equity Conversion Mortgage (HECM): A special type of mortgage developed and

insured by the Federal Housing Administration (FHA) that enables older home owners to

convert the equity they have in their homes into cash, using a variety of payment options to

address their specific financial needs. Sometimes called a ―reverse mortgage.‖

Home Equity Line of Credit (HELOC): A type of revolving loan, that enables a home owner

to obtain multiple advances of the loan proceeds at his or her own discretion, up to an

amount that represents a specified percentage of the borrower‘s equity in the property.

Home Inspection: A professional inspection of a home to determine the condition of the

property. The inspection should include an evaluation of the plumbing, heating and cooling

systems, roof, wiring, foundation and pest infestation.

Homeowner’s Insurance: A policy that protects you and the lender from fire or flood, which

damages the structure of the house; a liability, such as an injury to a visitor to your home; or

damage to your personal property, such as your furniture, clothes or appliances.

Homeowner’s Warranty (HOW): Insurance offered by a seller that covers certain home

repairs and fixtures for a specified period of time.

Homeowners’ Association: An organization of homeowners residing within a particular

area whose principal purpose is to ensure the provision and maintenance of community

facilities and services for the common benefit of the residents.

Housing Expense Ratio: The percentage of your gross monthly income that goes toward

paying for your housing expenses.

HUD-1 Settlement Statement: A final listing of the closing costs of the mortgage

transaction. It provides the sales price and down payment, as well as the total settlement

costs required from the buyer and seller.


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Hybrid Loan: An adjustable-rate mortgage (ARM) that offers a fixed rate for an initial period, typically three to ten years, and then adjusts every six months, annually, or at another specified period, for the remainder of the term.

I Income Property: Real estate developed or purchased to produce income, such as a rental unit. Index: A number used to compute the interest rate for an adjustable-rate mortgage (ARM).

The index is generally a published number or percentage, such as the average interest rate

or yield on U.S. Treasury bills. A margin is added to the index to determine the interest rate

that will be charged on the ARM. This interest rate is subject to any caps on the maximum or

minimum interest rate that may be charged on the mortgage, stated in the note.

Individual Retirement Account (IRA):

A tax-deferred plan that can help you build a retirement nest egg.

Inflation: An increase in prices.

Initial Interest Rate: The original interest rate for an adjustable-rate mortgage (ARM) which

is sometimes known as the ―start rate.‖

Inquiry: A request for a copy of your credit report by a lender or other business, often when

you fill out a credit application and/or request more credit. Too many inquiries on a credit

report can hurt your credit score; however, most credit scores are not affected by multiple

inquiries from auto or mortgage lenders within a short period of time.

Installment: The regular periodic payment that a borrower agrees to make to a lender.

Installment Debt: A loan that is repaid in accordance with a schedule of payments for a

specified term (such as an automobile loan). Interest is usually expressed as a percentage of

the amount borrowed.

Interest: The cost you pay to borrow money not including points on a loan or account charges.

Interest Accrual Rate: The percentage rate at which interest accumulates or increases on a

mortgage loan.

Interest Rate Cap: For an adjustable-rate mortgage (ARM), a limitation on the amount the

interest rate can change per adjustment or over the lifetime of the loan, as stated in the note.

Interest Rate Ceiling: For an adjustable-rate mortgage (ARM), the maximum interest rate,

as specified in the mortgage note.

Interest Rate Floor: For an adjustable-rate mortgage (ARM), the minimum interest rate, as

specified in the mortgage note.


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Investment Property: A property purchased to generate rental income, tax benefits, or

profitable resale rather than to serve as the borrower‘s primary residence. Contrast with

―second home.‖

J Judgment Lien: A lien on the property of a debtor resulting from the decree of a court.

Jumbo Loan: A loan that exceeds the mortgage amount eligible for purchase by Fannie

Mae or Freddie Mac and a Also called a ―non-conforming loan.‖

Junior Mortgage: A loan that is subordinate to the primary loan or first-lien mortgage loan,

such as a second or third mortgage.

K Keogh Funds: Tax-deferred retirement-money you made to retirement-savings plan for

small business owners or self-employed individuals who have earned income from their trade

or business. Contributions to the Keogh plan are tax-deductible.

L Late Charge: A penalty imposed by the lender when a borrower fails to make a scheduled

payment on time.

