Top 10 Questions to Ask the Short Sale Listing Agent Before Making an Offer

Admin Note: Over the coming weeks, I will be discussing short sales here at Buy Home Blog. I found an excellent article from an experienced short sale realtor’s perspective.


1. What is your experience representing sellers in short sales?

Dealing with a knowledgeable and experienced agent who has successfully closed many short sales is the sine qua non for a successful short sale.

Thousands of agents are now taking short sale certification programs and presenting themselves as short sale specialists. Many of these agents have never closed a short sale in their lives. In fact many of the people teaching certification classes have themselves never closed a short sale.

Knowing the mechanics of a short sale is not enough. Lots of agents now have this information from taking one of the many certification classes now prevalent. It will not get the job done.

Ask the agent how many short sales they have closed representing sellers in the last year. I would also ask them if they have closed any representing a seller with the particular loan servicer who is the third party approver(s).

(Representation of buyers in a short sale counts for nothing in terms of short sale experience since all the approval action goes on with the listing side.)

The listing agent needs to know how to escalate a deal to get an approval. Some loan servicers – BOA immediately comes to mind – reflexively decline short sales and, I believe, manufacture values, notwithstanding what their appraisal or BPO says, hoping to extract the maximum dollars from the buyer and agents.

(Understandable perhaps, but if they really wanted to get the most money from the short sale, they should provide a target number up front, not spend months jerking buyers and sellers around).

The agent needs to know how to get to management to get an approval with Servicers like this. In fact the listing agent needs to know how to do this just as reflexively as the servicer who is going to reflexively decline the deal.

Negotiating price prior to getting to the Management level is going to prolong the process, not shorten it. But the listing agent has to know how to get around the lower level negotiators.

2. How many liens are there on the property?

First or first and second or HELOC, HOA, Condo, Special Assessment, Tax?

3. Who is/are the servicer(s)?

BOA, for example is extremely difficult to deal with. Much more so than Wells Fargo. So unless you just get lucky it will take a much more experienced and savvy agent to get an approval from BOA than WF.

4. Who is the investor or insurer on the loan?

Fannie Mae, Freddie Mac, FHA or VA or Conventional or PMI.

Conventional loans are the Wild West for servicers since they can approve or deny anything they want.

Fannie Mae loans frequently have PMI which means, nothing is happening without the PMI companies approval, so even if there is only one lien, there may be two approvals required.

FHA has a proscribed process which allows servicers little latitude for game playing.

5. Is the listing agent going to have one contract signed and submitted or do they say they are going to submit the offers to the servicer to decide which one they want?

I would personally advise my buyers to run away from any deal where the agent says they are going to submit multiple offers to a servicer. That tells me the listing agent is clueless. Why would you send multiple offers to a loan servicer who takes months to approve one deal? If the agent can’t figure out which is the best deal in a multiple offer situation, they should get out of this business completely.

6. Has the servicer previously approved a deal which the buyer walked away from or has the servicer disclosed an acceptable price?

This may shorten the process, but not necessarily. Some servicers will force the agent to start all over from square one again with a new buyer, including ordering a new appraisal.

7. Does the agent have any financial modeling program to determine whether the offer is going to yield more cash to the investor than foreclosing?

This is how the lenders ultimately decide whether or not to approve a deal. Absence of this is means you are pretty much throwing darts with a blindfold on.

8. Has the property been priced appropriately?

I still see short sale listings where it is obvious the property is priced at a number which would pay off all of the liens. Ridiculous. Don’t even think about showing your buyers this property.

9. Do the agent comments say something like “commission paid on net sales price” or “50% to selling agent of approved commission”?

Either this agent is clueless or they don’t know how to handle commission negotiations with the lender. This is a run away, don’t walk situation.

