Foreclosure. It should go without saying that this is not, I repeat, NOT a fun word to hear or say. Unfortunately, foreclosures happen. According to RealtyTrac, in July 2017, “there are currently 628,016 properties in the U.S. that are in some stage of foreclosure…” While this number is quite large, it is 10% lower than the previous month. Credit.com also points out that the foreclosure rate is improving, but still lists North Carolina, Florida, and Ohio (plus seven other states) as still struggling with high foreclosure rates. Therefore, it is important to not just talk about foreclosures, but more importantly talk about how to prevent a foreclosure from happening to you.
What is a Foreclosure?
In the simplest terms, a foreclosure is the taking back of a property (by a lender) when the owner (also referred to as borrower) fails to pay his or her mortgage. By federal law, a borrower, living in the subject property, would have to be 120 days delinquent on a payment before a lender can begin the process of foreclosure.
If a borrower becomes delinquent, certain documentation is provided explaining possible foreclosure. First and foremost, the borrower is immediately notified on possible foreclosure through collection attempts and document notification. As a Trustee, the process we follow changes slightly based on the type of loan and borrower occupancy. For example, if it’s owner occupied and the primary residence, written notification is sent according to Senate Bill 900 (SB900).
In addition, a notice of intent is provided, which advises borrowers on their rights and provides assistance phone numbers, if needed.
How a Loan Management Company Can Help Prevent Foreclosure
All of that being said, we want foreclosure to be the last – LAST option. As a loan management company (and Trustee in this particular situation), our job is to seek out alternative options that work for BOTH the borrower and lender. We work very hard to find an alternative – I can say confidently that foreclosure can be avoided in most cases in the Private Lending arena, it just takes creativity, patience and communication.
- Forbearance, which is temporary halt or hold on enforcing a lender’s rights to proceed with the foreclosure. This option gives you a limited amount of time to catch up on payments or make other arrangements with the lender, like those mentioned below #3 and #4.
- Modification, which means a borrower can pay something that is acceptable to the lender, but not at the current loan terms. Therefore, a modification to the agreement must be made. This usually involves deferring past due payments and adjusting the interest rate, payment amount or both. If the interest rate stays as-is, the shortage caused by the lower payment amount can accrue. It could either be paid at a later date or perhaps forgiven if the terms of the modification are followed.
- Pre-foreclosure sale, gives the borrower time to sell the property. A good Loan Management Company will have a timeline and checklist that allows both parties to maximize the cash-out without taking too long or causing a “fire-sale”. This is often a win-win and we are really good at it.
- Deed in Lieu is accepting property in exchange for releasing the debt. This can be tricky as the lender accepts the property as is, with all title issues attached. Liens on the property or judgments against the borrower can transfer with the property making the lender liable for the debt.
We have an additional informational page that provides more detail about these options. Click here to read it.
If a Foreclosure is Inevitable…
Unfortunately, sometimes they are inevitable. In this situation, our goal as the Trustee is to save everyone involved time, money, and effort. On top of that, we want to make sure we’re adding more value to the equation than what is being billed. What we like to be able to do is make your foreclosure bullet proof. We do this by:
- Acting as the neutral, unbiased 3rd party, and removing the emotion out of the process for both borrower and lender.
- Representing both parties and acting in the best interest of all.
- There is never a step that we do not clearly explain.
- Adhering to strict systems and processes to ensure filing is on time.
- Identifying loose ends, if they exist, and tying them up to avoid costly mistakes down the line.
- Thinking ahead to consider how changes can impact the life of loan.
- Leveraging our network of specialists to better service our clients.
For $20 a month, we’ll do the standard loan servicing duties PLUS act as your guide as you go through this process. We’re going to do everything in our power to prevent a foreclosure. Whether it’s finding an alternative solution or not, we’re committed to coming alongside you as your partner to find it.
If you have more questions regarding foreclosure, or would like to know how we can help you in your situation, give us a call at (877)-335-8676.