Lease-Purchase Option: An option sometimes used by sellers to rent a property to a

consumer, who has the option to buy the home within a specified period of time. Typically,

part of each rental payment is put aside for the purpose of accumulating funds to pay the

down payment and closing costs.

Liabilities: A person‘s debts and other financial obligations.

Liability Insurance: Insurance coverage that protects property owners against claims of

negligence, personal injury or property damage to another party.

LIBOR-Index: An index used to determine interest rate changes for certain adjustable-rate

mortgage (ARM) plans, based on the average interest rate at which international banks lend

to or borrow funds from the London Interbank Market.

Lien: A claim or charge on property for payment of a debt. With a mortgage, the lender has

the right to take the title to your property if you don‘t make the mortgage payments.

Lifetime Cap: For an adjustable-rate mortgage (ARM), a limit on the amount that the interest

rate or monthly payment can increase or decrease over the life of the loan.

Liquid Asset: A cash asset or an asset that is easily converted into cash.

Loan Origination: The process by which a loan is made, which may include taking a loan

application, processing and underwriting the application, and closing the loan.


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Loan Origination Fees: Fees paid to your mortgage lender or broker for processing the

mortgage application. This fee is usually in the form of points. One point equals one percent

of the mortgage amount.

Loan-To-Value (LTV) Ratio: The relationship between the loan amount and the value of the

property (the lower of appraised value or sales price), expressed as a percentage of the

property‘s value. For example, a $100,000 home with an $80,000 mortgage has an LTV of

80 percent.

Lock-In Rate: A written agreement guaranteeing a specific mortgage interest rate for a

certain amount of time.

Low-Down-Payment Feature: A feature of some mortgages, usually fixed-rate mortgages,

that helps you buy a home with a low down payment.

M Manufactured Housing: Homes that are built entirely in a factory in accordance with a federal building code administered by the U.S. Department of Housing and Urban Development (HUD). Manufactured homes may be single-or multi-section and are transported from the factory to a site and installed. Homes that are permanently affixed to a foundation often may be classified as real property under applicable state law, and may be financed with a mortgage. Homes that are not permanently affixed to a foundation generally are classified as personal property, and are financed with a retail installment sales agreement.

Margin: A percentage added to the index for an adjustable-rate mortgage (ARM) to establish the interest rate on each adjustment date.

Market Value: The current value of your home based on what a purchaser would pay. An

appraisal is sometimes used to determine market value.

Maturity Date: The date on which a mortgage loan is scheduled to be paid in full, as stated

in the note.

Merged Credit Report: A credit report issued by a credit reporting company that combines

information from two or three major credit bureaus.

Modification: Any change to the terms of a mortgage loan, including changes to the interest

rate, loan balance, or loan term.

Money Market Account: A type of investment in which funds are invested in short-term

securities.

Mortgage: A loan using your home as collateral. In some states the term mortgage is also

used to describe the document you sign (to grant the lender a lien on your home). It also may

be used to indicate the amount of money you borrow, with interest, to purchase your house.

The amount of your mortgage often is the purchase price of the home minus your down

payment.


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Mortgage Broker: An individual or firm that brings borrowers and lenders together for the

purpose of loan origination. A mortgage broker typically takes loan applications and may

process loans. A mortgage broker also may close the loan.

Mortgage Insurance (MI): Insurance that protects lenders against losses caused by a

borrower‘s default on a mortgage loan. MI typically is required if the borrower‘s down

payment is less than 20 percent of the purchase price.

Mortgage Insurance Premium (MIP):

The amount paid by a borrower for mortgage insurance, either to a government agency such

as the Federal Housing Administration (FHA) or to a private mortgage insurance (PMI)

company.

Mortgage Lender: This is the lender providing funds for a mortgage. Lenders also manage

the credit and financial information review, the property and the loan application process

through closing.

Mortgage Life Insurance: A type of insurance that will pay off a mortgage if the borrower

dies while the loan is outstanding; a form of credit life insurance.

Mortgage Rate: The interest rate you pay to borrow the money to buy your house.

Mortgagee: The institution or individual to whom a mortgage is given.

Mortgagor: The owner of real estate who pledges property as security for the repayment of

a debt; the borrower.

Multifamily Mortgage: A mortgage loan on a building with five or more dwelling units.

Multifamily Properties: Typically, buildings with five or more dwelling units.