10. Does the agent purport to be an expert?

I would be very, very wary of anyone who purports to be an expert. The only experts I am aware of are the guys sworn in as such in court rooms. We have 10 to 15 short sales in various stages of approval all the time and I see new twists on servicer tactics and processes every day – and there are dozens of servicer representing hundreds if not thousands of different investors. And don’t forget HAMP or HAFA.

Bonus Question:

11. Will an Attorney get you a better deal on a Short Sale?

Think about it. Until this year, most attorneys would have turned their noses up at dealing with loan servicers on short sales. Suddenly, they’re experts in short sales.

(The inspiration for this blog post was a question asked me by another agent at a meeting of the top agents in the Anne Arundel County Association of Realtors in Annapolis).

Copyright – 2010 – Michael Davis

Michael Davis is a Realtor with Davis-Resnick Group, LLC. He is a short sale specialist in the suburban Washington, DC and Baltimore area and Residential Sales: Anne Arundel Real Estate and Annapolis Real Estate. Visit his site today at

Buying a Home: Your Step-by-Step Guide

Admin. note: Here’s a good home-buying overview article. We will be going more deeply into each step of the process of buying a home over the coming weeks. As we always stress – don’t get emotionally over-sold in the process, and don’t skip a step that you see below. There are plenty of homes in the sea of real estate.

Buying a piece of real estate for the first time is an exciting life event and can be somewhat of a challenging process. There are so many things going on, with so many parties involved. It’s easy to get confused about what to do next in what seems to be an overly complex maze of legal formalities. This article will explain, in easy terms for the inexperienced buyer, how the process works.

Step 1. Loan Pre-Approval

The first thing to do when you are looking for a home is to get yourself pre-approved for the home loan. This will involve completing paperwork about your income and assets. Once you complete that process, you will know how much money you have available to spend for your home purchase.

Step 2. Searching for Your New Home

Start looking. It is good to begin your search in earnest already having defined what you actually want. You can define your ideas in a systematic way, by making a list.

Step 3. Identify Home

When You find your dream home, you’ll know it. The right home for you might be the very first home you find or the thirtieth.

Step 4. Making the Offer

Before making a formal offer, put some appropriately serious research behind it. Learn what properties in the area have recently sold for. Make a fair offer — if it is too low you could all too easily alienate the seller; if it is too much you could end up paying more than you have to. In most cases, when you make an offer, you will need to put up anywhere from 1% to 3% of the asking price in “earnest money.” Your offer will cover the terms and contingencies that you want in addition to price, such as inspection, any needed repairs, and your desired closing date.

Step 5. Acceptance of the Offer

After a little negotiation back and forth, the seller and you will reach agreement on terms.

Step 6. Title Review

A title review, in most jurisdictions in, is normally conducted by a real estate attorney who researches the title, or ownership history of the home, and gives a formal opinion as to whether the seller’s title is clear and meets the terms of the contract to which you have agreed. In some states this is done without a lawyer but almost without exception there will be a requirement for a title search.

Step 7. Home Inspection and Necessary Repairs

Getting an independent inspection is important. An inspection can reveal problems that could be significant, from a furnace problem to a crumbling fireplace. If the inspection shows problems, you will have to discuss and negotiate repairs.

Step 8. Appraisal

An appraisal is a formal estimate of the home’s true value. No lender will be able to lend you a larger amount than the appraised value of the property. If the appraisal comes out lower than the selling price, your deal is in serious trouble. Solutions include the buyer adding in the difference in cash, the seller agreeing to lower the selling price to match the appraisal, or the seller and the buyer getting a different appraisal. This subject has come under increased scrutiny recently, so be careful.

Step 9. Final Loan Commitment

You will feel a big sense of relief when the lender completes a final review of your documents and approves your loan.

Step 10. Final Walk Through

The walk through takes place a few days to a few hours before closing. During the walk through inspection, ensure that the home is in the shape in which you agreed to purchase it. All repairs required of the seller need to have been accomplished satisfactorily. The final inspection is your chance to ensure that the home has not been damaged or altered since you contracted to purchase it.

