The Plan: 3 Key Elements:

• Credit Strategy (2 part)

A) Day 1 Credit Strategy: How to make the right decision regarding the mortgage payment (If you ask your realtor what you should do with the December 1 payment, please keep an eye on them because they are going to cringe, and they don’t know nor do they ethically or from a liability standpoint want that question). Learn the mechanics of the lien structure, the legalities of the situation, and the logic as it pertains to how future lenders will look at you when considering you for a new loan. You will make the right decision for yourself that night and you will not second guess it. That is the empowering beauty of it. Fact and logic enable you to cut through the emotion of the decision.

B) Life After the Short Sale: How to mend your credit and navigate your way back to a new mortgage in 12-24 months. This is critical to understand and focus on from the beginning. How are you going to be in a position to recover or are you going to have to wait six years before you can get a new loan.

• The Short Sale

How to get out from under the burden of the home
without allowing it wrecking you financially.

Here is an excerpt from part of my seminars to realtors. Do you see yourself anywhere in this below?

Here is what your clients do to themselves with no
solution for the impending mortgage problem:

1. Run up credit cards to pay the mortgage.
2. Borrow money from family members to pay the
mortgage.
3. Hardship withdraws from retirement accounts.
4. Advances from employers.
5. Utilize other loans or home equity lines to pay the
mortgage.

When all of their resources are depleted and there is still
no solution to the impending problem, people find
themselves in real trouble. Do you want to help your
client be in a position to buy again in the short to
intermediate term or do you just want to get them out
from under the home and earn a commission? It’s a
personal choice. Repeat business and referrals may
depend on your chosen course of action.

• The Mortgage Deficiency

How to address the deficiency and quantify your personal liability as it pertains to your current mortgages. Right now you are personally liable based on the mortgage note you signed at settlement when you purchased your home. There is a way to mitigate it and be free from the burden.

Why do you need a plan? You can’t minimize the adverse affects on your credit and overall financial profile without one.

My advice to anyone facing a mortgage problem, look for credible advice and don’t rely on your buddy or some tid bit of free hearsay for a solution. Lots of people honestly do not know what the hell they are doing. Be careful and take care of business and your family.

GHunter

As the government postures and the markets react there has been some constructive discussions from influential parties toward a solution. The primary goal is to keep as many people in their homes with an affordable solution as possible regardless of whether they have equity in the home. This will slow down the default rate and the foreclosure machine. How are we going to get there? The standard Loan Modification does not appear to work.

The 4.0% solution will provide 30 year fixed rate loans to people that are determined to be eligible to keep them in their homes. The rational for this move is that the US Government is already guaranteeing the 5.2 trillion in debt for Fannie and Freddie with our government paper. The long term government paper is yielding less than 4.0% so this does not appear to be a bad idea. The key is to find an affordable solution for people to stay in their homes and also create an incentive for them to stay as well.

Most people are creatures of habit and would like to stay in their homes. However, when you are facing $200,000 in mortgage debt over what the home can be sold for, and also and impending 40-50% payment adjustment, it is very difficult to create an affordable solution and an incentive for the homeowner to stay in the home with the current lender.

The 4.0% solution is much like our Hybrid Refinance except obviously a 30 year fixed rate would be government subsidized and it would completely take the existing lender out of the equation.

I think this is a great idea where loss sharing could be established between the government entity and the existing lender. The government does not have to force the hand of the lender upfront to write down the principle. The subsidy portion of the solution could also be laddered across the general population of eligible distressed homeowners. Not everyone will need a 4.0% subsidized loan for 30 years. Ladder the terms much like a bond ladder. Some homeowners would receive a 4.0% for 3 years, or 5 or even 7 years before a maximum of 1.0% annual adjustments to the market rate at origination of the loan has been met. Correlate the subsidy to the needs of the homeowners. Some homeowners will not be eligible. The adjustments would eventually eliminate the government subsidy. Some of the debt may have to linger with no payments if the homeowner cannot afford it even at the 4.0%. Regardless, it’s a good deal for the homeowner and the lender.

This program would make it affordable for many distressed homeowners but certainly not all of those affected. The government’s loss participation with the existing lender would minimize the public perception that it is a bailout. This also has a free market friendly appearance. And lastly and of equal importance, the homeowner has the incentive to stay in the home because over time they will only adjust up to a 30 year fixed rate of approximately 6-6.5%. Sounds like a long term solution to me. Who is going to make the call to Uncle Sam?

