It’s Not Too Late

Wondering what a homeowner should expect when payments are missed? The most important thing to know is that no matter what stage of default a homeowner is in, there is almost always a way to avoid foreclosure. That being said, the quicker a homeowner does something about the situation, the less challenging it will be to resolve.

First, here’s what a distressed homeowner should expect to happen when payments are missed:

30 Days Late: The lender will attempt phone contact or send a notice in the mail.

60 Days Late: The lender will attempt to make contact by phone and follow up with another letter in the mail.

90 Days Late: The lender will send a letter demanding all past due amounts within 30 days and start the foreclosure process.

120 Days or More Late: The lender’s attorneys will take over and the homeowner will be responsible for their fees in addition to missed mortgage payments and the loan amount due.

Not late yet, but about to be?

Homeowners who are not late but foresee missing payments should communicate this to their lenders as soon as possible. In the past, many banks wouldn’t work with homeowners unless they were one or more payments behind. In light of the mortgage crisis, most lenders who would rather take a proactive stance and decrease their loan losses. They are more willing than ever to work with homeowners to avoid being late.

If you or someone you care about is late with payments or may miss mortgage payments in the near future, call me.  I can help navigate the process and lead the way back to a path toward financial stability. Contact me today and alleviate the stress that comes with unaffordable mortgage payments.

Thanks for reading.

John

Be sure to check out NJShortSaleConnection.com

And if you’re not a distressed homeowner but thinking about buying or selling, check out Connect2Homes.com

“At a time when many Americans are struggling to pay their mortgages, peddlers of so-called mortgage relief services have taken hundreds of millions of dollars from hundreds of thousands of homeowners without ever delivering results,” FTC Chairman Jon Leibowitz said. “By banning providers of these services from collecting fees until the customer is satisfied with the results, this rule will protect consumers from being victimized by these scams.” After all, since they cannot make money for nothing, those whose intent is only to defraud the public will vanish from the industry.

The FTC issued the Mortgage Assistance Relief Services (MARS) Rule to protect distressed homeowners from scam artists who have sprung up during the mortgage crisis. This despicable operations falsely claim that, for a fee, they will negotiate with the consumer’s mortgage lender or servicer to obtain a loan modification, a short sale, or other relief from foreclosure. Many of these operations pretend to be affiliated with the government and government housing assistance programs. The FTC has brought more than 30 cases against operations like these, and state and federal law enforcement partners have brought hundreds more.

Advance fee ban

The most significant consumer protection under the FTC’s rule is the advance fee ban. Under this provision, mortgage relief companies may not collect any fees until they have provided consumers with a written offer from their lender or servicer that the consumer decides is acceptable, and a written document from the lender or servicer describing the key changes to the mortgage that would result if the consumer accepts the offer. The companies also must remind consumers of their right to reject the offer without any charge.

Disclosures

The Rule requires mortgage relief companies, sometimes called dept assistance programs, mortgage modification program counselors and the like, to disclose key information to consumers to protect them from being misled and to help them make better informed decisions. In their advertising and in communications directed at individual consumers (such as telemarketing calls), the companies must disclose that:

• they are not associated with the government, and their services have not been approved by the government or the consumer’s lender;
• the lender may not agree to change the consumer’s loan; and
• if companies tell consumers to stop paying their mortgage, they must also tell them that they could lose their home and damage their credit rating.

Companies also must explain in their communications to consumers that they can stop doing business with the company at any time, can accept or reject any offer the company obtains from the lender or servicer, and, if they reject the offer, they don’t have to pay the company’s fee. The companies also must disclose the amount of the fee.

Prohibited claims

The MARS Rule prohibits mortgage relief companies from making any false or misleading claims about their services, including claims about:

1. the likelihood of consumers getting the results they seek;
2. the company’s affiliation with government or private entities;
3. the consumer’s payment and other mortgage obligations;
4. the company’s refund and cancellation policies;
5. whether the company has performed the services it promised;
6. whether the company will provide legal representation to consumers;
7. the availability or cost of any alternative to for-profit mortgage assistance relief services;
8. the amount of money a consumer will save by using their services; or
9. the cost of the services.

In addition, the rule bars mortgage relief companies from telling consumers to stop communicating with their lenders or servicers. Companies also must have reliable evidence to back up any claims they make about the benefits, performance, or effectiveness of the services they provide.