Step 11. Closing

Closing is the transfer of title to you, as the buyer,. As the buyer you will have to pay the down payment on the property and your part of the closing costs. Before the day of the closing find out exactly how much money you will need to bring at closing.

That’s it! You’ve made it through. Once you’ve accomplished these steps, you’ll have your dream home.

This article was made available by your Broomfield Colorado real estate experts, Automated Homefinder.

Save your Money with Bank Foreclosure Homes for Sale

Bank foreclosure homes for sale provide excellent opportunities to everyone. Those who want to own a home but have not yet been able to do so owing to financial constraints can expect to strike a beneficial deal with lender foreclosures.

And those who are waiting for good investment opportunities in real estate will also find it to be a lucrative proposition. They can buy Bank foreclosure homes for sale for a fraction of their market worth in foreclosure auctions and sell them later for a good price, earning great returns in the process.

What are foreclosure homes?

Foreclosure homes refer to the property reclaimed by banks and other lending agencies when the home owners start defaulting on payments. In normal course of event, the bank issues warning and notices to those who have taken loan, to rectify their erratic payment behavior. But, when they are still unable to pay, the banks confiscate the property so that they can sell it in the market to recover their money. As such all foreclosure properties are essentially lender foreclosure.

The concerned lending agency does not have much interest in the foreclosed property. All they want to do is to sell it pronto so that they can recover their tied-up money. Therefore, we normally have auctions for Bank foreclosure homes for sale where the highest bidder gets the ownership title over the property after paying the requisite amount.

Advantage of lender foreclosure properties

- The most obvious advantage is that they are great value for money propositions. Foreclosed property is, often, 20 to 50 percent cheaper than its actual market worth, making it a sound investment.

- It’s a win-win situation for concerned parties. The lending agencies recover their lost money and the buyer get sound value for money. The lending agencies cannot recover the property and just sit on them. They will, then, incur great expenses on maintenance, upkeep and utility bills of the property.

- You can also get bank foreclosure listings giving extensive and comprehensive details of the property so that you can circumvent the brokers and directly approach the banks for the deal.

Myself webmaster of – A source for bank foreclosed properties, bank foreclosure home for sale, find foreclosed homes listing, A smart way to buy foreclosed properties , bank owned foreclosed properties and Bank foreclosed homes.

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You Can Now Get Foreclosure Help – You Can Stop a Foreclosure on Your Home

You have it in your power to stop a foreclosure before it happens because you do not want to lose your home and hurt your credit score. In many cases if you get behind on your mortgage payment by three months then the bank can foreclose on your home.

Get Free: Stop Foreclosure Advice

Usually what happens is they will send you a notice that you have 20 days to vacate the home and then they will sell it at auction. You need to understand that the bank does not want to own your home and especially in this bad real estate market because they will end up losing money on the auction sell.

How to: Avoid a Foreclosure

You can make arrangements with your bank to avoid your house from going into foreclosure. It may be difficult for you to get up enough courage to face going in and talking to your banker but the truth is they are willing to help you through this crisis. We as a nation are facing one of the worst housing crisis ever and there are many reasons that people are losing there homes. In many cases they have adjustable mortgages and the rate has shot up to the point where they can not afford the house anymore. In other cases you may have lost your job and do not have enough money coming in to pay the mortgage.

Remember that it is up to you if you are behind on your mortgage to talk with your banker so you can avoid losing your house in a foreclosure. It may be difficult to do this because you may feel bad that you are behind on your payments but it is better to keep the lines of communication open and solve the issue than wait and let your house go into foreclosure.

Bryan Burbank is an expert in the field of Foreclosures. For more information go to:

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Understanding the Basics of Short Sale Foreclosure

Short sale foreclosure involves two types of real estate techniques. The first involves real estate that has been repossessed by the mortgage lender. These properties are also referred to as bank owned or real estate owned (REO).

