Posted on: 09th Apr, 2004 12:24 am
if you are behind on your payments and facing foreclosure, you may need loss mitigation help. loss mitigation options (forbearance, loan modification, etc) help a borrower avoid foreclosure by providing them with alternatives to pay down their mortgage. it also minimizes the lender's credit loss resulting from the borrower's inability to repay the loan.
how do i negotiate for loss mitigation?
here's an overview of what you should do when you cannot keep up with your usual payments, how to negotiate with the lender, and what actually happens when you are considered for a loss mitigation/loan workout plan.
contact the lender: unless you've missed a few payments, some lenders will not negotiate with you for a workout plan. however, if the lender refuses to negotiate unless you're behind, you should keep trying. contact the lender's loss mitigation department and request a loan workout option to help you pay down the mortgage.
hardship letter: prepare a hardship letter including the specific date when the hardship started. take a look at this sample hardship letter. you should attach documents supporting your hardship claim. learn more on how to write a hardship letter.
lender's analysis of your loan: after the lender has agreed to discuss a loan modification, they will send you a packet of forms. they will want you to provide as much information as you can about your finances so they can evaluate your situation using their own calculations. the types of information they are looking for include:
contact the lender: unless you've missed a few payments, some lenders will not negotiate with you for a workout plan. however, if the lender refuses to negotiate unless you're behind, you should keep trying. contact the lender's loss mitigation department and request a loan workout option to help you pay down the mortgage.
hardship letter: prepare a hardship letter including the specific date when the hardship started. take a look at this sample hardship letter. you should attach documents supporting your hardship claim. learn more on how to write a hardship letter.
lender's analysis of your loan: after the lender has agreed to discuss a loan modification, they will send you a packet of forms. they will want you to provide as much information as you can about your finances so they can evaluate your situation using their own calculations. the types of information they are looking for include:
- 2 months of bank statements
- tax filings for past 2 years
- receipts of 4 months of regular monthly payments
- personal statement about your finances
- situation that made you delinquent
- paystubs for past 2 months (to check for current ability to pay off loan)
- name and contact details of borrower's current employer
- for self-employed persons, last 2 years of tax information and year-to-date and profit and loss business statement for past 2 years
- recent utility bill
- monthly net income for past 2 years (adjusted to changes in income)
- monthly living expenses (under normal conditions) with debt payments (adjustments are made to reflect rise or fall in expenses for each of the first 3 months of the loss mitigation option)
- surplus income available each month by deducting expenses from income
- surplus income percentage by diving surplus income by total monthly expense
what are the loss mitigation options?
here's a rundown of the workout options available to you in order to avoid a foreclosure.
| options | how to benefit | who qualifies | when to qualify | property condition |
special forbearance | repayment plan for the borrower to cover the debt and get current on loan until you can make the usual payments through a structured payment plan or loan modification. |
| delinquent for 3 months but not more than 12 months. | property should not need repairs which may affect payment under forbearance. |
loan modification | permanent change in terms of the loan - the debt is included in the loan balance and reamortized at a reduced interest rate. |
| behind on payments for 3 months or more and 1 year has passed since the loan was signed. | property should be in good physical condition; otherwise costs to complete repair work will drain out enough cash and borrower won't be able to make payments under the modification. |
short sale/ pre-foreclosure sale | sell off property to pay off the debt, though property value has declined to less than the money owed. know more… |
| one who is already behind on payments or likely to be behind soon. | no serious damage to property. even if damaged, cost of repair should not exceed 10% of the repaired appraised value. property should be able to be sold free and clear of liens. |
deed-in-lieu of foreclosure | borrower offers property to lender who sells it off to retrieve the unpaid balance. learn more… |
| the loan is in default (that is, the borrower is more than 30 days late on their payments and the cause of the default cannot be eliminated). | property should be free of any liens. property shouldn't have been used as rental property for more than 1 year. |
partial claim | placing your past debts into a subordinate 2nd mortgage (not exceeding 12 months of piti) payable to hud (2nd loan payment to begin only after first mortgage is paid down; there's no interest on the 2nd loan). |
| delinquent for 4 months but not more than 12 months. | property should be in good physical condition. |
*n.b: the criteria and conditions stated in the table above may vary from one lender/mortgage company to another.
