Foreclosure Prevention Seminar

Presented by The Roanoke Real Estate Team

Saving homes by fixing loans

1. Your lender does not want your home.

2. Your lender wants to help you stay in your home.

3. Staying in your home is the preferred outcome.

4. Together we can make that happen.

Early Warning Signs of Foreclosure

• Credit card debt out of control.• Paying for necessities with credit cards. (groceries, utilities,

etc.)• Cannot meet monthly financial obligations. • Borrowing from friends and family.• Loss of employment, or reduction in hours or wages.• Major illness which can cause loss of work and increased

health costs.• Divorce, separation, or other traumatic family or personal

situation.• Death of a spouse or significant other.• Cannot afford new adjusted payment on a ARM mortgage loan.• Major unbudgeted maintenance expense. • Excessive debt is the number one cause of financial collapse

and foreclosure.

Keys to saving your home

• Act as soon as possible.• Do not ignore letters from your lender.• Tell the lender what they can do to help you.• Consult professionals; Lawyer, CPA, Realtor.• Prioritize spending by only paying for the

necessities. • Look for ways to generate cash, sell items that

have value, but are not used or needed.• Don’t get scammed by “foreclosure prevention

specialists” offering to save your home for a fee.

Alternatives to Foreclosure

• Forbearance: Lender may allow borrower to skip a payment, if borrower has a reasonable plan to catch up arrears.

• Reinstatement: Borrower agrees to make a lump sum payment in the future to bring mortgage up to date. (tax return, future bonus, anticipated increase in income)

• Repayment Plan: Borrower makes increased monthly payments until the missed payments are brought current.

Loan Modification

• Modify the mortgage by converting it to a fixed rate mortgage and a lower interest rate, extending the years and lowering the payment.

• Increasing the term of the mortgage and adding the “missed payments” to the end of the loan.

• Forgiving part of the loan to make it more affordable.• Deed in Lieu of Foreclosure or “Deed for Keys”: This does have a

negative impact on the borrowers credit, though not as much as foreclosure.

• Cash for Keys- When the borrower has equity built up in the home, the borrower and lender agree to exchange a cash settlement for the home.

• Sell the home: If the value of the home is greater than the loan amount it is a good possibility the home could be sold.

Some lenders may be willing to do one or all of the following

Short Sale

• Borrower is “Upside Down” in the home, owes more than the home is able to be sold for.

• Home needs to have a fully executed contract before it can be presented to the bank for consideration.

• Seller can continue to live in the home while it is on the market.

• Do not need to be behind on payments.• Does not show up as a negative on credit report• Saves Lender time and money, reduces amount

of foreclosed properties the Lender needs to service.

The last resort

Common reasons for Short Sale

• Money: Loss of job, decrease in household income, etc.

• Marital: Divorce or legal seperation.

• Medical: Long term disability, injury, or illness.

The Short Sale Process

• Have you missed any payments? • Have you received a foreclosure notice? • What is the hardship contributing to the

need for a short sale?• Have you filed for bankruptcy protection?• Do you have a home equity line of credit

or any type of second mortgage?• Are there any liens against the house title?

(taxes, contractors, etc.)

Borrowers status with the Lender:

The Short Sale Process

• Bank Statements: Previous 2 months statements• Financial Statements: Show all income sources, current

bank balances, any assets and expenses.• W-2’s: Previous 2 years W-2 forms.• Tax Returns: Previous 2 years Federal tax return.• Hardship Letter: A letter stating the reasons for the

delinquent payments.• Other Account Information: IRA’s, 401k’s, etc.• Other pertinent Information: Bankruptcy filing, Death

Certificate, Divorce Decree, Disability letter, etc.• Must represent all persons named on loan documents.

Borrowers Documentation