The second type of short sale foreclosure references property which is still in the borrower’s possession, but on the brink of foreclosure. Lenders agree to accept less than borrowers owe in exchange for quick sale of the real estate. Short sale options are typically offered after all other options to prevent foreclosure have been unsuccessful.

Currently, banks are holding a large number of non-performing loans; meaning borrowers are not making payments. Banks and mortgage lenders receive money from the Federal Treasury based on their performing loans. When they hold too many non-performing loans, the Feds can cease lending money until their bottom line improves.

By law, banks are limited on the number of REO properties they can own. As more Americans are served with foreclosure papers, many lenders have reached their limit. Short sale foreclosure allows lenders to liquidate a portion of their real estate holdings.

Short sales can remove a huge financial burden from borrowers who do not qualify for refinancing or loan modifications. The process takes between four and nine months to complete. Much depends on the caseload of the bank and if the borrower holds multiple mortgages.

The best short sale foreclosure is known as Payment in Full with Pursuit of Deficiency Judgment. Using this arrangement, the lender accepts the sale price as payment in full towards the mortgage note. The borrower is able to walk away from their property and be released from the mortgage debt.

The worst short sale foreclosure is known as Deficiency Judgment. Many banks hold borrowers accountable for any deficiency between the loan balance and sale price. This amount is usually several thousand dollars. When borrowers hold two or more mortgages, the deficiency amount can be staggering.

When mortgage lenders issue deficiency judgments, borrowers incur several financial consequences. Judgments remain on the borrower’s credit report until repaid in full. For most, this can take a lifetime to repay.

Deficiency judgments have far-reaching effects and prevent borrowers from obtaining credit for many years. Borrowers will have very little chance of qualifying for a mortgage loan while the judgment is in place.

Short sale foreclosure will impact borrowers’ credit rating. ‘Payment in Full’ short sales are the least detrimental. Although the black mark remains on credit reports for seven years, borrowers can apply for another mortgage loan within a few years.

Short sale foreclosures are complex and confusing. Borrowers should spend time learning about the different types of short sales, along with the pros and cons of each. Arm yourself with knowledge so you are better prepared to negotiate with your lender.

Simon Volkov is a private real estate investor and author of the “Short Sale Hardship Letter eBook Course“. He offers one-stop shopping for borrowers, lenders and investors by connecting buyers and sellers through his network of real estate professionals. Simon has negotiated hundreds of successful short sale transactions. If you need to sell your home fast to satisfy a short sale or are an investor looking for discounted real estate investments, stop by

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Learn About the Foreclosure Timeline – How Long For the Lender to Foreclose on Your Home

If you get behind on your mortgage then you can go into foreclosure but it is important that you try to work out an arrangement with your lender. In many cases the lender will be more than willing to work with you because they do not want to own your house and try to sell it in this housing market. Basically the time line for a foreclosure is about 2 or 3 months if they do not hear anything from you then you will get a notice form the bank to appear in court. It is better to avoid this at all cost and call the bank to make arrangements to go and see them.

Get Free: Important Foreclosure Advice

Working out the terms is better for you and the bank because when you go into foreclosure it becomes more difficult to work out terms. Also you have to remember that the bank does not want to take possession of your property. If they do this then they will have to sell it in a bad housing market and in most cases they have more houses than they can deal with already. It is important to also remember that after they have the hearing you will have about 20 days to vacate your house and then the bank will sell it at auction. You can avoid this from happening if you take action now.

How to: Avoid a Foreclosure

Remember that for you to avoid a foreclosure you need to call the bank and work out terms before they send you a notice. Once you go to court you are going to have only about 20 days to get out of your house and by that time it is too late.

