Stop Foreclosure Answer

Many people who pay their mortgages on time every month and who have never been late on any of these payments are frustrated because of what they have heard about the new program announced by the Obama Administration in March to help people facing foreclosure.  They have heard that to save their homes people in foreclosure may get interest rates as low as 3%.  The interest rates on their own mortgages are much higher than 3%.  No one is giving them a break on their rates.

People who are seriously late on their mortgage payments are being rewarded while those who are conscientious and pay their mortgage on time are being zapped.  Where’s the justice?

You know – ever since this mortgage crisis started we have been told that the increase in foreclosures has been due to people defaulting on subprime mortgages.  Normally these were people with low income and lousy credit.  They were classified as losers.

Why should people in foreclosure be given a break on their interest rate and monthly payment?  They don’t deserve it?  If they can’t make the payment now, they deserve to lose their homes.

Is that view of people in foreclosure accurate? Let’s take a closer look at it.

I can guarantee you that you will be surprised by who is actually facing foreclosure.  Most probably someone you know, maybe even a relative, is in foreclosure right now and you have had no idea that this has happened to them. 

How could this be?  Well, they haven’t told anyone because they are too embarrassed.  It is possible that they made some poor financial decisions in the past which caused this crisis for them.  Most probably it was something else beyond their control. 

As long as there have been mortgages, there have always been people facing foreclosure.  Before the subprime crisis the primary reasons were:

Job Loss

When a person loses their job and remains unemployed for an extended period of time, they frequently can not continue to make their mortgage payments.

Job Transfer

With all the downsizing going on companies have told employees that if they wanted to keep their jobs they would have to move to a different location.  Sometimes they had to move to another state.  Many had homes they couldn’t sell and ended up with homes in 2 locations.  As time passed, they found that they could not continue to make mortgage payments on both homes.

Serious Illness

Sometimes a family member has a serious illness that lasts a long time.  The cost for treatment is not covered fully by insurance.  The family may not recover financially after paying these bills off.

Divorce

Divorce is not only tragic but also can be expensive.  Frequently the spouse keeping possession of the home finds that they can not make the payments on the mortgage.

Death

When the primary wage earner in the family dies unexpectedly, the family may not have enough income to keep making the mortgage payments.

Even people with subprime mortgages who had been making their payments on time every month have had to face foreclosure when their mortgage reset and they found that there was no way to refinance it.  Their monthly payment increased so drastically that there was no way they could pay it.

I am sure that you would agree with me that help should be given to people who face crises like these so that they don’t lose their homes.  For many couples losing a home is the culmination of the financial crisis they have experienced.  Frequently such a strain is placed on the marriage that it does not survive.  The couple ends up divorcing.

There are several other things you may not realize about how these mortgages will be modified under the plan announced by the Obama administration in March.

First, the interest rate the person in foreclosure gets will be determined by where their mortgage payment is in relationship to their gross monthly income.  In only extreme cases would the interest rate be reduced to 3%.  The majority of time it will be higher.

Second, there is a trial period of 3 months.  If the person does not make the payment on time monthly for the first 3 months, the terms of the original mortgage are not modified.

Third, the initial lower rate is only in effect for the first 5 years.  After that the rate rises 1% a year until it reaches a maximum.  The maximum rate is the prevailing rate now at the time the mortgage is modified.  It would be comparable to the interest rate a person not in foreclosure could get on the same date.

This new program may go a long way in helping people save their homes.  If it does, the number of foreclosures will be significantly reduced.  There will be less strain put on us by declining home values and the cost to subsidize future bailouts.

Much Success,

Mark Elkins

Many people facing foreclosure are embarrassed.  They are embarrassed of the situation they are in.  They are embarrassed that they could not do anything to prevent it.  Many times they feel they should have done something to prevent it even when there was nothing that they could have done.

Frequently they isolate themselves because of the embarrassment.  They don’t want their relatives or friends to know what is happening.  So they avoid them.

They feel that they are alone.  They can’t imagine that other people have been through this before.  That is where they are wrong.

Foreclosure only pertains to mortgages.  For most of our country’s history, mortgages as we know them today did not exist.  So foreclosures only have been common in the last 70 years.

However, there have always been bankruptcies.  The only difference between  bankruptcy and foreclosure is that a foreclosure is tied to a mortgage.

