Foreclosure in 92394>Question Details

Treading, Other/Just Looking in 92394

I could really use some advice and any suggestions you could give me. I, like a lot of people am way under water on my current home.

Asked by Treading, 92394 Sat Mar 27, 2010

I have never missed a payment and have a 781 fico. I have a fixed 5.5% so I was not affected by all the crazy loans but do have a 2nd of approx 30k that i took out for improvements approx 5 yrs ago. My problem is my income has decreased by over $20k yr since I purchased my home and $$$ is very tight. There is a very strong, probably inevitable, chance that my income will again be cut in the next fiscal year and If that happens I will not be able to keep my home. Since I am current and have no credit issues, I do not seem to qualify for any assistance with the loans.What if anything can I or should I do? If I lose my home, how long will it be until I would be able to purchase again? A friend of mine suggested I try to purchase something small to fall back on if I lose my home . If I did this, wouldn't the 2nd home be in jeopardy also?? Is there anything I can do or should I just accept the inevitable foreclosure so I can start rebuilding??? Thanks for any and all suggestions.

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You still have a good fico score.

Maybe short sale is not what you want. There is one other possible option. Get a second job. (I know, tough today) and use that income to save this house. If you could do that now maybe you could save your house.

The only other thing I can think of would be to cut out your unnecessary expenditures. Remove cable tv. save $50 or more. Brew your own coffee and take to work. At least $5 a week. Stop drinking soda and beer. It adds up. Cancel everything you can live without. Even going from broadband to dial-up would save you about $15 a month. Do not eat out, that could be well over $100 a month depending on your lifestyle.

Look at everything you buy. ask do I NEED that. Not do I WANT it, do I NEED it? If you can live without it and do not buy it you may find a lot of extra money you never saw before. A boring life is less enjoyable, but a lot more financially secure. Perhaps this is a choice that could help you to save money.

I just bought a 1999 grand marquis with 75,000 miles on it for $3,400 (plus $500 to get it home). That was paid with cash. Compare my expense to someone who buys a new car at $450 a month. Less than a year I am ahead. If you look not at monthly expense but real cost it amy help to remove some purchases to a cheaper one to fit your need.
2 votes Thank Flag Link Sat Mar 27, 2010
What if anything can I or should I do? There are lots of "free" help and you can start here first:

If I lose my home, how long will it be until I would be able to purchase again? If shortsale, 3 years. If foreclosure, 5-7 years. If bankruptcy, 10 years.

A friend of mine suggested I try to purchase something small to fall back on if I lose my home . If I did this, wouldn't the 2nd home be in jeopardy also? Yes, you would. But due to the current financial market, it would be very difficult for your to qualify for a second home loan...your current income will have to be sufficient to cover "both" loans. Even if you rent the current home, the lender would allow a max. of 75% rental income to be available for debt service. With all due respect to your friend, his/her suggestion is not a very good one.

Is there anything I can do or should I just accept the inevitable foreclosure so I can start rebuilding? You have to be ready and willing to be persistent to call and followup with your lender(s) and request them to consider a loan modification for you. You (the borrower) does NOT have to be in default to qualify for a loan modification. You only have to demonstrate "eminent" default...which as you've described, if your income drops further, you will be in default.

Get your loan number and check here to see if your loan is a Fannie or a Freddie loan: ... if it is, be persistent and request for a loan modification with your lender. The lenders are NOT required to but they are being asked and financially incented by the US Treasury department to consider your loan modification.

If your loan is NOT a Fannie or a Freddie, then ask your lender for their own loan modification programs. Lenders don't advertiser this option, but alternative modification programs (in-house) do exist.

If or when you hit a brick wall (or going in circles) with the bank staff on the phone, then consider working with a non-profit housing counselor: ... these people can intervene on your behalf.