of all the loss mitigation options, special forbearance is the best. it may be combined with loan modification when there's doubt about the borrower's income stability. especially in these tough economic times, if you're unable to get a loan modification, your lender may be open to a short sale or a deed-in-lieu to avoid foreclosure. if you convince your lender to accept a deed-in-lieu you can even talk to the lender about rental options. whichever option you decide is best to help you avoid foreclosure, you'll need to submit the same documents to prove your hardship.
of all the loss mitigation options, special forbearance is the best. it may be combined with loan modification when there's doubt about the borrower's income stability. especially in these tough economic times, if you're unable to get a loan modification, your lender may be open to a short sale or a deed-in-lieu to avoid foreclosure. if you convince your lender to accept a deed-in-lieu you can even talk to the lender about rental options. whichever option you decide is best to help you avoid foreclosure, you'll need to submit the same documents to prove your hardship.
related readings
Hi anonymous,
If they haven't accepted your partial payments, then they should return that to you. It will be better if you could contact your lender and clarify the matter with them. I don't think you will be able to reverse the deed. I will suggest you to have a word with an attorney and take out his opinion in this matter.
If they haven't accepted your partial payments, then they should return that to you. It will be better if you could contact your lender and clarify the matter with them. I don't think you will be able to reverse the deed. I will suggest you to have a word with an attorney and take out his opinion in this matter.
To the man who was desperately needing advice, of course there is a way out. If the lender is looking for a specific amount of money, and you and your Mom can come up with that amount, that will settle it.
My vacation home is in foreclosure in fla. ive tried modification,(to no avail) they've nixed a short sale as well. what defiency judgement laws am i under as im a resident of michigan? and since it's got PMI, is the PMI group coming after me or the servicer? And finally it's taken them 3 years to foreclose what amount of past due are they going to claim?
in review for loan modification before it goes to underwriter with bank of america, my son is on title and loan but he has his own morgage also, the bank of america is asking me for my son to sign a quick claim deed since he does not live or contribute to loan , is this okay to due?
Hi!
Welcome to forums!
To al,
In Michigan, the lenders can come after you to recover the deficient balance resulting from the sale of the property. As you have a PMI, the insurance will help you in paying off the deficient balance to the lender. The PMI group can come after you to recover their dues. The lender will claim the deficient balance resulting from the property sale from you.
To anonymousluna,
A quitclaim deed will only help you in removing your son from the property deed. It won't remove him from the mortgage. Unless you refinance the mortgage or assume it, your son will remain liable for the mortgage.
Feel free to ask if you've further queries.
Sussane
Welcome to forums!
To al,
In Michigan, the lenders can come after you to recover the deficient balance resulting from the sale of the property. As you have a PMI, the insurance will help you in paying off the deficient balance to the lender. The PMI group can come after you to recover their dues. The lender will claim the deficient balance resulting from the property sale from you.
To anonymousluna,
A quitclaim deed will only help you in removing your son from the property deed. It won't remove him from the mortgage. Unless you refinance the mortgage or assume it, your son will remain liable for the mortgage.
Feel free to ask if you've further queries.
Sussane
yeah...i'm with sussane here...a quit claim deed sure doesn't seem like a solution to much of anything for you anonymous luna. have the modification mavens given you any clue as to why they'd suggest that? as sussane pointed out, he'd still be obligated on debt anyway.
al, as far as michigan law is concerned, what it says and/or doesn't say won't have any impact on a property that's in florida. the lender is bound by local statutes. now, if this lender should decide to seek restitution of any unpaid amounts from the foreclosure action, they'd have to sue you again, in my opinion (remember this is just opinion, not fact). once they make the decision to sue, they'd take you into a michigan court, there seeking a judgment for whatever the deficiency is. of course, that being the case, if you default on the judgment, they'd have the right to then seek to stake a claim on your michigan property.
but that would seem to be a long ways off, don't you think?
as for how much delinquency will be considered - they'll consider just as much as actually exists; the whole enchilada.
al, as far as michigan law is concerned, what it says and/or doesn't say won't have any impact on a property that's in florida. the lender is bound by local statutes. now, if this lender should decide to seek restitution of any unpaid amounts from the foreclosure action, they'd have to sue you again, in my opinion (remember this is just opinion, not fact). once they make the decision to sue, they'd take you into a michigan court, there seeking a judgment for whatever the deficiency is. of course, that being the case, if you default on the judgment, they'd have the right to then seek to stake a claim on your michigan property.
but that would seem to be a long ways off, don't you think?
as for how much delinquency will be considered - they'll consider just as much as actually exists; the whole enchilada.