Bryan Burbank is an expert in the field of Finance and Foreclosure. For more information go to:

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How a Bank Short Sale Save Your Home from Foreclosure

A bank short sale is an option offered by some mortgage lenders when a homeowner is facing foreclosure. Although the process requires considerable time and patience, this alternative gives borrowers the opportunity to be released from their mortgage loan and walk away from their property.

Lenders can enter into bank short sale agreements on all types of real estate. The most common include single family residences, commercial real estate and vacant land. Short sales are usually reserved for borrowers who do not qualify for refinancing or obtaining a loan modification.

Short selling is exactly what it sounds like. Real estate is sold ‘short’ of what is owed on the mortgage note. Banks will agree to accept less as long as the borrower is able to locate a qualified buyer within a short period of time.

Short sales are usually managed by the lender’s loss mitigation department. Once borrowers become 31 days delinquent on their payments, their account is turned over to a loss mitigator. This individual is responsible for mediating between the borrower and lender. The goal is to arrive at a mutually-beneficial agreement.

Not all mortgage lenders participate in short sale transactions. Those that do, require borrowers to adhere to strict guidelines and deadlines. One missed deadline or improperly filed document can result with the lender commencing in foreclosure action.

Bank short sale properties are usually listed through licensed realtors. Under certain circumstances, lenders may allow a home to be placed on the market as “For Sale by Owner”. When listing real estate through a realtor it is a good idea to work with an agent with experience in short sales.

If you are like most people, you probably wonder why a bank would agree to accept less than is owed. The primary reason is that foreclosures are costly and time-consuming. Foreclosing on a single property can cost the bank between $60,000 and $80,000. The process can take up to 18 months to complete.

With short sales, the process takes four to six months and there are no costly legal expenses. The lender agrees to accept a lesser amount in order to expedite the sale and recover the majority of their investment.

A bank short sale can be a saving grace for individuals facing foreclosure. Although the borrower is unable to continue living in their home, a short sale is less detrimental to their credit than foreclosure.

One extremely important issue to address is to determine the type of short sale your lender offers. Two types exist – Deficiency Judgment and Payment in Full without Pursuit of Deficiency Judgment. The first can ruin your life for decades, while the latter can remove an enormous financial burden.

Lenders who issue deficiency judgments persue the borrower for the difference between the short sale price and loan balance. If you owe $180,000 on your mortgage and the property sells for $140,000, the bank issues a judgment in the amount of $40,000.

Most people facing foreclosure don’t have $40,000 lying around. Having a judgment attached to your credit can have widespread effects. If you are fortunate enough to obtain any type of credit, chances are you will pay a high interest rate. Insurance carriers can increase premiums. The judgment can even affect employment opportunities.

Payment in full without pursuit of deficiency judgment will affect your credit score. However, it takes considerably less time to recover from the financial fallout. Borrowers able to get back on track financially can apply for another mortgage loan within two years.

It is wise to become educated about bank short sales and understand the pros and cons. Talk with your lender to see what options are available. When properly constructed, short sales can be beneficial to all parties involved.

Real estate investor and author, Simon Volkov, specializes in buying and selling bank short sale real estate. If you need to sell your home quickly or an investor looking for exceptional deals, visit today.

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Buying Foreclosures Vs Buying From Seller Direct

Are you on the market to buy a home?

Great. it is a great time to purchase real estate and I recommend every person that have been waiting for a great time to invest in real estate to buy.

We hear about it in the news and from people we know and its all true, it is the best time to buy homes that are for sale either through short sale, foreclosures and other sales.

Why should you buy from a seller when you can buy a foreclosure?

Most sellers are in pressure these days and they’re willing to negotiate to a much lower price than the actual asking price. The sellers that will negotiate with you the most are the people with the equity. So if you know of someone that he’s under some pressure, but he have $150,000 equity in his home and he can’t refinance, offer him some money and test the water. If this seller needs money he will take almost every offer you will give him because he cant refinance, he doesn’t want to loose his house because of the equity and it will be hard for him to sell because most of us these days are buying foreclosures and short sale homes.

