Using A ''deed In Lieu Of'' To Stop A Foreclosure Recently lenders have been taking deeds in lieu of foreclosure from homeowners to resolve foreclosures. The lender simply accepts a deed in exchange for forgiving the homeowner of his mortgage or Read more...
To a homeowner, foreclosure is a shocking experience. When foreclosure takes place, it is extremely costly to the homeowners because not only have they lost their home, they have also lost any equity they may have built up in the property. (Equity is the difference between the true market value of the property and the balance owed and/or the total amount of all liens against the property). Along with the loss of all equity, people losing their property due to foreclosure also lose the amount of their original down payment and any money spent on improvements since they bought the home.
As we mentioned earlier, there are many reasons why property (home) owners find themselves in the type of financial trouble that could result in foreclosure. Here are some of the most common reasons.
1. Economic Downturn The downsizing of many companies was a major reason for the declining job market in the early nineties. Companies that downsize create employee layoffs and/or changes in job classifications. The economic trend over the last few years has generally required more than one person in each household to work. The combined income created more buying power for the family unit. Company downsizing resulted in one or more family members losing their job(s) and/or a reduction in the number of hours worked by one or more family members. The loss of income created a budget problem for many families, making it hard to keep up with their mortgage payments and other bills.
The downturn in the economy resulted in declining property values. Before the economical downturn in the early 1990s, property values, for the most part, had continually increased. Now, we are again seeing a decline in property values. This decline has created many problems. Lower property values caused an inability on the part of many homeowners to refinance, making them unable to take advantage of the lowest interest rates available in many years. Many homeowners found that they could not refinance or borrow against their home equity to consolidate their debt load (bills). When homeowners lose part of their income due to situations such as economical downturn and the decline of property value, the result, in many cases, is the loss of their home due to foreclosure.
2. Balloon Payments A balloon payment is the final installment payment on a note that is greater than the preceding installment payments and which pays the note in full. Many homeowners bought during the so-called good times, when property values were appreciating/ increasing rapidly. Sellers were able to sell their homes at two to three times the original cost. Many sellers were willing to carry back a 2nd or 3rd mortgage/ note/ loan on the property themselves. The length of time the seller would carry the paper/ note/ loan would generally be three to five years. The new borrower/ homebuyer usually made interest only payments on the carry back. At the end of the three to five-year term, the entire balance on the 2nd or 3rd loan/ note carried back by the previous owner would be due.
Once the note reached the maturity date at an agreed upon time, the entire sum/ balance of the carry back loan would then be due and payable to the seller/ previous owner. Unfortunately, the property value did not always appreciate/ increase, meaning that the new homeowners could not refinance or borrow enough money to make the payment. The missed balloon payment started the process ending in foreclosure.
3. High Payments During the late 1970s and through most of the 1980s, home values increased all over the U.S. Many buyers thought the home prices would continue that upward trend. Many expected the property values to continue to spiral upward, and some even expected property values to possibly double and triple. A number of buyers bought properties they could barely afford with the intent to refinance later at a lower interest rate or possibly to sell and capture the profit. Many persuaded themselves that if they didn’t buy immediately, they would be unable to buy in the future, when prices were expected to be significantly higher. Some buyers made a lot of money buying and selling properties. However, many others lost their properties as a result of high monthly payments they could not maintain. (Many are in trouble right this minute and need help.) This resulted, in many cases, in foreclosure.
4. Speculation Many real estate investors bought on speculation. They theorized that buying several properties, and using them as rentals, would make them millionaires in a short period of time. Some did just that, but many others had problems. The lack of experience in managing rental properties, plus the problems accompanying rental properties, became a nightmare for many. The change in economic conditions created additional problems when the renters could no longer afford to pay the required rent. When the rents were not coming in as expected, the owners could not keep up with the loan payments. Other problems included some of the payments on properties being more than the rental income (the rental income was less than the loan payment), creating a negative cash flow for the property owner. Declining property values also created a situation wherein properties would not sell for enough money to pay off the existing mortgage. Foreclosure was frequently the result.
The above reasons are not the only reasons for foreclosure, but they are some of the most common. Foreclosure conditions have created problems for both homeowners and lenders. In good economic times, foreclosures may not be as costly to the lender as in poor economical times. In good times, they may be able to sell the property for full price and recover their investment/ balance owed the lender. In a poor economy, however, lenders often suffer tremendous losses when they end up with a property. Again, as a reminder, lenders do not like to foreclose; the last thing they desire to have is another piece of property. In poor economical times - in fact, at most times - lenders are very willing to negotiate to avoid complete foreclosure. Quite often, forbearance agreements can be worked out with the lender or lenders.