Attorney exemption

Attorneys are generally exempt from the rule if they meet three conditions: they are engaged in the practice of law, they are licensed in the state where the consumer or the dwelling is located, and they are complying with state laws and regulations governing attorney conduct related to the rule. To be exempt from the advance fee ban, attorneys must meet a fourth requirement – they must place any fees they collect in a client trust account and abide by state laws and regulations covering such accounts.

Just to be clear, I have not found a lot of attorneys who truly understand all of the options for distressed homeowners.  Here is where I will put in my shameless plug for those in my geographic area.  The people most knowledgeable about the options are real estate agents who are Certified Distressed Property Experts (CDPE).  We are kept up to date on the ever-changing laws and rulings concerning distressed properties.  If you’re not in my area, I can help you find a CDPE/Colleague in any part of the country.  Banks also tend to approve more transactions when a CDPE is involved, due to our competence.  I am the willing recipient of referrals from the distressed property divisions at two major banks in my area.

The bulk of the ruling went into effect in December, 2010.  The Advance Fee ban went into effect Junaury, 2011.  The FTC rulemaking proceeding was conducted pursuant to Congressional legislation sponsored in 2009 by Senators Jay Rockefeller and Byron Dorgan. The Final Rule applies only to entities within the FTC’s jurisdiction under the Federal Trade Commission Act, which excludes, among others, banks, savings and loans, federal credit unions, common carriers, and entities engaged in the business of insurance. In June 2009, the FTC issued an Advance Notice of Proposed Rulemaking seeking comment on the practices of for-profit mortgage relief companies. In February 2010, the FTC announced a Notice of Proposed Rulemaking and sought comments from interested persons, including advocates for consumers, the business community, and the legal profession.

Click here for facts about mortgage consumers’ rights.

The Federal Trade Commission works for consumers to prevent fraudulent, deceptive, and unfair business practices and to provide information to help spot, stop, and avoid them.  To file a complaint in English or Spanish, visit the FTC’s online Complaint Assistant or call 1-877-FTC-HELP (1-877-382-4357).  The FTC enters complaints into Consumer Sentinel, a secure, online database available to more than 1,800 civil and criminal law enforcement agencies in the U.S. and abroad.  The FTC’s website provides free information on a variety of consumer topics.

STAFF CONTACT:

Laura Sullivan or Evan Zullow
Bureau of Consumer Protection
202-326-3224

(MARS)
(FTC File No. R911003)

The current U.S. housing market and national financial crisis has caused untold stress and heartache for many American families. Foreclosure is one of the most devastating financial challenges that a family can face and one that many times can be avoided. There are options available to home owners in need.  Below is a brief explanation of these solutions, including their benefits and drawbacks:

Reinstatement
A reinstatement is the simplest solution for a foreclosure, however it is often the most difficult. The homeowner simply requests the total amount owed to the mortgage company to date and pays it. This solution does not require the lender’s approval and will ‘reinstate’ a mortgage up to the day before the final foreclosure sale.

• Benefit: Does not require the mortgage company or lender’s approval.
• Drawback: Requires that a homeowner be able to pay all back payments, fines and fees.

Forbearance or Repayment Plan
A forbearance or repayment plan involves the homeowner negotiating with the mortgage company to allow them to repay back payments over a period of time. The homeowner typically makes their current mortgage payment in addition to a portion of the back payments they owe.

• Benefit: Allows the homeowner to make back payments over time.
• Drawback: Requires that a homeowner be in a financial position to pay not only their current mortgage, but also a portion of the back payments owed. Some mortgage companies will require a homeowner to ‘qualify’ for forbearance.

Mortgage Modification
A mortgage modification involves the reduction of one of the following: the interest rate on the loan, the principal balance of the loan, the term of the loan, or any combination of these. These typically result in a lower payment to the homeowner and a more affordable mortgage.

• Benefit: Reduces the payment a homeowner is required to make on a monthly basis and may reduce the principal balance of the loan
• Drawback: Requires that a homeowner ‘qualify’ for the new payment and will often require full documentation. Lender has to be actively pursuing modifications.

Rent the Property
A homeowner who has a mortgage payment low enough that market rent will allow it to be paid, is able to convert their property to a rental and use the rental income to pay the mortgage.

• Benefit: Allows homeowner to keep property indefinitely.
• Drawback: The issues that can arise with a rental property are many, and rent often does not cover the full cost of property ownership and maintenance.

