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re_manager
2530 Posts |
 Posted - 03/28/2008 : 11:01:02 PM
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A friend of my family has asked me to give him advice regarding some financial difficulty he has been having. He purchased a home 12 months ago for $310,000 and put $15,000 down for a 95% LTV, one loan. The interest rate is 9.2%, 30 Year Fixed as his credit is in the low 600's. He figured he would refinance the house once it increased in value. Obviously that is not going to happen. He has roughly $10,000 in assets and family income of $6,800/month.
So he has a payment that he is having difficulty making at this time. He has not made the payment since January so it is currently 3 months late. We has called the bank to ask if they would help him lower the interest rate and they have not been helpful.
The home is now worth $250,000 so he is negative $60,000 on it and is located in the Central Valley, CA.
What would you tell him to do at this point? |
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dontwastemytine
96 Posts |
Posted - 03/28/2008 : 11:08:30 PM
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Properties which have deficient equity and are delinquent in payments leave most homeowners assuming they have only one solution -- foreclosure. Wrong!
"Short pay/sale" is the latest vogue term in real estate. Lenders may refer to the idea as a "discounted payoff." The latter basically entails a financial institution accepting less than what is owed in lieu of foreclosure. With an uncertain housing market it behooves an institution to try to sell a property at a mitigated loss rather than prolong the inevitable foreclosure process. The foreclosure process is not only a costly procedure the lending institution will have to endure, but it doesn't guarantee an expedient repossession of the property in question because of the possibility of the borrower filing bankruptcy. Even if repossession were to take place, an institution is faced with assuming carrying costs for months until the property finally sells.
A lender will not take less on a loan simply because the home has devalued and the borrower doesn't like owing more on the home than it's worth. A lender will consider short pay as a last resort, to avoid the tremendous cost to itself if it has to foreclose on the property.
Your friend my want to do a short sale of this home and them go find another one like it for the current market price. |
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racerx
10198 Posts |
Posted - 03/28/2008 : 11:29:55 PM
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Have him call a HUD-approved counseling agency. They may be able to intercede on his behalf. Their service is usually free or low-cost.
http://www.hud.gov/offices/hsg/sfh/hcc/hccprof14.cfm |
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dontwastemytine
96 Posts |
Posted - 03/28/2008 : 11:42:21 PM
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quote:
Originally posted by racerx
Have him call a HUD-approved counseling agency. They may be able to intercede on his behalf. Their service is usually free or low-cost.
http://www.hud.gov/offices/hsg/sfh/hcc/hccprof14.cfm
you are a Decepticons |
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KHufford
3041 Posts |
Posted - 03/28/2008 : 11:48:07 PM
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quote:
Originally posted by dontwastemytine
quote:
Originally posted by racerx
Have him call a HUD-approved counseling agency. They may be able to intercede on his behalf. Their service is usually free or low-cost.
http://www.hud.gov/offices/hsg/sfh/hcc/hccprof14.cfm
you are a Decepticons
And you are a drunkticons...
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djorge44
676 Posts |
Posted - 03/29/2008 : 05:37:35 AM
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| He could try NACA too |
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velecico
2200 Posts |
Posted - 03/30/2008 : 7:47:48 PM
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stay as long as possible without making payments , Cali is so screwed up , probably another 12 months till he gets booted out , save up all the mortgage payments as you will need a big security deposit for your next rental , rent for 2-3 years , about that time things may start to look better , save all your rental receipts and make sure you dont tank your other credit , lenders will be looking to give out money in 36 months the same as they did before the bubble burst |
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Speelbot
7 Posts |
Posted - 03/30/2008 : 8:18:11 PM
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| ....he could call the banks work-out dept & tell them to lower the interest or he will stay in the house without paying 'til the sherrif arrives in about 6 or 7 months...and that your offer expires in 48 hours. |
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subprime
3481 Posts |
Posted - 03/30/2008 : 8:23:33 PM
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In addition to that I have seen some credit repair companies that will work with you to repair your credit, remove mortgage lates/foreclosures by sending multiple letters to the lenders.
I wonder with all the talks of a bailout and gov't intervention if there will ever be the possibility of removing this foreclosure from the credit report without the cost of a credit repair company?
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rtrefflich
1761 Posts |
Posted - 03/30/2008 : 10:05:47 PM
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There are actually three ways to go about this:
1) call an attorney and say how your friend did not understand what he was signing, the challenges that the loan had and that he was in reality screwed by the broker, lender, agent, title, and everyone else involved. After spending a few thousand dollars on an attorney reviewing the GFE, TIL and other documents, there is bound to be some type of error in their which may negate the loan.
2) As mentioned above, you can do a short sale/short pay, find someone with experience in negotiating with the bank on this. Feel free to call me if you have any questions. Have an investor purchase the home on the short pay and lease option the home back to your friend. Here in San DIego in the first phone call, we are already down $170,000 on a $274,000 loan (1st and 2nd). Depending upon what the properties around his are selling for would be a good start to drop the price. In CA, you cannot tell them to stop making payments, they have to "decide" this on their own.
3) Sell it on a short pay on the market if they want to get out
4) Foreclosure. This will ruin their credit when a short pay will show up as a debt settled. I have a credit report for a client who did a short pay and a little after a year he had a 684 mid score. |
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AK__47
430 Posts |
Posted - 03/31/2008 : 06:44:32 AM
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quote:
Originally posted by rtrefflich
There are actually three ways to go about this:
1) call an attorney and say how your friend did not understand what he was signing, the challenges that the loan had and that he was in reality screwed by the broker, lender, agent, title, and everyone else involved. After spending a few thousand dollars on an attorney reviewing the GFE, TIL and other documents, there is bound to be some type of error in their which may negate the loan.
2) As mentioned above, you can do a short sale/short pay, find someone with experience in negotiating with the bank on this. Feel free to call me if you have any questions. Have an investor purchase the home on the short pay and lease option the home back to your friend. Here in San DIego in the first phone call, we are already down $170,000 on a $274,000 loan (1st and 2nd). Depending upon what the properties around his are selling for would be a good start to drop the price. In CA, you cannot tell them to stop making payments, they have to "decide" this on their own.
3) Sell it on a short pay on the market if they want to get out
4) Foreclosure. This will ruin their credit when a short pay will show up as a debt settled. I have a credit report for a client who did a short pay and a little after a year he had a 684 mid score.
You might not want to do #1 if you were involved with the loan. |
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