Additional Related
Resources
Buy A Foreclosure Home And Stop Wasting Money On Rent Many people, who are still paying a rent that adds up to a huge amount yearly, don’t realize that they have a much better alternative – and that is, to buy a foreclosure home. Isn’t it so Read more...
Do Lenders Really Mistreat Foreclosure Victims? The question of whether lenders mistreat foreclosure victims has two sides and both are based on historical fact. The lenders' side is homeowners are financially irresponsible and are breaking a Read more...
Two Common Misconceptions Regarding Foreclosure There are many misconceptions about foreclosure. The people that lose their homes by foreclosure don't want the public to know about their personal tragedy, so the misinformation usually comes from Read more...
What A Foreclosure Eviction Means You can expect an eviction if your home is sold because of a foreclosure sale. Whether the sale is by auction, or by a trustee's sale, the eviction is the legal process by which a property owner Read more...
Barack Obama: Solving the housing crisis - Salt Lake Tribune By barack obama
Published Feb 7, 2012 01:01AM MDT
In my State of the Union address, I laid out a blueprint for an economy that?s built to last ? an economy built on American manufacturing, American energy, skills for American workers, and a renewal of American values of fairness and responsibility. Over the past decade we strayed from those values and we saw what happened. Millions of families who did the right thing were hurt when the massive housing bubble burst. Folks who shopped for a home they could afford, secured a mortgage and made the... ... Pinole good Samaritan faces foreclosure - San Jose Mercury News: News Former East Bay Municipal Utility District plumber severely injured while stopping to help stricken man on freeway; faces mounting debts. DocX Faces Foreclosure Fraud Charges in Missouri - International Herald Tribune: Business The charges against DocX, which provided home foreclosure services to lenders across the nation, are one of the few criminal actions to follow reports of widespread improprieties against homeowners. Key states move closer to foreclosure-abuse deal - Salt Lake Tribune By DEREK KRAVITZ The Associated Press
Published Feb 6, 2012 06:41PM MDT
Washington ? California and New York, the key holdouts in a long-awaited settlement over foreclosure abuses, moved closer Monday to backing a deal with most other states that would force the five largest mortgage lenders to reduce loans for about 1 million households. But those states, along with a handful of others, had not joined the settlement by a Monday deadline set by the nation?s state attorneys general. And a deal might not be finalized for days. California still has ?significant sticki... ... Mortgage relief: Partial plan better than none - Yahoo! News Search Results for mortgage The architects of the joint state-federal mortgage releief plan believe it would be better for homeowners to get a partial deal than nothing at all, according to sources. Occupy Bernal, Petaluma zero in on foreclosures - SFGate: Business & Technology Occupy Bernal, Petaluma zero in on foreclosures OccupyMN Fences Off A Foreclosure-Free Zone In S. Mpls - WCCO: National <img width="150" height="112" src="http://cbsminnesota.files.wordpress.com/2012/02/occupymn.jpg?w=150" class="attachment-thumbnail wp-post-image" alt="(credit: CBS)" title="Occupy Minnesota S. Mpls Home" />The group Occupy Minnesota stepped up their efforts Saturday to prevent foreclosures. <img alt="" border="0" src="http://stats.wordpress.com/b.gif?host=minnesota.cbslocal.com&blog=15909630&post=211019&subd=cbsminnesota&ref=&feed=1" width="1" height="1" /> GOP candidates shy away from Nevada housing crisis - SFGate: Top Stories GOP candidates shy away from Nevada housing crisis Thousands of condo owners stuck in condos they can?t sell - Salt Lake Tribune By LESLEY MITCHELL The Salt Lake Tribune
Published Feb 3, 2012 04:46PM MDT
Pete Farley?s condominium is tidy, updated, clean and in a good neighborhood. And with a listing price of just under $175,000, it is affordable to most buyers. All of those things should make it an easy sell in today?s real estate market. Instead, the condo unit is largely unsellable. The problem is that Farley?s condo community lacks certification from the U.S. Federal Housing Administration. And without that seal of approval, buyers with FHA-insured loans ? and some with other types of loans ... ... Obama seeks to broaden reach of housing assistance - Salt Lake Tribune By JIM KUHNHENN and BEN FELLER The Associated Press
Published Feb 1, 2012 05:59PM MDT
