North Fulton County GA, including Alpharetta, Milton, Johns Creek and Roswell real estate listings and homes for sale, home buying, home selling information – Thomas J. Esposito

The North Fulton Blog

The Alternatives to Foreclosure Part 3

June 9th, 2010 9:54 AM

The remaining alternatives to foreclosure available to homeowners are:

Deed in Lieu of Foreclosure(DIL) - Sometimes referred to as a friendly foreclosure since the homeowner gives back the deed and their rights to the home in exchange for avoiding foreclosure. The banks avoid the lengthy and costly foreclosure and frequently, they will forego their right to a deficiency judgement. This will only work where there is one mortgage and there are no other liens on the home. While this option doesn't carry quite the hard hit to a credit record as a foreclosure, it is usually more severe than a short sale. There may also be a requirement for the homeowner to try to sell the home for a specified period before the lender will proceed with a deed in lieu of foreclosure.

Bankruptcy - A bankruptcy will usually stop a foreclosure and allow a homeowner to reorganize his debts and keep his property. The reality is that most of the time this doesn't work out and only stalls the foreclosure. If the homeowner is not able to make the payments after bankruptcy, the house will be foreclosed on anyway.

Servicemembers Civil Relief Act (SCRA) - This bill was signed into law in 2003 and provides protection to military personnel that are in foreclosure in specific situations. It can provide temporary relief from paying his mortgage under specific circumstances caused by his military service.

Short Sale - When a homeowner owes more on his property than it is currently worth, there is an option of pursuing a short sale. Due to recent and overwhelming market changes, lenders have become much more negotiable in resolving these transactions. Very simply, a short sale takes place when a lender agrees to accept less than the full balance of the loan at closing. A buyer closes on the property and it is "sold short".

That concludes the section on alternatives to a foreclosure. I will be expanding the discussion on short sales because that is normally the best solution for someone facing foreclosure and it is what I have specifically trained to do. So please continue to follow the short sale thread in future posts.

Posted by Tom Esposito on June 9th, 2010 9:54 AMPost a Comment (0)

The Alternatives to Foreclosure Part 2

June 6th, 2010 3:39 PM

In my last post, I discussed the alternatives to foreclosure available to homeowners. I then discussed 4 of them in more depth. I wanted to continue that discussion today.

Refinance - If the homeowner has sufficient equity in the home and their credit has not been too badly damaged, they may be able to refinance. This also may be a short term solution since payments are usually higher than what they were since they include closing costs. If the hardship that caused the late payments is still an issue, chances are the owners will be late again, plunging them back into the foreclosure scenario.

Mortgage Modification - Mortgage lenders have attempted to modify some mortgages to assist homeowners by making them more affordable. These modifications may take the form of lower interest rates or a reduction of the principle owed. The federal government has attempted to forestall the tide of foreclosures with the creation of the Home Affordable Modification Program (HAMP), where incentives are paid to lenders that successfully modify homeowner mortgages and avoid a foreclosure. Many of those that have received a "trial modification" slip right back into default usually since they hardship that caused the situation in the first place has not been eradicated. Since the numbers of successful mortgage modifications has been extremely small, this HAMP program has largely been considered a failure.

Short Re-fi - This is a relatively new option offered by some lenders. It involves a refinance of a home with a reduction in the principle balance and lower interest rates. The borrower will have to show a hardship and be able to show that they can pay the reduced amount before being approved.

In My next post, I will cover the remaining alternatives.

Posted by Tom Esposito on June 6th, 2010 3:39 PMPost a Comment (0)

The Alternatives to Foreclosure

June 4th, 2010 1:44 PM

Many homeowners facing foreclosure believe that there is nothing they can do to avoid it. But there are 11 options available to avoid foreclosure. They are:

Reinstatement

Forbearance or repayment plan

Sell the property

Rent the property

Refinance

Mortgage modification

Short re-fi

Deed in lieu of foreclosure

Bankruptcy

Servicemembers Civil Relief Act (SCRA)

Short Sale

Reinstatement - A reinstatement requires that a homeowner pay all missed payments, late fees, and legal fees that are due up to the date the loan is reinstated. The amount owed is time sensitive and will increase usually after 30 days.

Forbearance - If the issue that caused the homeowner to miss payments was temporary and the owner is unable to make a full reinstatement payment, they may be able to negotiate a forbearance or repayment plan. The lender will allow the borrower to pay the missed amount over a period of time, in addition to making their regular monthly payment. This will probably require the owner to show that the hardship has passed and they are capable of making future, larger payments until they're caught up. NOTE: Typically, a mortgage is not fully reinstated under this repayment plan until all payments are made in full. If a homeowner misses one payment, the lender can and usually does, reinstate the foreclosure process at the stage they were in previously.

Sell the Property - If the owner has equity in the home, they can sell it and use those funds to cure the foreclosure. The biggest problem with this alternative is that homeowners believe they have to hurry and sell the property, take the first offer they receive and it's less than what they need to cure the foreclosure. If they had a smart agent to advise them, they would immediately change over to a short sale and proceed to closing. Unfortunately, there are so many homes with a mortgage that are "upside down" that this option doesn't always work. The estimate is that currently 50% of all homes with a mortgage are upside down. As the economy and unemployment situation creep along, this percentage is sure to rise.