If your home is in CA, there's a new law passed in Oct. 2009 - SB94 where "advance fee" for loan modification services is prohibited:

There's much more to share with you so please contact me should you have further questions:

Hopes the information helps.
2 votes Thank Flag Link Sat Mar 27, 2010
Great advise Jenny, I see so many Realtors here pushing short sale and you get it.
Dear Treading, We are all living tight these days, you need to look at other avenues of cutting expenses because losing your home is not an option, it is a life changing event and if you think things are difficult now try getting back on your feet after foreclosure. Be advised short sale, deed-in-lieu-of or deed for lease are forms of foreclosure, and I can not reiterate enough foreclosure is a life changing event.
You need to contact your bank and start communicating your situation, income cuts qualify you for a modification. Being proactive and persistent will do wonders maybe not with the bank but if you ever did get to a point where you went before a judge in a foreclosure case the judge would look favorably on the fact you attempted to avoid going into default.
I help victims of foreclosure (that's after) and you do not want to go there, again short sale, deed-in-lieu-of, and deed for lease are a form of foreclosure

Ramifications of Foreclosure, Short Sale or Deed-in-lieu-of-foreclosure

Here are some of the ramifications of foreclosure, short sale or deed-in-lieu-of-foreclosure, there are many more like your job, yes employers are checking credit records these days.

Your credit score will be reduced by 200-400 points, short sale a little less 100-200 points.

All forms of foreclosure stay on your credit report for 10 years.

After you have gone through foreclosure, short sale or deed-in-lieu-of-foreclosure there will be what is known as the "waiting period", this period of time varies for each and can be reduced if you had some type of extenuating circumstances that caused the foreclosure:
Waiting Periods to Buy After Foreclosure
* Buying After a Foreclosure
The waiting period is 5 years up to 7 years.
* Buying After a Foreclosure with Extenuating Circumstances
The waiting period is 3 years up to 7 years.
* Buying After a Deed-in-Lieu of Foreclosure
The waiting period is 4 years up to 7 years.
* Buying After a Deed-in-Lieu of Foreclosure with Extenuating Circumstances
The waiting period is 2 years up to 7 years.
* Buying After a Short Sale
The waiting period was just upped from 2 to 3 years. However, if a seller does not have a 60-day late pay, that seller may immediately buy another home. It's a reason to stay current on your payments while the home is on the market as a short sale.
In addition to the waiting period, most loans require a minimum down payment of 10% and a minimum FICO score of 680. The home purchase must also be the principal place of residence, not a rental nor a vacation home.

Lastly, most loan applications will ask the dreaded question "Have you ever been foreclosed on?" this stays with you for life, many think that because it will not show up on the credit report after 10 years they can answer "no", well lying on a loan application is a felony that carries a major jail term, so be aware.
1 vote Thank Flag Link Sat Mar 27, 2010
what did you choose back then?

Fair Isaac released a report that says credit scores are affected about the same, whether a seller does a short sale or foreclosure. Fair Issac says the average points lost on a FICO score are as follows:

30 days late: 40 to 110 points
90 days late: 70 to 135 points
Foreclosure, short sale or deed-in-lieu: 85 to 160
Bankruptcy: 130 to 240

Almost the same damage....but SS is gong away much sooner form your credit.
0 votes Thank Flag Link Thu Oct 18, 2012

There are lots of opinions out there. One reason for that is that the market has changed and is changing continually. Not all lenders are created equal. So people give advise on the experience they have had with their lenders. Our office has a Real Estate attorney that comes with the sale of your house or the purchase of your home. So we can always ask our attorney on each scenario.
I personally would never tell a client to get behind on the mortgage. That is wrond. Don't let a bank talk you into being late either without legal consultation. With that said I think you can try a loan motification. Tell them that you really want to stay in your home. The situation has greatly changed since you purchased and you are now making less money. You have been paying on time but it is very difficult each month. And that it also appears that next fiscal year the income is going to drop again. So you are trying to be proactive and get the amount reduced now so you will continue paying on time. There are programs also to assist you. They are not always successful but you won't have the horror story if you continue to pay on time. They will not be able to get you our of your home. If the Mod is not successful then we can short sale your home. You want to do this before Dec 31 so that the second cannot go after you. There is really lots regarding your situation that needs to be discussed personally with a Realtor and/or an Attorney. I can help you with both. If you are in California call me

Mary Young
0 votes Thank Flag Link Mon Aug 6, 2012
There are programs available to for homeowners who have a change in circumstances and still remain current .. please contact me and we can go over some with you.
0 votes Thank Flag Link Mon Jul 9, 2012
Hello Treading,
A short sale can be an excellent solution for homeowners who need to sell, and who owe more on their homes than they are worth. In the past, it was rare for a bank or lender to accept a short sale. Today, however, due to overwhelming market changes, banks and lenders have become much more negotiable when it comes to these transactions. Recent changes in corporate policy and the Obama administration (HAFA) have also improved the chances of getting a short sale approved. For homeowners to qualify for a short sale, they must fall into any or all of the following circumstances:

1) Financial Hardship – There is a situation causing you to have trouble affording your mortgage.
2) Monthly Income Shortfall – In other words: "You have more month than money." A lender will want to see that you cannot afford, or soon will not be able to afford your mortgage.
3) Insolvency – The lender will want to see that you do not have significant liquid assets that would allow you to pay down your mortgage.