Falls Church, Va. ? Conceding his earlier housing programs have fallen short, President Barack Obama on Wednesday proposed a vast expansion of government assistance to homeowners, aiming to make lower lending rates a possibility for millions of borrowers who have not been able to get out from under burdensome mortgages. The president?s proposal is laden with election-year politics and faces a difficult path in Congress. Obama wants to pay for the estimated $5 billion to $10 billion cost with a ... ... If you're about to lose your home, just occupy it - Chicago Tribune: Opinion If you're about to lose your home, just occupy it Obama details broader housing refinancing plan - Star Tribune: Latest President Barack Obama called on Congress Wednesday to make it easier for millions of additional homeowners to refinance their mortgages at lower interest rates even if they owe more than their homes are worth. He conceded that his administration's housing plans so far have not lived up to their promise. Obama details broader housing refinancing plan - Minnesota Public Radio: Business The president called on Congress today to make it easier for millions of additional homeowners to refinance their mortgages at lower interest rates.<img src="http://feeds.feedburner.com/~r/MPR_Business/~4/s3W5aagPLgs" height="1" width="1"/> Ex-Credit Suisse trader pleads guilty in NY - Salt Lake Tribune By LARRY NEUMEISTER The Associated Press
Published Feb 1, 2012 10:12AM MDT
New York ? A former London-based Credit Suisse managing director pleaded guilty Wednesday and agreed to cooperate in a federal probe of trading of sub-prime mortgage securities, admitting that he falsified the books to enhance his standing in his company and his year-end bonus as the housing market collapsed. David Higgs pleaded guilty in Manhattan to a charge of conspiracy to falsify books and records and commit wire fraud, which carries a potential maximum sentence of five years in prison. ?To... ... Obama Details Broader Housing Proposal - NPR News The president called on Congress Wednesday to make it easier for millions of additional homeowners to refinance their mortgages at lower interest rates even if they owe more than their homes are worth. He conceded that his administration's housing plans so far have not lived up to their promise. White House details mortgage refinancing plan for homeowners - LA Times: Business The White House hopes to help millions of homeowners lower their monthly mortgage bill with a $5 billion to $10 billion plan to set up a streamlined refinancing program for people who are current on their payments.
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Published Feb 1, 2012 08:15AM MDT
President Barack Obama will announce a package of proposals to jolt the housing market out of its doldrums, including an effort to help more borrowers take advantage of historically low mortgage interest rates, the White House said Tuesday. The president, following up on a promise made during his State of the Union speech last week, will ask Congress for a tax on large banks in order to help homeowners refinance into government-insured Federal Housing Administration loans, the White House said i... ... Feds want to help turn foreclosed properties into rentals - Chicago Tribune: Popular Feds want to help turn foreclosed properties into rentals Obama to detail broader housing refinance plan - Star Tribune: Latest The Obama administration is trying to fix a stubborn drag on the economy by allowing millions of more homeowners to refinance their mortgages at lower interest rates even if they owe more than their homes are worth, tackling a difficult issue of vital concern in states key to President Barack Obama's re-election. BofA unit: Texas law should govern Utah foreclosures - Salt Lake Tribune By Tom Harvey The Salt Lake Tribune
Published Jan 31, 2012 05:57PM MDT
Lawyers for the foreclosure arm of Bank of America argued Tuesday that when it sells a home in Utah it is governed by Texas law and not Utah statutes. That assertion came in arguments in U.S. District Court in Salt Lake City where ReconTrust and BofA are being sued over what Utah attorneys contend were years of illegal foreclosures in Utah. Under state law, only a practicing attorney or a title company with offices in Utah can file a notice of default with county recorders that starts the forecl... ... America is becoming a nation of renters - MSNBC There was fresh data from the government Tuesday showing that the American dream of owning a home is fading fast. ... How homeowner fought foreclosure - Chicago Tribune: Real Estate How homeowner fought foreclosure Mortgage modification program expanded to investors, others - Chicago Tribune: Business Mortgage modification program expanded to investors, others Brokedown Palace - Newsweek Top Stories David Siegel wanted a Versailles. Now he wants revenge.
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