If your house is foreclosed, is it true that you cannot buy another home for 3 years? So, if you do a Deed in Lieu of Foreclosure, what is the time period during which you cannot buy a home, since the "Foreclosure" was avoided.
welcome ruthie,
after a foreclosure or a deed in lieu of foreclosure, you'll have to wait for 3-4 years in order to get a new mortgage.
after a foreclosure or a deed in lieu of foreclosure, you'll have to wait for 3-4 years in order to get a new mortgage.
And beware, those of you who think you can allow a home to go to foreclosure and then turn around and buy a new home in a short timespan...the 3 or 4 years we've come to know and love will be moving toward lengthier time spans...as much as 7 years. Watch for it.
Hi,
I'm glad I found these forums. My situation my not be as dire as some but I would still like advice on what direction to go in. We bought our first house a bit over 4 years ago just before the market crashed. We have an 80/20 loan and are totally up to date on our payments. We currently owe about $172,000 and estimate the house to be worth about $158,000 based on comparables in the neighborhood - that being said the neighborhood is in a "transistional area" and therefore houses have not been selling fast.
Anyways, we are planning to move to another country in the next year. What is our best option to get rid of teh house with out foreclosing?
I'm glad I found these forums. My situation my not be as dire as some but I would still like advice on what direction to go in. We bought our first house a bit over 4 years ago just before the market crashed. We have an 80/20 loan and are totally up to date on our payments. We currently owe about $172,000 and estimate the house to be worth about $158,000 based on comparables in the neighborhood - that being said the neighborhood is in a "transistional area" and therefore houses have not been selling fast.
Anyways, we are planning to move to another country in the next year. What is our best option to get rid of teh house with out foreclosing?
I should add that despite only being around $14,000 short, the added cost of a realitor as well as the presumably long length of time to sell add to the problem.
Hi Guest,
You should list the property in market and try to sell it off in order to get rid of the property. You can use the sale proceeds in order to pay off the mortgage in full.
You should list the property in market and try to sell it off in order to get rid of the property. You can use the sale proceeds in order to pay off the mortgage in full.
Adonis - I'm not sure that helps me. My goal would be to sell it but I do not think it will sell for what is owed on it. I don't have $20,000 plus to pay for the difference of what it will likely sell for to what is owed.
i have home my name or my wife namewe continue pay morgage paymet both ist and 2nd mortgage but now i loss job from 2 month and cant afford the payment cuslot of other payment like my 3 car paymet my son in college andother expeditur its very hard ship now other thing my basement got water leakage when heavey rain many time. even i ask for modification both of my leder they not ready to do cusbefore i never miss payment if i repair that leakage its cost too much that its out of my reach and continue leak when rain its afraid to mold in that wall in base ment i already vaccate home and move in apt. and think for forcolosure no other option is come in my mind if i sell home its not worth that i have blance on my 1st and 2nd mortgage and from my house to next 2 house already on sale from long time but still on listing pls advised me wat to do cus i already out from house and dont want to keep due to big hardship i already given my all credit card for debt consolidation to co. and pay to them more then 700 month pls showme path
Hi Sukh!
Welcome to forums!
If you don't want the property any longer, then you can list the property in the market and try to sell it off. In order to sell off the property, you should contact a real estate broker and take his opinion in this regard.
Feel free to ask if you've further queries.
Sussane
Welcome to forums!
If you don't want the property any longer, then you can list the property in the market and try to sell it off. In order to sell off the property, you should contact a real estate broker and take his opinion in this regard.
Feel free to ask if you've further queries.
Sussane