Last year we all heard that Ed McMahon, Johnny Carson’s sidekick on the Tonight Show, was facing foreclosure on his Beverly Hills home.

Let me tell you about some of the other famous people who have gone thru bankruptcy.  I think that you are going to be surprised.

First, there was Thomas Jefferson, the third president of the United States and principal author of the Declaration of Independence.  Following his death his estate, Monticello, and all of his possessions were auctioned off to pay his debts.

Then there was Thomas Paine, a counterpart of Thomas Jefferson and author of Common Sense in 1776.  This pamphlet advocated our independence from Great Britain.  

The great painter, Rembrandt, and the author, Mark Twain, also declared bankruptcy in their lives.

Presidents were not spared.  Abraham Lincoln, Ulysses S. Gant and William McKinley were bankrupt at some points in their lives.

We all know the problems General Motors has now.  Not many people know that William C. Durant, the founder of General Motors, was bankrupt in the years after he founded the company.

Milton Hershey, the founder of Hershey Foods which makes Hershey Bars, went bankrupt prior to founding the company.

Larry King, the Talk show host, and Dorothy Hammill, the Champion Olympic figure skater, also declared bankruptcy.

Then there was Rock and Roll pioneer, Jerry Lee Lewis, and singers, Mick Fleetwood, Willie Nelson and Wayne Newton.

Actors were not spared.  Don Johnson, Burt Reynolds and Mickey Rooney all filed for bankruptcy.

Even Walt Disney and Donald Trump experienced bankruptcy.

Abraham Lincoln and many of the others declared bankruptcy earlier in their lives and didn’t allow it to hold them back.  They went on to accomplish great things in their lives.  Many also reacquired wealth after recovering from the bankruptcy.

If you are facing foreclosure, just realize that you are not alone.  Take charge of the process.  Do everything you can to save your home and maintain your dignity.  Remember – don’t try to handle it on your own.  Get the help you need for a lawyer or an expert in the field.  You will have a greater sense of peace throughout the process.  You will also have greater success.

Much Success,

Mark Elkins    

Sometimes lenders don’t seem to have the brightest customer service people working for them.  Maybe I should say that the people working for them are just content with putting in their hours and having a job.  They are not really passionate about giving great customer service to the people who contact them.

You know what I mean – the kind of people that are just putting in their 40 hours every week.  The only reason they are working in the job they have is to get their pay every Friday.  They have no desire to help people.  They would rather be working someplace else.  Yet because of their attitude this was the only job they could find.

I have heard of people who are having financial challenges and struggling to pay all of their bills on time.  They have kept paying their bills on time; however, they have gone through all of their savings.  Then they have gotten advances on their credit cards to make their payments.

They are now at the point where their savings are exhausted.  They are at the limits on each credit card they have.  There is nowhere else they can go for additional money to pay their bills.  Soon their payments will be late.

Their financial situation may be temporary.  Their crisis may have been caused by unemployment and now they are on the verge of getting a new job.  The new job won’t pay them as much as the old one but they will be able to pay their bills.  They may have had a home which they could not sell.  They have decided to rent it.  When the rent money comes in, they will have more than enough to pay their bills.

They just need help short term to tide them over until the money comes in.

They contact their mortgage lender and talk to a customer service representative.  They explain their financial situation to them.  The customer service representative checks the mortgage record.  The payments on the mortgage have been made time up to this point.

The customer service representative advises them that since their record is current, nothing can be done.  If they were two months or more behind on their payments, they might be able to get a loan modification.  However, right now they cannot.

Duh – does that make any sense? I don’t think so.

These people don’t want to fall behind on their payments.  They just want the lender to work with them.  Yet the customer service representative implies that the lender won’t do anything until they fall two or more months behind on their payments. 

By going by a strict interpretation of the guidelines the lender will not be paid as quickly.  The mortgage may go into foreclosure.  The people lose all respect for the lender.

It really upsets me to hear about customer service representatives who do this.  Rather than helping they are making the situation worse.  In the long run they are costing you and me money because if people in these situations go into foreclosure, the lender loses.  We pay with our tax dollars to bail them out.  We also pay in the form of higher interest rates on mortgages.

I hope that you are not caught in this situation.