Multiple Listing Service (MLS): A clearinghouse through which member real estate

brokerage firms regularly and systematically exchange information on listings of real estate

properties and share commissions with members who locate purchasers. The MLS for an

area is usually operated by the local, private real estate association as a joint venture among

its members designed to foster real estate brokerage services.

Mutual Funds: A fund that pools the money of its investors to buy a variety of securities.

N Negative Amortization: An increase in the balance of a loan caused by adding unpaid interest to the loan balance; this occurs when the payment does not cover the interest due. Net Monthly Income: Your take-home pay after taxes. It is the amount of money that you

actually receive in your paycheck.

Net Worth: The value of a company or individual‘s assets, including cash, less total

liabilities.


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Non-Liquid Asset: An asset that cannot easily be converted into cash.

Note: A written promise to pay a specified amount under the agreed upon conditions.

Note Rate: The interest rate stated on a mortgage note, or other loan agreement.

Offer: A formal bid from the home buyer to the home seller to purchase a home.

Open House: When the seller‘s real estate agent opens the seller‘s house to the public. You

don‘t need a real estate agent to attend an open house.

Original Principal Balance: The total amount of principal owed on a mortgage before any

payments are made.

Origination Fee: A fee paid to a lender or broker to cover the administrative costs of

processing a loan application. The origination fee typically is stated in the form of points. One

point is one percent of the mortgage amount.

Owner Financing: A transaction in which the property seller provides all or part of the

financing for the buyer‘s purchase of the property.

Owner-Occupied Property: A property that serves as the borrower‘s primary residence.

P Partial Payment: A payment that is less than the scheduled monthly payment on a

mortgage loan.

Payment Change Date: The date on which a new monthly payment amount takes effect, for

example, on an adjustable-rate mortgage (ARM) loan.

Payment Cap: For an adjustable-rate mortgage (ARM) or other variable rate loan, a limit on

the amount that payments can increase or decrease during any one adjustment period.

Personal Property: Any property that is not real property.

PITI: An acronym for the four primary components of a monthly mortgage payment: principle,

interest, taxes, and insurance (PITI).

PITI Reserves: A cash amount that a borrower has available after making a down payment

and paying closing costs for the purchase of a home. The principal, interest, taxes, and

insurance (PITI) reserves must equal the amount that the borrower would have to pay for

PITI for a predefined number of months.

Planned Unit Development (PUD): A real estate project in which individuals hold title to a

residential lot and home while the common facilities are owned and maintained by a

homeowners‘ association for the benefit and use of the individual PUD unit owners.

Point: One percent of the amount of the mortgage loan. For example, if a loan is made for $50,000, one point equals $500.


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Power of Attorney: A legal document that authorizes another person to act on one‘s behalf.

A power of attorney can grant complete authority or can be limited to certain acts and/or

certain periods of time.

Pre-Approval: A process by which a lender provides a prospective borrower with an

indication of how much money he or she will be eligible to borrow when applying for a

mortgage loan. This process typically includes a review of the applicant‘s credit history and

may involve the review and verification of income and assets to close.

Pre-Approval Letter: A letter from a mortgage lender indicating that you qualify for a

mortgage of a specific amount. It also shows a home seller that you‘re a serious buyer.

Pre-Qualification: A preliminary assessment by a lender of the amount it will lend to a

potential home buyer. The process of determining how much money a prospective home

buyer may be eligible to borrow before he or she applies for a loan.

Pre-Qualification Letter: A letter from a mortgage lender that states that you‘re pre-qualified

to buy a home, but does not commit the lender to a particular mortgage amount.

Predatory Lending: Abusive lending practices that include making mortgage loans to

people who do not have the income to repay them or repeatedly refinancing loans, charging

high points and fees each time and ―packing‖ credit insurance onto a loan.

Prepayment: Any amount paid to reduce the principal balance of a loan before the

scheduled due date.

Prepayment Penalty: A fee that a borrower may be required to pay to the lender, in the

early years of a mortgage loan, for repaying the loan in full or prepaying a substantial amount

to reduce the unpaid principle balance.

Principal: The amount of money borrowed or the amount of the loan that has not yet been

repaid to the lender. This does not include the interest you will pay to borrow that money.

The principal balance (sometimes called the outstanding or unpaid principal balance) is the

amount owed on the loan minus the amount you‘ve repaid.

Private Mortgage Insurance: Insurance for conventional mortgage loans that protects the

lender from loss in the event of default by the borrower. See Mortgage Insurance.

