The U.S. government statistics showed that over 1 million foreclosures were filed in America in 2010. In 2011, there have already been over 3 million foreclosures filed. Two housing industry records broken two years in a row. Oddly, last year the news bureaus were telling us that the mortgage and housing industry had bottomed out and that the only way to go was up. The numbers tell us otherwise.
Upside Down
As the housing markets continue to settle, much of the value of many homes has settled to such a degree that home buyers are finding themselves with loans worth up to twice the fair market price of their houses. Of course, this devaluation has been the cause of a rush to ease that upside-down status with home loan modifications.
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One Hand and the Other Hand
Home buyers must ensure that they continue to meet their payments in full and on time even though they are negotiating a mortgage modification. A home buyer may find themselves working in good faith with their lender to lower amounts owed and lower monthly payments, only to have a foreclosure notice show up in the daily mail. Sometimes it seems financial institutions do not have their right hand working in coordination with their left. Of course, panic sets in and the borrower has to scrounge a way to stop foreclosure and at the same time negotiate a mortgage modification.
Contingency Plan - Chapter 7
Home buyers going through modification might want to consider a bankruptcy strategy, especially if meeting current payments is becoming an impossibility. It could forestall a foreclosure proceeding. The services of a bankruptcy or real estate attorney are necessary. A Chapter 7 can shunt aside a lot of unsecured debt allowing the home buyer to focus payments on the mortgage. A Chapter 7 Bankruptcy will put a stay on the foreclosure until the mortgage holder files a motion for relief of that stay. Once that is approved, foreclosures can commence.
Contingency Plan - Chapter 13
Filing a Chapter 13 Bankruptcy may be the best option. It will allow a home buyer to catch up on payments past due and maybe even be the starting point for a loan modification which can occur in the 3-5 year repayment term that accompanies such a bankruptcy. It too will allow the borrower to get other debt obligations under reins, especially credit card debt. Often, if things are negotiated properly, any unsecured debt left after that repayment time could be excused as well.
Take Action
The minute a home buyer recognizes that meeting monthly payments will be a problem, it is incumbent on them to start talking with their lender. Tell them the problem and how you think you could best overcome it. Talk to them about payment reductions or other expedient actions that could delay foreclosure proceedings. Remember that negotiating a home loan modification is not a way to stop foreclosure. Lenders expect home buyers to keep making payments. Doing nothing represents a lack of will on the part of the buyer to set things straight. It will only lead to financial disaster: the buyer will absolutely ruin their credit for years to come, as well as lose the home.
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