We service all of the Ventura County and can refer a Certified Distressd Property Expert to consult with you regarding your special circumstances. Vist our site for more details:
0 votes Thank Flag Link Sat Mar 27, 2010

The previous answers have a lot of good information. However, one thing that most of us agents don't want to discuss is letting a house go and renting. In the past, in California, it has almost always been better to buy than to rent. This is a historical fact that no one is likely to argue with. However, things have fundamentally shifted in CA and the nation, as a whole.

In order to save your credit score you might be tempted to look into some of the options DP2 was talking about. Credit may not be as important with the new rules that Congress is passing that restrict the banks.

In our area, the High Desert, things are always worse than the rest of CA. Close to 85% of mortages in the Inland Empire are upside down. There is very little in the way of employment and all the new laws being passed in Washington DC are going to depress the economy further. With Western European social programs we can expect Western European unemployment rates of 12-20%. Probably higher in CA as we follow Spain's 'green' programs. The US home ownership rate has always been higher than Europe's, but that may soon change.

Other factors to consider are the probably passage of Cap and Trade and VAT taxes. We were borrowing 50% of our national expenditures before the health care bill, and it is likely to be revenue neutral as Social Security and Medicare. These things are in addition to other bubbles in the economy. There is likely to be another downward dip in housing values here once the commercial property and credit card markets have their busts.

With all the changes in the law, I wouldn't count on the old 3/7/10 standard. There is a fundamental lack of stability in our entire legal system. Contract and bankruptcy laws were ignored in the AIG bonuses (whether or not you agree with them or not) and the Chrysler BK. For the first time in our nation's history, the Federal government has criminalized what used to be your choice in health care. Simply put, the old rules can't be counted on to apply. There is also talk about cramdowns on the banks if you can't afford the payments, so you may just want to hold on.

There have been a lot of buyers that have picked up homes and these investors are looking for good renters for newer homes and offering rents that are much lower than you could buy a house. You won't have to pay for repairs either. You might even be able to get into a rent to own program yourself. The laws in CA have increasingly begun to favor renters over landlords.

I'm sorry if this doesn't answer your question in the way you were hoping. It certainly doesn't help me as an agent to recommend that you don't buy, and looking at the trends I've been talking to my boss about expanding into property management in order to stay flexible with the markets. My advice to most people is to live as inexpensively as possible at the moment. If that means renting, so be it.

Good Luck to you.
0 votes Thank Flag Link Sat Mar 27, 2010
I commend you for being proactive. many home owners in your situation would bury their heads, ignore the signs, and do nothing. You have several options, and the times given below (3/5-7/10 years) only apply if you intend to obtain conventional financing to buy another home. You could buy another home with seller financing sooner. One way to do this is to start working with an investor now.

An investor might offer to buy your home a few different ways: 1) an all-inclusive trust deed (aka subject-to mortgage [meaning subject to your current financing]), 2) lease-option (aka rent-to-own), or 3) short-sale. (The first two options are forms of creative [or seller] financing.) If you were behind on your payments--not that I'm recommending for you to stop paying--then an investor might have another option: short-paper. Many investors (myself excluded) would prefer to buy a home, from a seller in your situation, via short-sale; others (myself included) would prefer to buy it subject-to. (Some of us in the latter group [myself included] would prefer to buy it via short-paper if your payments were behind.) Plus, that investor could work with you to buy your next home possibly with creative financing.

A caveat to keep in mind when working with us is that most of us won't offer to pay as much CASH as a normal (or retail) buyer, but many of us are willing to pay more if we're able to purchase with seller financing.

Another option is for you to work with an agent (who typically caters to retail buyers/sellers), and you could still sell via subject-to mortgage, lease-option, or short-sale. You might even get a higher offer price. However, you'll find that fewer agents know how to properly structure a transaction with creative financing, and often the ones who do (like Don Tepper) are also investors.

Whether you opt to work with an investor and/or an agent, both can help you sell your current property and buy your next one.
0 votes Thank Flag Link Sat Mar 27, 2010
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