Part 2 in 3-part series on “What you don’t know about foreclosure can hurt you”
Each person’s situation is different, and I can’t cover all the information needed to fully explore options for you – but here’s the most important first steps to take;
- Talk to your lender(s); Even if you’re not behind on your payments, talk to your lender. Let them know that ‘foreclosure is imminent’ and ask for options. The person you’ll be talking to is trained as a bill collector. They may not be very nice, and it can be discouraging. Keep trying. Call back again if you don’t get help. Be persistent, and polite. Ask for loan modification information. Many lenders are willing the change the terms of the loan to make it more affordable and keep you in your home. Ask for the department that can help you explore options to stay in your home. Keep a log of your calls – dates / times / who you talked to. A simple $.59 spiral bound notebook works great. Let them know you want to apply for the Making Home Affordable Program “HAMP” (1-888-995-HOPE). If they received TARP funds, they should be cooperating with HAMP. Applying for Making Home Affordable loan modifications (HAMP) will also prepare you to benefit from the new Home Affordable Foreclosure Alternatives (HAFA) program beginning in April (flyers and information booklet included in your packet).
- Find a lawyer and CPA; Most lawyers will offer an initial consultation for free. It’s important for you to know your rights and your options. Some homeowners have explored bankruptcy as a way to get out from under an overwhelming deficiency judgment, for instance. A good CPA is necessary to help you understand and explore the impact of a 1099 on your finances and whether you might qualify for the IRS debt forgiveness.
- Organize your finances; The lenders are going to ask for a complete set of financial data from you in order to try to modify your loan. Should a loan modification not work, the same information is necessary for a Short Sale offer. This is the homework that may not be fun, but will be critical for you as you explore what options may work to avoid foreclosure. It’s a good idea to set up a file system or folder to put incoming statements into, as your lender will want updates. You want these easily available. At a minimum you’ll need;
* Two Years of Tax Returns
* Two months of bank statement (all accounts
* Two months of pay stubs (or unemployment checks)
* Financial Statement (your Realtor can give you a generic form)
* Hardship Letter – necessary for a Short Sale
- Find a Realtor who is specially trained in Short Sales; If a loan modification doesn’t work, a Short Sale may be the best alternative to save your credit and minimize the damage of an underwater property. Short Sales require a different skill set than a normal real estate transaction. It’s important for you to have a professional that is specially trained in this area, and has some experience. Due to Act 137 legal limitations restricting Realtors in this area, it’s a fairly new skill set to the local real estate market. More and more Realtors are getting specialized Short Sale training and designations. It’s always a good idea to interview your Realtor, and especially with Short Sales, ask them about their experience with listings and successful Short Sale closings.
- Don’t give up! Homeowners I’ve talked to who were successful in their loan modifications were persistent. For a successful resolution, you’ll need to hang in there and keep trying to explore all options. The impact on your credit of a foreclosure will be much, much worse than a Short Sale. Although you may feel overwhelmed, it’s worth trying to find a solution. Foreclosure is always available – but should be your very last option. Realtors who are specially trained in Short Sales have information about loan modifications, programs to help you stay in your home, and how to do a successful Short Sale if those don’t work. You’re not alone!
More information and resources;
- Frequently Asked Questions; Loan Modifications, Short Sales, Refinance
- Foreclosure Solutions
- Short Sales Explained
- Helpful Resources
I have specialized training in short sales, and a successful track record of helping homeowners on Kauai sell their property as a short sale. If you’d like a confidential consultation, please know I’m here to help. Contact me anytime.