Why banks willing to short sale homes?

Foreclosure process is very expensive for banks. While they understand that they’ve already lost money on this particular property, they’re not interested in loosing even more so they short sale the home. They basically negotiate with a buyer a good deal so he will be happy, but at the same time he will cover most of the costs and the expected lost that they would have from a foreclosure process. Short sale can be a great deal for someone, but it may take up to 4 months worth of negotiations and it might not going to happen after all.

Every real estate agent can help you with short sales?

No. most real estate agents are trying to avoid short sale because of the time that it takes to close the deal, also because most of the times the deal will not go through so they’ve spend time without making any money. There are small percentage of real estate agents that are specialise in short sales, reo’s and foreclosures, these are the agents you would want to contact for help.

These real estate agents have been doing short sales, reo’s and foreclosures for many years and some for the past year only, but they have the experience negotiating and closing deals.

In this market you don’t want to waste any time. You have to educate your self as much as you can and get things done in the right way. We all got into bad mortgages and wrong investing decisions, but we have to learn from the mistakes and take what we’ve learned and put it into action now.

Good Luck.

Yanni Raz is a mentor for many in the Real Estate Mortgage industry, Yanni Raz is been tutoring many homeowners in California and help some also to save their homes.

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Foreclosure Steps

As the global economy melts under the heat of a worldwide financial upheaval, Americans are fighting to maintain their financial status too. Most people are thinking about ways to deal with the sudden and daunting changes in their lives. As the rate of unemployment and industrial slowdown goes up, it’s becoming harder than ever for people to maintain a sound financial position.

Many of them are failing to arrange the funds to pay the bills, insurance premiums and make mortgage payments. If you are worried about a possible foreclosure, it is important to know what it’s all about, especially the steps involved in foreclosure.

Basically, foreclosure steps can be classified as those given below:

Step #1: Defaults in Payments

if you are facing foreclosure, you have probably not made one or more of the mortgage payments. That’s a common reason why many people get under the foreclosure net. While some may not be able to make mortgage payments due to illness, family problems and job loss, others are missing payments in response to the resetting of adjustable rate mortgages.

Step #2: Notice of Default                            

when you fail to make mortgage payments, the lender sends the Notice of Default. It is their way of reminding debtors that they are missing out on payments, starting a legal process. The Notice of Default stage is the right time to try and avoid protection foreclosure. In other words, there’s still time to repair the damage.

Step #3: Clear the Debt

depending on the sate where you reside, you may have about 45-180 days to clear your debt. This can be done in several ways. You can sell the house, renegotiate the terms of loan, make the debt payment or turn over the house to the bank.

Step #4: Foreclosure                                                        

always remember that foreclosure is the legal process wherein the bank takes formal possession of your house. Before anything gets resolved, specific action is required from your side. In simple terms, there are specific steps that need to be taken by you before the home is taken by the bank under legal foreclosure.

If you cannot get rid of the debt through your own resources or the bank’s help, you can explore options like a short sale, selling the house, or a Deed in Lieu of Foreclosure. Only when these alternatives have been explored will the bank initiate the foreclosure. Sometimes you can fight the foreclosure and seek legal remedy.

Step #5: Sheriff’s Sale

once the foreclosure of your home takes place; it is sold at a Sheriff’s Sale. In this process, anyone can bid on the house but it is common for the bank to buy the house for $1 over the deficiency.

Step #6: Redemption Period

the redemption period gives you a final opportunity to claim your house back from the foreclosure. To do so, you must come up with the money to pay off the amount for which the house was sold at the Sheriff’s Sale. A short period of time is given for the same after the sale of the house.

Mike Greaves is a self-made entrepreneur, a well known travel consultant and internet marketer. Over the years he has traveled across the world and has numerous writings credited to his name in many renowned publications. His areas of writing include travel experiences including reviews of world best hotels and he has also gained expertise in areas of legal foreclosure, how avoid foreclosure and subprime foreclosure.