Any attempts to persuade lenders to forgive existing debt while allowing the homeowners to stay in the home have not worked. This is a fact on a macro level that was validated by Shiela Blair of the FDIC recently on CNBC. The less upheaval to the distressed homeowner will in most cases equate to a lower the loss ratio to all parties.

We don’t have to jump to debt forgiveness. That would be a handout and the markets don’t like handouts. The 4.0% Solution is only an idea for those that would like to stay in their homes. If you are flexible to leave your home, and would like to learn about the “Mac Daddy” of all free market solutions, then you must educate yourself with the Short Sale Solution. Rid yourself of affordability issues and avoid foreclosure with the Real Estate Short Sale.

The Real Estate Short Sale is the only free market solution that levels the playing field and provides you relief with the opportunity to get, the majority and in many cases, all of the residual mortgage debt forgiven. If you need to delay or stop foreclosure, the Short Sale, can not be beat on merit. However, please don’t take my word for it without research.

Our best clients for Real Estate Short Sales are the ones that have been beaten by their lenders with false hopes of extravagant Loan Modifications only to find out that the lender is an ambivalent dictator. The homeowner becomes indifferent and then this merely becomes a business transaction. That is exactly where our course “The Negotiated Solution” will take you without the need to get the 60-120 day beat down from your lender. Check it out. It comes with a money back guarantee.

There are many ideas to stabilize the housing crisis. I say we use them all selectively as we fit them to the needs of the distressed homeowners. Let’s draw out the time frame of the problem so the economy and the real estate market are not overwhelmed by it. In the end, when signs of fundamental stability return to the housing market, you will see all of our other problems and fears in the financial markets quickly dissipate. Housing is the key and we are over thinking it and allowing it to consume us. Blogging from the front line of the housing mess.

GHunter

The recent announcement by Citi and JP Morgan Chase to Stop Foreclosures for a period of time across their distressed loan portfolios was highly publicized. The perception that was derived from the news reports offered hope that the lenders were going to come together and provide affordable solutions for distressed homeowners. We can all agree it sounded like good news and a very constructive measure toward a resolution of our housing crisis.

The real question you have to ask yourself is did the bankers do it for their own self interest or simply because they really want to help the homeowners.

Let’s go over some simple facts so we don’t get caught up in the false hope of lower loan payments for all. This is not a permanent moratorium on foreclosures. A foreclosure proceeding is the lenders legal right to regain control over a property once it has become delinquent. The lenders want their money back at some point. If they cannot work out a solution they will eventually have to revert back to foreclosure. The current announcements are directed at stopping foreclosures so it can be determined what borrowers should be helped with modified terms to keep them in their homes. Keep in mind, there is no guarantee that the lenders will come up with long term solutions to keep the distressed homeowners in their homes. Also keep in mind that many of you are not going to be eligible because you don’t meet the real definition of a distressed homeowner.

Here is my view. There are so many properties in real estate owned (REO) portfolios on the banks’ balance sheets that it would only be prudent to temporarily stop foreclosures. After all, a basic supply and demand analysis dictates that by adding more properties by foreclosure to the current portfolios will only further depress existing property values and make matters worse for the lenders themselves. The bankers and lenders alike need to slow the foreclosure process down to allow for the current REO inventory to be sold at reasonable prices. Otherwise allowing the rate of foreclosures to accelerate will only add to the severity of the problem. Also, it is not the intention of lenders to take down complete communities with foreclosures. They need natural attrition and balance or they will inflict additional unnecessary losses to their portfolios.

The fact is the majority of loan modifications and government programs, with all the rhetoric, have had low adoption rates and not worked for the people as forecasted. It is hard to wave a wand and change the past given the sheer size of the housing crisis. Stopping foreclosures a solid year plus into the full brunt of the housing crisis clearly is not the prime spot for the lenders to all of the sudden become kind to the distressed homeowners. The bankers and lenders are taking this action to save their own hides. Plain and simple, this is how it works. According to the lenders, there is a financial incentive to put on the breaks regarding foreclosures so let’s make it a positive PR campaign while we are at it. It makes perfect sense.

If you have any doubt, then ask yourself why the lenders have not fully adopted all the government programs to benefit the homeowners. Also, why do loan modifications represent an approximate 90% failure rate? The lenders are owned the money and without a financial incentive to force their hand, frankly, you lose.

Where is the positive for you? The lenders are giving you more time to provide them a solution. A real estate short sale is ideal in this environment. Provide your lender a comprehensive solution. Get your property sold and provide your lender a solution that they cannot pass up. Don’t expect your lender to grant you an affordable solution to your current predicament. Their attitude is that you borrowed the money and you owe it back to them. Remember the old saying “beggars can’t be choosey”. They are absolutely 100% correct and at their discretion they can legally pursue you for their money by means of the mortgage note.