Deed in Lieu of Foreclosure
Also known as a ‘friendly foreclosure’, a deed in lieu allows the homeowner to return the property to the lender rather than go through the foreclosure process. Lender approval is required for this option, and the homeowner must also vacate the property.

• Benefit: Many times in a successful deed in lieu, the lender will forego their right to a deficiency judgment.
• Drawback: Requires that a homeowner vacate the property, and a deed in lieu may be reported to credit bureaus as a foreclosure.

Bankruptcy
Many have considered and marketed bankruptcy as a ‘foreclosure solution,’ but this is only true in some states and situations. If the homeowner has non-mortgage debts that cause a shortfall of paying their mortgage payments and a personal bankruptcy will eliminate these debts, this may be a viable solution.

• Benefit: Does not require lender approval.
• Drawback: If a homeowner cannot afford their mortgage payment, a bankruptcy will only stall—not stop—the foreclosure process. Bankruptcy can be costly, is damaging to credit scores, and can only be declared once every seven years.

Refinance
If a homeowner has sufficient equity in their property and their credit is still in good standing, they may be able to refinance their mortgage.

• Benefit: In some cases, this will lower payments.
• Drawback: In today’s market, a refinance will almost always raise mortgage payments, and is an expensive process.

Servicemembers Civil Relief Act (military personnel only)
If a member of the military is experiencing financial distress due to deployment, and that person can show that their debt was entered into prior to deployment, they may qualify for relief under the Servicemembers Civil Relief Act. The American Bar Association has a network of attorneys that will work with servicemembers in relation to qualifying for this relief.

• Benefit: If qualified, this will lower payments on all consumer debt in addition to mortgage payments.
• Drawback: Must be active military to qualify.

Sell the Property
Homeowners with sufficient equity can list their property with a qualified agent that understands the foreclosure process in their area.

• Benefit: Allows homeowner to avoid foreclosure and harvest some of their equity.
• Drawback: In many cases today, homeowners do not have sufficient equity to sell their property without negotiating a short sale (see next solution).

Short Sale
If a homeowner owes more on their property than it is currently worth, then they can hire a qualified real estate agent to market and sell their property through the negotiation of a short sale with their lender. This typically requires the property to be on the market and the homeowner must have a financial hardship to qualify. Hardship can be simply defined as a material change in the financial stability of the homeowner between the date of the home purchase and the date of the short sale negotiation. Acceptable hardships include but are not limited to: mortgage payment increase, job loss, divorce, excessive debt, forced or unplanned relocation, and more.

• Benefit: A short sale allows the homeowner to avoid foreclosure and salvage some of their credit rating. This also keeps foreclosure off the individual’s public record, and in many cases will allow the homeowner to avoid a deficiency judgment. Borrower may qualify for another mortgage in as little as 24 months (as opposed to five years for a foreclosure).
• Drawback: Short sales can be a trying process in which a homeowner is best served by contracting with a qualified real estate agent with a proven track record of success with short sales and distressed properties to guide the way.

This represents only a summary of some of the solutions available to homeowners facing foreclosure.

Please call me today for a free and confidential evaluation of your individual situation, property value, and possible options.

Thanks for reading.

John

Choosing a real estate agent is a business decision at its core, but it can also be very personal in nature.  After all, the agent will be a part of your personal life and (for sellers) have access to your home.  And what is more personal than the place you call “home?”  There are many things to consider when selecting an agent.  Of course, the agent’s license should be active and in good standing.  If you’re in an area that has a Multiple Listing Service (MLS) and Board of Realtors, you’ll want to ensure membership and participation.  You can request to see the agent’s license with valid dates and membership information for the local Board.

Apart from the requirements above, there are many other factors that are important to evaluate.  These include both business and personal considerations.  Let’s start with some of the basic professional/business factors:

Are the Agency Relationship and Fiduciary Responsibilities aligned with your needs?  It is vital to know how the agent will work for you and if he/she will be working in your best interest or if he/she will also work for the other party in the transaction.  An agent should discuss the various agency relationships at the first substantive meeting.  In most states, this disclosure is legally required.  For whom will the agent work?  Do the agent and company represent buyers or sellers or both?  Are your conversations with the agent confidential?  What are his/her fiduciary responsibilities to you?  I cannot stress enough how important it is that you both fully understand the agency relationship that will exist as you work together.