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Are Free Loan Modifications Really Free? Are Non-Profits Really Who You Want to Stop Your Foreclosure?

We have all heard the saying, “You get what you pay for.”   So what do you get if you pay nothing?

In today’s troubled economy more and more people are feeling the financial pressures of paying the monthly bills.  The mortgage crisis has affected an amazing percentage of American homeowners.  Sub-prime lending and Adjustable Rate Mortgages (ARM) are the main culprits.  Unfortunately, these “no proof of income” and ARM loans are beginning to catch up with those who did not have the fundamentals of these loans properly explained upon their originations.

Loan Modification is a rapidly growing solution for those with mortgage payments which are too large to fit comfortably into the monthly budgets.  There are numerous ways to address the process of a Loan Modification.  One of these is to attempt it on your own forgoing assistance from a professional company specializing in all forms of Loan Modification.  To do this, millions of Americans have gone to government subsidized sites such as

President Obama’s Plan, which includes more than $70 billion dollars of financial assistance through a Government Loan Modification Program, gives financially strained homeowners some much needed hope. However, there is a good possibility that the families who need this help the most will not be able to use HopeNow’s services to complete their modification. A recent Ezine article by Alfred Sant illustrates this:

“Because of the numerous and strict requirements enacted, plus the intense analysis involved, most of these needy families will be unable to meet the criteria for help.  Since there is so much red tape involved with the Government Loan Modification Program, only a small percentage of the homeowners affected by possible foreclosure will get any assistance from this Loan Modification Program.  Banks and lenders are not required to work with homeowners, since the Government Loan Modification Program is voluntary. However, depending on each case, if it is financially lucrative for the banks or lenders, then the homeowners have some hope of getting assistance.  After forms are completed, documents and paperwork processed and all questions answered in great detail, the banks will make a determination as to which borrowers provide the greatest reward and least risk to them financially.”

The fact is HopeNow has come up short (to say the least) in performing long term modifications for Americans who are no longer able to keep up with their monthly mortgage payments.  Don’t listen to me.  Do the research on line and see for yourself.

“One of the biggest disappointments of the foreclosure prevention fight has been HOPE for Homeowners, a plan Congress passed in an attempt to help as many as 400,000 underwater, delinquent borrowers from going into foreclosure.
In its first seven months, HOPE for Homeowners helped one family stay in its home.”
May 21st, 2009

HopeNow promotes itself as providing a place where distressed homeowners can attain a loan modification for free.  The issue then becomes who is helping you on the other end of the phone when you call for help.  What level of vested interest does this not-for-profit individual have in improving your financial situation by adjusting your mortgage rate/payment to a more manageable level?  What are they getting out of it?

“Hope Now, the coalition of regulators, servicers, lenders, and community advocates helping sub prime borrowers, is being criticized as ineffective and too narrowly focused.  Even its own members are piling on.  Sources associated with Hope Now, most of whom spoke on condition of anonymity, tick off a list of problems: infighting among members, inflated loan modification statistics, and empty public relations moves.   “Hope Now is nothing,” said a representative of a Hope Now member. “It’s hard for it to do anything. It has no authority over investors or even its own members. And, surprise, people have different ideas about the best way to proceed.”

-American Banker; February 2008

If the above wasn’t disturbing enough The Mortgage Insider states in a December 2008 article:

“According to a study published yesterday by the OCC, defaulting mortgages lucky enough to get modified are going back into default within six months 53 percent of the time. This is a shocking statistic to me as well as to the Comptroller of the Currency, John C. Dugan.  Mr. Dugan in the press release said, “After three months, nearly 36 percent of the borrowers had re-defaulted by being more than 30 days past due. After six months, the rate was nearly 53 percent, and after eight months, 58 percent,” the Comptroller said in remarks at the Office of Thrift Supervision’s National Housing Forum today.”  How can folks be so cavalier with their “second chance”?  Mr. Dugan speculated, “Is it because the modifications did not reduce monthly payments enough to be truly affordable to the borrowers? Is it because consumers replaced lower mortgage payments with increased credit card debt? Is it because the mortgages were so badly underwritten that the borrowers simply could not afford them, even with reduced monthly payments? Or is it a combination of these and other factors?”