Rent the Property - In some cases a homeowner facing foreclosure can rent the property to cover his mortgage. This is a short term solution since when the taxes and insurance payments are due, many homeowners can't make those payments. The lender will force them to start an escrow account to cover the insurance and taxes, raising the monthly mortgage note higher than the rent can cover. Another potential problem to consider is if the homeowner is renting out their home, where are he and his family going to live?

This has been a brief explanation of some of the alternatives available to those facing a foreclosure situation. I would strongly advise homeowners considering one or more of these alternatives to speak with a legal and financial adviser before proceeding. If they decide to proceed, then they should seek the assistance of a real estate professional for those alternatives involving a change of ownership. We will continue with this discussion further in my next post.

Posted by Tom Esposito on June 4th, 2010 1:44 PMPost a Comment (0)

New Website

June 1st, 2010 10:10 AM

As I had mentioned a few weeks ago, I have changed the focus of my business to reflect the continued importance of helping homeowners avoid foreclosure. It will take me a few weeks to make the changes I want in this website, changes that will support the distressed property emphasis of my business. You'll be able to find me at www.northfultonhomebuyer.com for a while longer, but then you can locate me at www.dpsac.com. That stands for the name of my business: Distressed Property Solutions of Alpharetta and Cumming, (dpsac). I thought it would be easier to use this than to spell out that long name each and every time someone wanted to log on.

I will also have another website at the Certified Distressed Property Expert website but that won't be available quite yet. The true benefit of that site will be that you can download reports of interest and check eligibility for doing a HAFA shortsale. Well, more information to follow. As you check back here to view the blog articles, you'll start to see the new site take shape. I hope it will be informative and useful to you. I think we're going to be shackled with these distressed properties for the next 5-7 years, so we might as well know all we can about them. Thanks.

Posted by Tom Esposito on June 1st, 2010 10:10 AMPost a Comment (0)

Attitude of Homeowners Facing Foreclosure

May 30th, 2010 5:10 PM

Today I wanted to spend some time briefly discussing the attitude of many homeowners facing foreclosure. Many of the people I’ve spoken to were in denial. They couldn’t believe that they were in this kind of a situation. Most did not know what steps to take. They were looking for a way out but just did not know where to turn.

Many of them were deeply embarrassed. Most of us were raised with a sense of responsibility to fulfill our obligations. The idea that the man of the house was responsible for keeping a roof over his family’s head and providing food for the rest of the family was a prevalent theme when I was growing up. If you were not able to provide for your family you were ashamed. This embarrassment keeps many homeowners, mostly men, from seeking help. They don’t know what actions to take and where to go for help. They can’t tell friends or family and especially couldn’t tell the neighbors since that would increase their embarrassment.

If they did seek assistance from their lender, they usually had to hold on the phone for lengthy periods of time, sometimes hours, adding frustration to their embarrassment. In the early days of the foreclosure crisis, the banks didn’t have a clue what to do. After waiting a long time, you reached someone who did not know what to tell you. Their constant response was "when are you going to make a payment". They didn’t understand that if you had the money you’d have made the payment. They were not sensitized to any hardship you may be suffering that precluded you from making the payment. The only sure thing was a phone call EVERY DAY from the bank asking when you were going to pay. It is no wonder that 70% of all homeowners facing foreclosure take no action at all. That is an incredible statistic. Many just withdraw inside themselves wishing the problem would go away. They become paralyzed into taking no action.

It has only been in the past year to 18 months that we’re seeing the banks getting their houses in order. After getting their bailouts, many of the banks were able to stabilize themselves. Still, more than 300 banks failed over the last year and a half. But they have now doubled their staff and trained their employees to handle the needs of their customers. We’re not out of the woods by a long shot, but we’re making progress.

In the midst of all this turmoil, the short sale came into the spotlight. This tool has been around for a long time, but has been used sparingly. However we’re seeing a tremendously large quantity of short sales making their way through the cumbersome and lengthy maze to become the one alternative to a foreclosure that offers a real sense of a solution to the foreclosure crisis.

A homeowner will still take a hit in their credit score and won’t be able to purchase a home for a few years, but this "waiting period" isn’t all bad. It will give families an opportunity to recover from their hardship and get their finances in order before venturing into the homeownership situation again. I know that homeowners are feeling better about themselves and the situation they find themselves in today. They can start to see the light at the end of the tunnel. They are also beginning to understand that they are not in this situation alone. That doesn’t make it okay to default on your mortgage, but many others are also going through a similar situation which makes their dilemma easier to deal with. With the high unemployment rate and the housing market not rebounding as quickly as we’d like, we have a long ways to go before we’ll see the return of the real estate industry and our economy, but we’re taking the first steps in the long road to recovery, one home at a time.

Posted by Tom Esposito on May 30th, 2010 5:10 PMPost a Comment (0)