Promissory Note: A written promise to repay a specified amount over a specified period of

time.

Property Appreciation: See ―Appreciation.‖

Purchase and Sale Agreement: A document that details the price and conditions for a

transaction. In connection with the sale of a residential property, the agreement typically

would include: information about the property to be sold, sale price, down payment, earnest

money deposit, financing, closing date, occupancy date, length of time the offer is valid, and

any special contingencies.

Purchase Money Mortgage: A mortgage loan that enables a borrower to acquire a property.


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Q Qualifying Guidelines: Criteria used to determine eligibility for a loan.

Qualifying Ratios: Calculations that are used in determining the loan amount that a borrower qualifies for, typically a comparison of the borrower‘s total monthly income to monthly debt payments and other recurring monthly obligations. Quality Control: A system of safeguards to ensure that loans are originated, underwritten

and serviced according to the lender‘s standards and, if applicable, the standards of the

investor, governmental agency, or mortgage insurer.

R Radon: A toxic gas found in the soil beneath a house that can contribute to cancer and other

illnesses.

Rate Cap: The limit on the amount an interest rate on an adjustable-rate mortgage (ARM)

can increase or decrease during an adjustment period.

Rate Lock: An agreement in which an interest rate is ―locked in‖ or guaranteed for a

specified period of time prior to closing. See also ―Lock-in Rate.‖

Ratified Sales Contract: A contract that shows both you and the seller of the house have

agreed to your offer. This offer may include sales contingencies, such as obtaining a

mortgage of a certain type and rate, getting an acceptable inspection, making repairs, closing

by a certain date, etc.

Real Estate Professional: An individual who provides services in buying and selling homes.

The real estate professional is paid a percentage of the home sale price by the seller. Unless

you‘ve specifically contracted with a buyer‘s agent, the real estate professional represents

the interest of the seller. Real estate professionals may be able to refer you to local lenders

or mortgage brokers, but are generally not involved in the lending process.

Real Estate Settlement Procedures Act (RESPA): A federal law that requires lenders to

provide home mortgage borrowers with information about transaction-related costs prior to

settlement, as well as information during the life of the loan regarding servicing and escrow

accounts. RESPA also prohibits kickbacks and unearned fees in the mortgage loan

business.

Real Property: Land and anything permanently affixed thereto — including buildings,

fences, trees, and minerals.

Recorder: The public official who keeps records of transactions that affect real property in

the area and is sometimes known as a ―Registrar of Deeds‖ or ―County Clerk.‖

Recording: The filing of a lien or other legal documents in the appropriate public record.


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Refinance: Getting a new mortgage with all or some portion of the proceeds used to pay off

the prior mortgage.

Rehabilitation Mortgage: A mortgage loan made to cover the costs of repairing, improving,

and sometimes acquiring an existing property.

Remaining Term: The original number of payments due on the loan minus the number of

payments that have been made.

Repayment Plan: An arrangement by which a borrower agrees to make additional payments

to pay down past due amounts while still making regularly scheduled payments.

Replacement Cost: The cost to replace damaged personal property without a deduction for depreciation.

Rescission: The cancellation or annulment of a transaction or contract by operation of law or by mutual consent. Borrowers have a right to cancel certain mortgage refinance and home equity transactions within three business days after closing, or for up to three years in certain instances. Revolving Debt: Credit that is extended by a creditor under a plan in which (1) the creditor contemplates repeated transactions; (2) the creditor may impose a finance charge from time to time on an outstanding unpaid balance; and (3) the amount of credit that may be extended to the consumer during the term of the plan is generally made available to the extent that any outstanding balance is repaid.

Right of First Refusal: A provision in an agreement that requires the owner of a property to

give another party the first opportunity to purchase or lease the property before he or she

offers it for sale or lease to others.

Rural Housing Service (RHS): An agency within the U.S. Department of Agriculture

(USDA), which operates a range of programs to help rural communities and individuals by

providing loan and grants for housing and community facilities. The agency also works with

private lenders to guarantee loans for the purchase or construction of single-family housing.

S Securities: A financial form that shows the holder owns a share or shares of a company

(stock) or has loaned money to a company or government organization (bond).

Sale-Leaseback: A transaction in which the buyer leases the property back to the seller for a

specified period of time.

Second Mortgage: A mortgage that has a lien position subordinate to the first mortgage.

Secondary Mortgage Market: The market in which mortgage loan and mortgage-backed

securities are bought and sold.