In short, you get what you pay for.  Free is not always free. This trend of re-default is not due to the loan modification industry itself, it is due to incorrectly performed loan modification by individuals lacking the necessary knowledge and resources.  One would be wise to consider hiring a professional to negotiate the terms of a note held on the single largest asset they have.

We all choose to hire people, based on their expertise, to take care of those things in our life which we’re unable to do ourselves.  This may be due to lack of knowledge, time or patience.  Whatever the reason we trust these individuals will, in a professional manner, give us the service for which we pay.  That’s WHY we pay for them.  Would you opt for a free child care service or pay for a license facility to watch your children while you’re working?  Do we choose the free medical clinic if we are able to go to our family doctor instead?  Do we opt for the “discounted” meat or do we pay for the fresh stuff?

If, after considering all this, you still feel you want to tackle a loan modification on your own; be sure to avoid the following common mistakes.  Many before you have tried and inadvertently fallen into one of these pitfalls.  Unfortunately, for many of them, by the time they realized their error(s) their home is too far into foreclosure.

MISTAKE #1: Applying with your lender prior to knowing the way the entire system works and being unaware of lenders requirements in order to approve your application.

MISTAKE #2: Paying huge sums of money as upfront charges to a loan modification company before establishing its credentials and loss mitigation expertise. Many home loan owners have surrendered thousands of dollars without positive returns, instead of starting with their own do it yourself loan modification application process.

MISTAKE #3: Time is of essence. Do not end up wasting it by speaking to employees who under the pretext of assisting you end up extracting last dimes from your pockets. They actually belong to collections department and will probably never help you in providing an actual loan workout. You need to know the right contact person in order to derive the desired results.

MISTAKE #4: Unconvincingly written hardship letters will not help your cause. The description should be compelling in order for the lender to empathize with your situation. It is imperative to understand that if you do not convince your bank that you deserve a Loan workout plan due to circumstances which are beyond your personal control, your chances of approval are very minimal.

MISTAKE #5: Error of Omission – Incomplete information or omitting relevant fields on your application form can be the most common reason for the delay and in some cases even rejection of your proposal. Are you aware that your local bank shall verify all the information provided by you? It is a full disclosure procedure, in which, delays can be avoided by disclosing all your income and debts in totality. There is a method available to ensure that you do not leave or miss anything on your proposal.

MISTAKE #6: Submitting a Loan Workout proposal which does not meet the criteria or requirements set forth by your lender. Each lender has their own criteria that must be met. When your forms do not conform to set criteria of the banks, then in all probability your proposal will be declined. Ensure that you know your banks lending guidelines and then complete your loan modification forms. Are you aware of method to gauge your target mortgage payment so it is within your budget and also confirming to lenders guidelines for approval?

MISTAKE #7: Not providing your lender with the entire loan modification package that includes all forms and documents needed for their review. Remember, your lender has thousands of borrowers like you who need similar assistance.

MISTAKE #8: Not being persistent in communicating with your lender can allow for your case to fall through the cracks and remain un-resolved. You must ensure you are in constant communication with your lender to ensure you get a speedy resolution to your application.
Do know what happens to the package when items are missing or incomplete and cannot be further processed? It is brushed aside and relegated to the bottom of the pile which effectively barriers your chance for a possible loan workout program.

-Jonathan Gillham

Nathan Jeffcoat is a novice writer who enjoys long walks on the beach and current events. His views, although always correct, are not necessarily the views of this website or any of its affiliates.

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