What are the agent’s Education, Certifications, and Specializations?  Does your state require Continuing Education (CE)?  If not, does your agent regularly attend classes or seek additional certifications?  Does he/she have a specialty that could work to your benefit or make his/her representation to you more valuable?  For example: Is your home considered a luxury property?  Working with a certified luxury specialist would be a wise choice.  Are you looking for a home in an active adult community?  Consider working with an agent who is a Senior Real Estate Specialist (SRES), experienced in the particular needs of mature clients.  Are you struggling with mortgage payments and/or owe more than your home is worth?  It is definitely a wise choice to hire a Certified Distressed Property Expert (CDPE).

Is the agent Knowledgeable and Experienced in the Area?  Does the agent know the area, the school system, the community, and the market trends?  Has he/she sold any homes in the area recently?  Can he/she speak knowledgeably about the broader real estate market and even financing requirements?

And then there are the personal considerations:

The relationship you build and maintain with your agent could be relatively long term.  In order to enable the agent to do his/her job well, you need to share a great amount of personal and lifestyle information.  Many times, an agent ultimately knows more about a family (and their finances) than their own friend

 Do your friends or family members have any referrals?  Many people choose their agent based on referrals from someone they know.  Has a friend or neighbor recently bought or sold a home?  Did they have a good experience working with their agent?  Asking for referrals can potentially lead to a good agent.  But even with a referral, it is best to do your own research as well.

Do you “click” with the agent?  While you don’t have to develop a friendship or become “BFF’s,” you have to be able to communicate and understand each other.

Is the agent full time and available?  I put this under personal considerations rather than basic business credentials for several reasons.  Do you feel you could call this agent with questions and/or comments?  Would messages be returned in a timely manner?  If you see a call come in from the agent, would you answer?  Although agents deserve personal time, we ultimately have to work with our clients’ schedules.  The agent you choose should be flexible, especially when it comes to communicating.

Is there trust?  As with any hired professional, it is imperative that you trust the agent.  In order to make buying and/or selling decisions, the agent and the advice given have to be credible.  The information you obtain from the agent has to be relevant and on-point.

Most people begin their search for homes and agents on the Internet.  Much has been written about agents, how many to interview, and even the questions to ask.  Some of the information on the Internet can be valuable while a lot of what I’ve read is also “anti-agent” or simply false, illustrating reasons not to trust real estate agents.  As with all research, it’s important to consider the source of the information and determine its credibility and possible bias.  The best thing a consumer can do is to become informed, look for a professional with a track record of success, understand the working relationship (agency), and hire someone trustworthy who will represent and protect the client’s best interests.

Thanks for reading…

John

As a buyer or seller, the evaluation process you employ to make that decision should be somewhat similar to that of the agent’s.  Focus on services that you want and/or need.

The following are services that the company controls:

Internet Exposure: Sellers want to see their home on the Internet…EVERYwhere.  The company should have a good website with feeds to multiple sites.  (So should the agent.)  Part of the Internet campaign should include Realtor.com, the most visited real estate website above all others.  There are multiple subscription levels.  Sellers want them all.

One-Stop-Shopping:  Buyers prefer a company that makes the transaction as convenient as possible and offers access to Title and lending companies at the same location.

Market Share: Local market share and the number of agents on the roster are both important.  Having more agents creates the impression of more exposure and more of a collective effort to sell, similar to team spirit.  A larger market share helps to provide knowledge of the area as well as awareness of the inventory and market trends.

Commission Split: The company that pays the agent a larger portion of the total commission amount allows the agent to allot more money toward marketing.  An agent’s split with the company is usually not discussed or made public; however, it can be reflected in the agent’s personal marketing plan. And of course, to state the obvious, the more an agent makes per transaction, the more that agent is incentivized to ensure a successful outcome.

If your agent has chosen to join another company, talk to your agent about how the new company will enhance the services you will receive.  Most people who have already developed a relationship with the agent and established a level of trust continue to work with the existing agent. I recently made the decision to change firms. I was successful in helping my clients evaluate my new company based on the criteria I had used along with demonstrating how their experience would be enhanced moving forward.

If you decide that you prefer to stay with the previous company, you’ll now have to choose another agent.  Buyers and sellers alike look for many different things in an agent.  The process of choosing an agent can be both business and personal in nature.

How to choose the right agent for you is a blog post that will be coming soon.

Keep reading,

John