A solution is a hand. Stop and avoid foreclosure all together with Real Estate Short Sales. Even if you just made a bad decision or just got caught and don’t have a real affordability problem, the macro environment in housing is giving you a pass. As an ex-lender, I am urging you to educate yourself and take advantage of your best options. Our site has it all at www.thenegotiatedsolution.com . The sooner you focus on a solution the sooner you will benefit. I am blogging from the front line of the housing crisis.

GHunter

Once you decide to pursue a Real Estate Short Sale you will, also at a certain point, need to focus on finding a new place to live.  Everyone needs a roof over their head.  I know this is not a happy subject but it is part of the Short Sale Solution.  You will be selling your present home and eventually you will have to move out.  If you follow our course program you will be completely prepared for this and it will not get you down.  Stick to the plan.

Due to the emotional nature of having to move out of your present home it is easy to stray from the plan and become overly emotional and distressed.  If this occurs you have to pick yourself up and understand that this is temporary and part of the process that is going to allow you to solve the problem for both you and your lender and obtain a significant amount of forgiven mortgage debt.  Just try to understand that your actions of addressing the problem constructively, with a solution for your lender, are going to allow you to minimize the overall adverse affects of losing your home.  In other words, you will recover much faster.

When you finally do face the task of finding a new home to rent you will have to deal with the rental agents.  It is not uncommon for them to simply reject you due to your credit report.  If you were delinquent or became delinquent they may simply reject your application.  This initially will be devastating.  Here is where you need to follow our credit strategy with an emphasis on “Life After The Short Sale-How to mend your credit and navigate your way back to a new mortgage in 12-24 months”.  Explain to the rental agent your plan and that you are providing a solution to your lender in the midst of a major housing crisis.  You will be fine if you follow the plan and think clearly.  This is no time to panic.

I recently had a client spend several weeks looking for a place to rent only to be rejected three times.  He finally called me one evening in a bit of a panic.  He asked how he was going to find any place to live.  I went back over the credit strategy and told him to call back the rental agent for the property that he liked the most.  I reiterated how to explain the solution he was providing to his lender to avoid foreclosure.  I then told him to give it a try and stop freaking out.  I am not losing my home but I do have a family and I take it very seriously when one of our clients is worried like this.  Just before we ended the call I told him if he needed my help I would be happy to call the rental agent for him.

I have spoken with him since and he is fine. He was able to rent the place he liked.  It is all about having a plan and sticking to it.  A short sale is a solution for your lender in a time of crisis.  It is not a deliberate means of violating your social responsibility.  This crisis will pass and our economy will recover.  Capitalism will not die and you, as you stick to the plan, will be ok.   

“Helping homeowners level the playing field with their lenders” is our mission statement. Blogging from the front line of the housing crisis. 

GHunter

A foreclosure is the legal means by which your lender regains control over your property. The process is governed by the various state laws. Each state has disclosure guidelines, time lines, and restrictions as to how the foreclosure proceedings must be conducted. The lenders must follow the laws in each state when foreclosing on a property.

At a certain point of loan delinquency, a lender will exercise their right to foreclose on the property. When a lender determines that they are going to begin foreclosure proceedings on your property you will begin to receive notices from attorneys with demands for full payment. When these demands are not met in the time frames outlined, the lender has the legal right to accelerate the mortgage. This means that the loan you thought you had with 28 years remaining will soon be due all at once. The letters surrounding demand, acceleration and the actual establishment of a foreclosure date are intimidating to the homeowner.

Why is it important to stop foreclosure and make the effort to avoid foreclosure altogether with either a Loan Modification, Hybrid Refinance, or a Short Sale with your lender?

When you originally took out your mortgage, and went to settlement with all the happy realtors, lenders, and settlement attorneys that were dreaming dollar signs and just wanted you to quickly sign the 150 pages of documents so they could get rid of you and get paid, there was a very important document in the pile. It was called a Mortgage Note. You signed a Deed of Trust and a Mortgage Note. The Deed of Trust attached to the house or otherwise termed the collateral. Conversely the Mortgage Note attached to you and made you personally liable.

I had a client on Friday that decided after several months that he didn’t want to finish his short sale because it was taking too much time. This guy is actually in the business and did not understand the ramifications of the Mortgage Note. I explained it to him like this. If you are not personally liable for the mortgage thereby giving the lender the legal right to come after you, then why do lenders require Mortgage Notes and not just a Deed of Trust. I mean come on, why don’t we just consider all loans non recourse. Right about that time he woke up and said, “ah….” . Yeah, and your in the business!

