Welcome to another edition for our Ezine-Newsletter as always you will find some very useful and sometimes very revealing information. Best of all its free so tell your friends.

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God Bless!

Guy Te

Date of Newsletter: 01-2008-07

This Issue Number, Category and Headline: Real Estate - Stop Foreclosure - Foreclosure Workouts and Loss Mitigation – Do They Usually Work

Issue # 1

By Guy Te Watson

Loan Workout - A loan workout is negotiating with your lender for any kind of plan that will help you and the lender when you are delinquent in payments or in default on a loan. Loan Workout is a broad term used to cover different options you may try to arrange or have some else arrange with the lender for you such as loan modification, repayment plan, short sale, forbearance plan etc.

A similarly broad term for workouts is called Loss Mitigation covering much the same options to workout an arrangement to get a borrower out of defaulting on a loan. The problem with these Loan Workout or Loss Mitigation options when used is they don’t’ usually work to prevent foreclosure in the long run. Just think about the term “Loss Mitigation. “ What does the word “Mitigation” mean? It means to lessen or reduce. What is trying to be reduced in this instance, well “Loss” is being reduced, hence “Loss Mitigation” or “Loss Reduction.”

So, whose loss in really being reduced in Loss Mitigation techniques? Well, unfortunately it is not the borrower’s loss that winds up being reduced the vast majority of the time with these techniques but the lender’s loss in mostly reduced. That is why I would not recommend these options most of the time. Let’s take a brief look.

1. Loan Modification.
With “Loan Modification” the lender agrees to change the terms of the loan. The lender will reduce the interest rate, reduce principal portions made in payments, or extending the amortization period to reduce overall payment amount. Ultimately the changes are in the favor of the lender getting more money in the long run and the changes are temporary.  When the the terms go back to normal foreclosure is right around the corner again. Not a good option most of the time.

2. Forbearance Agreement.
The debtor agrees to pay money or take some other action and the creditor agrees to temporarily halt legal actions until the borrower catches payments up. These types of agreements usually end with a foreclosure with the lender getting as much out of the borrower as it can before foreclosing because the terms of a forbearance are usually high payments and stiff late payment fees with demanding more money out of a borrower to catch things up not less making it more difficult on the borrower money wise in the long run.

3. Deed In Lieu Of Foreclosure - Quitclaim Deed.
In the “Deed in Lieu of Foreclosure Process” the borrower deeds and gives the property to the creditor to 1) stop foreclosure and 2) for the forgiveness of potential deficiencies. It is difficult to negotiate with the bank for even on and very, very difficult to negotiate for both. Not great also because the borrower loses his or her home and all equity, very bad.

4. Short refinance.
Negotiate the creditor down to a low ball lump sum payoff of the mortgage and refinance the mortgage to cover the lowered payoff amount and all late and transaction fees. Sometimes one may be able to get friend or relative to make up the difference if one cannot get a refinance of the needed amount to totally payoff the existing mortgage being foreclosed on and late fees and legal fees and transaction charges. For the vast majority of people this is a difficult solution to workout because the lender is not going to want to short sell to the borrower and many times the borrower’s credit or worth of the property may not allow for a refinance and it may need to involve relatives and friends which is not a good idea.

5. Short Sale.
A third party buys the property and the creditor accepts a lowball price as full settlement of the debt or with deficiencies too that the borrower must pay on (The deficiency amount will likely be be the difference between how much the house sold for at foreclosure auction and what the borrower owed on the property and the legal fees for the foreclosure).  This is not to great a deal since the creditor will not sell for to lowball a figure and forgive deficiencies easily, they want money; but most of all the borrower loses the home, never an option for me.

6. Friendly Foreclosure.
The creditor, or other third party that buys the mortgage, sells the property at foreclosure and cleans the title of other liens. Then later the property is sold back to the debtor or another determined by the debtor. It is usually hard to find some or for the borrower to be able to afford to arrange this. If they had the resources themselves or through others to arrange this they would not likely be in foreclosure in the first place.

7. Repurchase After Foreclosure.
The borrower makes arrangements to buy back a foreclosed property after the auction. Again, if they had the resources themselves or through others to arrange this they would not likely be in foreclosure in the first place.

8. Repayment Plan.
The borrower pays a portion of the delinquent amount up front and agrees to pay the rest in addition to the normal payment over several months. Expect the creditor to ask for half of the delinquent amount and legal fees to be paid up front then the borrower will be required to promise to pay the rest of the delinquent amount in within six months along with regular payments. This type of payment agreement is likely to wind up back in foreclosure since the borrower who could not make regular payments is not required to make larger payments.  The borrower needs a monthly payment amount arrangement that is significantly less not more in order in insure foreclosure to not be right around the corner again.

9. Assumptions Of The Loan.
The borrower finds someone who can assume the loan with the lenders agreement. Finding someone in time can be difficult and most of all the homeowner loses the home.

What the Above Workouts Do Not Consider And Why They Are Usually Bad Options:
They do not consider:

a)  The lender is in violation of numerous laws in the creation and servicing of the loan.

b)  The lender has been overcharging the borrower and the borrower when recovering the overcharges owes the lender a lot less than the stated delinquent amount or owes nothing.

c)  The lender actually owes the borrower money when considering the damages that the lender has done to the borrower and the awards for damages that are due the borrower.

d)  The lender was in breach of the contract before the borrower was because the law violations and overcharges occurred before the borrower’s delinquent payments and default.

e)  When using most “Workout” options or “Loss Mitigation” strategies the borrower either losses his or her home as a part of the workout plan or winds up losing his or her home in foreclosure ultimately at a later date soon thereafter anyway.

So What Should You Do To Stop and Beat Foreclosure?

To stop and beat foreclosure make the lender pay for the lender’s damages against you. When doing this (making the lender pay for damages) many times people can get their loan amount greatly reduced by having the “Award for Damages” amount they receive taken off the principle on the loan, then have the interest rate significantly reduced and have their credit repaired back to before the late payments and foreclosure started.

For more information on where to find a foreclosure debt settlement expert to help stop your foreclosure or to help your client stop a foreclosure go to:
http://help-to-stop-foreclosure.net/


 

Without Prejudice - All Rights Retained
Copy Claim June 2008, Watson Lord and Watson - Guy Te Watson