Secured Loan: A loan that is backed by property such as a house, car, jewelry, etc.

Security: The property that will be given or pledged as collateral for a loan.


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Securities: Financial forms that shows the holder owns a share or shares of a company

(stocks) or has loaned money to a company or government organization (bonds).

Seller Take-Back: An agreement in which the seller of a property provides financing to the

buyer for the home purchase. See also ―Owner Financing.‖

Servicer: A firm that performs servicing functions, including collecting mortgage payments,

paying the borrower‘s taxes and insurance and generally managing borrower escrow

accounts.

Servicing: The tasks a lender performs to protect the mortgage investment, including the

collection of mortgage payments, escrow administration, and delinquency management.

Settlement: The process of completing a loan transaction at which time the mortgage

documents are signed and then recorded, funds are disbursed, and the property is

transferred to the buyer (if applicable). Also called closing or escrow in different jurisdictions.

See also ―Closing‖

Settlement Statement: A document that lists all closing costs on a consumer mortgage transaction.

Single-Family Properties: One- to four-unit properties including detached homes, townhouses, condominiums, and cooperatives, and manufactured homes attached to a permanent foundation and classified as real property under applicable state law. Soft Second Loan: A second mortgage whose payment is forgiven or is deferred until resale

of the property.

Servicemembers Civil Relief Act: A federal law that restricts the enforcement of civilian

debts against certain military personnel who may not be able to pay because of active

military service. It also provides other protections to certain military personnel.

Subordinate Financing: Any mortgage or other lien with lower priority than the first

mortgage.

Survey: A precise measurement of a property by a licensed surveyor, showing legal

boundaries of a property and the dimensions and location of improvements.

Sweat Equity: A borrower‘s contribution to the down payment for the purchase of a property

in the form of labor or services rather than cash.

T Taxes and Insurance: Funds collected as part of the borrower‘s monthly payment and held

in escrow for the payment of the borrower‘s, or funds paid by the borrower for, state and local

property taxes and insurance premiums.

Termite Inspection: An inspection to determine whether a property has termite infestation or

termite damage. In many parts of the country, a home must be inspected for termites before

it can be sold.


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Third-Party Origination: A process by which a lender uses another party to completely or

partially originate, process, underwrite, close, fund, or package a mortgage loan. See also

―Mortgage Broker.‖

Title: The right to, and the ownership of, property. A title or deed is sometimes used as proof

of ownership of land.

Title Insurance: Insurance that protects lenders and homeowners against legal problems

with the title.

Title Search: A check of the public records to ensure that the seller is the legal owner of the

property and to identify any liens or claims against the property.

Trade Equity: Real estate or assets given to the seller as part of the down payment for the

property

.

Transfer Tax: State or local tax payable when title to property passes from one owner to

another.

Treasury Index: An index that is used to determine interest rate changes for certain

adjustable-rate mortgage (ARM) plans. It is based on the results of auctions by the U.S.

Treasury of Treasury bills and securities.

Truth-In-Lending Act (TILA): A federal law that requires disclosure of a truth-in-lending

statement for consumer credit. The statement includes a summary of the total cost of credit,

such as the annual percentage rate (APR) and other specifics of the credit.

Two- to Four- Family Property: A residential property that provides living space (dwelling

units) for two to four families, although ownership of the structure is evidenced by a single

deed; a loan secured by such a property is considered to be a single-family mortgage.

U Underwriting: The process used to determine loan approval. It involves evaluating the property and the borrower‘s credit and ability to pay the mortgage. Uniform Residential Loan Application: A standard mortgage application you will have to

complete. The form requests your income, assets, liabilities, and a description of the property

you plan to buy, among other things.

Unsecured Loan: A loan that is not backed by collateral.

V Veterans Affairs (U.S. Department of Veterans Affairs): A federal government agency that

provides benefits to veterans and their dependents, including health care, educational

assistance, financial assistance, and guaranteed home loans.

VA Guaranteed Loan: A mortgage loan that is guaranteed by the U.S. Department of

Veterans Affairs (VA).

W


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Walk-Through: A common clause in a sales contract that allows the buyer to examine the

property being purchased at a specified time immediately before the closing, for example,

within the 24 hours before closing

Warranties: Written guarantees of the quality of a product and the promise to repair or

replace defective parts free of charge.

32 Ways to Stop Foreclosure - Online Text -Final

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