This is precisely why it is important not to dump your problem in your lenders lap. You need to be responsible and provide your lender a solution. The Short Sale is an excellent means of avoiding foreclosure and helping yourself out of a bad situation. Don’t be fooled by what you hear. You owe the lenders the money and even if you can’t pay it don’t give them an incentive or legal means of getting any type of judgment against you. You will recover from this real estate mess. When you do, you will not want to deal with the headaches of the past.

Oh and lastly, get out of denial. You have a problem and you are not helping yourself emptying the retirement accounts and running up the credit cards with no solution.

On a positive note, has your check from the government arrived in your mailbox yet? You better go check the mailbox. You know the one from all the bailout program that you are expecting. What about your happy lender that just adores you? Has your one sided Loan Modification been approved yet? I am thinking that you either have a big check on the kitchen table or your lender values you as a customer so much that they just called you and said, “Spin the wheel and name your new lower payment”.

Tomorrow is another day, keep checking the mailbox or get a solution. Your lender literally does not give a “rat’s ass” about you. I am blogging from the front line of the housing crisis. Check out thenegotiatedsolution.com for answers.

Ghunter

A Loan Modification by design is supposed to provide homeowners an affordable solution so they can stay in their home. This will then theoretically allow both the homeowner and the lender to avoid mortgage delinquency and foreclosure all together. Given the many people owe significantly more on their properties than they are worth you would think that lenders would be willing to do everything they can to keep people in their homes. The incentive for a lender to keep a homeowner in the home to avoid foreclosure is very significant when compared to the potential financial downside of foreclosure for the lenders.

If this is truly the case then why do only 10% of Loan Modifications provide an affordable long term solution for homeowners? Why do 90% of Loan Modifications outright fail? It’s simple. The lenders are unwilling to forgive a portion of the debt burden to provide a fair and affordable solution for the distressed homeowner. They belligerently focus on the debt in aggregate that is owed with the expectation that it is all to be repaid. Given the size of the debt burden that most people have and the law of numbers this is not a realistic position the lenders hold.

I don’t care how much talk there is in the news about modifications that will provide long term solutions. The market is only seeing short term fixes and homeowners’ that are force to leave their homes via foreclosure even after they have spent months attempting to work out a modification with their lenders. Lenders are not on board with a fair solution. They have the explicit expectation that people will mortgage their lives away and eat bread crumbs for the next 50 years to repay what is owed. I am personally tired of hearing lenders tell me. “we did lend them the money”. I always smile and reply, “yes you did and I feel for you but you are not getting it all back”. Maybe I should say that the 100-500K in debt my clients owe above their home values will be repaid in after tax dollars. Yeah right! Maybe the dumbass lenders should had respectfully stuck to the preexisting guidelines for their lending activities. Such guidelines are design to protect both lenders and borrowers from foreclosure.

Ironically, it is also common to hear lenders gripe about the costs of properties that they have taken back in foreclosure. When the lender loses everyone’s cooperation and there is no hope of a Loan Modification, a Short Sale, or any other mutually beneficial solution because they have railroaded a family into foreclosure, they normally gripe about the costs. I hear this from the realtors that specialize in REO property sales for the lenders. They market is hitting the lenders hard and when a property is in REO there is no solution other than the lender bearing the full burden until they can sell the property.

The reason this happens is that lenders are large organizations and there is little continuity in dealing with the recovery process regarding the current housing crisis. You commonly will see a homeowner that has been working with their lender for a couple months trying to obtain a modification only to have the collection department and a legal team posturing preparations for the foreclosure sale. Now if the client is working on a short sale solution at the same time, just in case the Loan Modification does not yield an affordable solution, you will also have the Loss Mitigation Department as a third initiative. All of these departments will be working independently in parallel to one another under the same roof called your lender. When I say independently I mean it literally. It’s a conveyor belt or what I call a machine and the left hand does not have a clue as to what the right hand is doing.

The lender could really care less about the homeowner. They just want their money back. When the lenders start caring about the homeowners you will see the reciprocal of 90% Loan Modifications working and only 10% failing. At this time it is the reverse so don’t be fooled.

If you owe a significant amount of debt over what your home is worth you would be better to spend some time researching our Short Sale Solution or our Hybrid Refinance options. Whatever you decide please do not sign up for anything that is not a long term solution for your problem. You owe this to yourself.

GHunter