Much Success,

Mark Elkins

Check out any Loan Modification firm before you have them represent you. There are many scams.  There are also firms whose employees do not know the law completely and end up costing their clients money…  

There have been numerous stories of people in foreclosure who have been ripped off by these firms.  There also have been numerous times where the settlements they got for their clients were not the best and their charges were outrageous.

Let me tell you about the experience a friend of mine had with one of these firms. I was unaware that he was in foreclosure and that he had contacted this firm. Prior to the modification being agreed to he told me what it was. 

The deal the Loan Modification firm worked out for him with his lender was that he would pay them $5,000 upfront to have his mortgage reinstated.  The monthly payment on his mortgage would drop by $100. 

Here’s the kicker – The $100 drop was in the escrow portion of his payment.  He bought cheaper insurance which brought the payment down $100.  The principal and interest portion of his payment was remaining the same. 

The Loan Modification firm charged him $1,500 for their services.  As far as they were concerned, they had earned their fee.  They did get his foreclosure stopped.

There was one other issue.  He did not have the $5,000 to pay the lender.  He would have had to borrow it from family or friends or take it from the money he was using to pay other bills.  Neither one of these were ideal for him. 

If he borrowed the money from family or friends, he may have damaged his relationships with them.  There was no way that he would be able to repay them quickly.

If he took it from the money he had allocated for other bills, he would fall behind on his payments there.  He would end up late on all those payments too.

When he told me the arrangement the Loan Modification firm had worked out, I asked him if I could see what I could do.  I got on the phone with the lender.  I used what I had learned about the law to negotiate to my friend’s advantage. 

I got them to accept $1,000 rather than $5,000 to have his mortgage reinstated.  I also negotiated a savings of $150 in his monthly principal and interest payment.  My friend still had the $100 a month savings on his insurance.  So his net savings each month was $250.

Are you ready for the sad thing?  If my friend asked for my help right at the start, I may have been able to save him more money.  However because of the botched job the Loan Modification firm did, my hands were tied.

I don’t want to see the same thing happen to you that happened to my friend.  If you decide to use a Loan Modification firm, make sure that they are reputable.  Then make sure that the modification they get for you is the best that they can get.

You don’t want to be burned in a scam.  You also want them to get the best arrangement for you that they can.

Much Success,

Mark Elkins  

There was an article in the March RealtyTrac Newsletter that really made me sad. 

It talked about the large number of people just giving up and walking away from their homes.  They no longer believe they can stop the foreclosure on their homes.  Their frustration rises when their homes are declining in value and they have little or no equity left.

This is happening more frequently in those states with the highest number of foreclosures – California, Florida, Nevada, Ohio, Michigan and Arizona.

The owners no longer have hope.  They don’t see any way to get out of the financial crisis they have experienced.  When I hear this, I wonder what the impact is on their families.  What are their kids experiencing?  Do they have the same worries and fears that their parents do?  What are the long range consequences for them?

Frequently when a homeowner in foreclosure sees another homeowner give up and walk away, they find it easier to do the same thing.  They don’t want to fight as hard to keep their home.  They think that their neighbor fought hard and it didn’t work for their neighbor.  So it’s not going to work for them. They just throw in the towel and walk away.

I live in the Chicagoland area and I was glad to see that my area is bucking the trend.  Owners here are not giving up and walking away as frequently as in other areas.  The article in the Mark RealtyTrac newsletter commented that the reason for this is that lenders want to keep homeowners in their homes.  They are more open to working with them.

There was another bright spot in the article.

A homeowner in California was considering walking away from his home.  Before he did, he did some more research.  He found that the lender had made a mistake on his mortgage.  He actually was not in default.  The attorney representing the lender sent the homeowner a check for $30,000 and had the credit bureaus remove the negative comments in his credit.  His credit scores were restored.

I firmly believe that if more study of this is done, it will be found that most of the homeowners who are walking away from their homes either have done nothing to try to stop the foreclosure or tried to represent themselves.  They found that it was too much for them to handle.

If you are in foreclosure, don’t just sit there and think that this is a bad dream that will go away take action.  Don’t try to represent yourself.  Get in touch with lawyer specializing in foreclosures or find a lay expert who has detailed knowledge of all aspects of foreclosures.  Have them review your situation and tell you what action to take.  Even have them represent you.

You want to take control of the process and do all that you can to save your home.  When you have a lawyer or an expert on your side, you know that they will be there supporting and guiding you.

Much Success,

Mark Elkins