Beware of the Scammer!

As with any crisis or disaster, in addition to the folks who really do try to assist those in dire straits, it never fails that the scum of the earth also show up trying to take whatever advantage they can of those less fortunate than they are. This is just as true in the case of foreclosures as in any other major crisis situation. The scammers just crawl out from under their rock and start taking--from anyone they can trick or deceive.
One of the more common scams making the rounds now is the equity strip routine. Basically, it goes like this. Pleasant sounding scammer approaches someone in default on their mortgage, but still owning the jhouse and having some equity in it. He convinces the homeowner that if the owner will just add the scammer's name to the title, the scammer will make certain the mortgage is paid on time until the homeowner can get back on his or her feet financially. The scammer may even ask the homeowner to pay a 'small' monthly payment to Mr. Scammer as 'rent' or a 'service fee' for the supposed assistance being rendered.
Once the homeowner has placed scammer's name on title, scammer then goes, unbeknownst to homeowner, to a bank and takes out another loan on the property equal to all,or most of the remaining equity in the property. Newly enriched at homeowner's expense, he disappears, never to make a single payment on either the new loan or the old. As no mortgage payments are being made by anyone, the homeowner ultimately does lose his or her home, along with any equity they may have had in the property before our scamming slimeball showed up in the first place.
Moral of the story: If it seems too good to be true, it probably is. Good advice: Don't agree to ANYTHING or sign ANYTHING with someone who you don't know well or have had an opportunity to thoroughly check out.

More Relief--Maybe....

I just heard of another possible life preserver for anyone who finds themselves in trouble with their mortgage. Provided by Fannie Mae, it is NOT designed to save those who just simply got in trouble because they weren't careful enough in taking on too much debt in buying their home. Rather, it is directed at those in trouble with their mortgage purely because they fell afoul of what I call the 'Fatal Four'. The Fatal Four are: Life, Wife, Health and Wealth. They represent what are relatively temporary life events that can have major negative impacts on a homeowner's ability to pay the mortgage. The first, Life, refers to a death of a family member, along with all of the expense and emotional aggravation it carries. The second, Wife, refers to a divorce, and, yes, it obviously could just as easily be Husband, but that doesn't rhyme. Anyone going through a separation or divorce knows only too well how that can destroy family budgets and obliterate the monthly mortgage payment. Health is obvious. A major health crisis with its attendant medical expenses can kill your mortgage faster than anything else. I have had people in these straits tell me they had to choose between taking action to save their lives or paying the mortgage and, obviously, the mortgage lost. That's a very understandable choice, to say the least. The final issue, Wealth, is usually an issue when the homeowner loses his or her job, or, in some cases, has a major financial catastrophe other than the other three issues arise.
Folks who fall into one of these groups may be eligible for a small unsecured personal loan to cover the late payments on their mortgages, as well as the following regular payments until they are back on their feet and able to resume payments on a regular basis from their income. Called the HomeSaver Advance program, loan servicing firms will be able to offer borrowers a maximum loan of the lower of either $15,000 or 15% of the unpaid mortgage balance. The loan can be for as long as fifteen years at a rate of 5% interest. Not only can it cover mortgage payments, it can also be used for mortgage-related costs, such as lawyers fees, escrow costs or insurance payments. The borrower doesn't ever get to physically receive the money. Rather, it goes to the servicing firm, which applies the funds to the borrower's mortgage.
Qualifications: the borrower must have a mortgage loan that was sold to Fannie Mae, a requirement that is met by nearly a quarter of all mortgages. The original loan must be at least six months old, and the borrower must be behind at least two payments. Finally, the borrower must be able to prove that they have solved the problem that got them in trouble in the first place, and can afford the additional payments the new loan will require.
Is this for you? It's better than the alternative. You have nothing to lose by asking your servicer. Call NOW! The home you save may be your own.

A word for investors in foreclosed property--AUCTION! As more and more properties are lost to foreclosure, the repossessing lenders are having to find new ways to dispose of the properties they now own. Though most will initially be listed for sale by Realtors and made available for sale in the traditional way, as more and more of these fail to sell as quickly as the owning lenders desire, many are being packaged and turned over to professional auction firms for sale in huge bulk auctions. Lasting usually 1 or 2 days, a typical auction will dispose of many hundreds, sometimes thousands of properties, often a rate of one home every two minutes. Financing is often available at the site of the auction for the winning buyer/bidder. When you attend, be prepared for a mind numbing cacophony of noise as the bidder and auctioneer's voices are amplified throughout the (usually) huge hall. Also, have at least 10% of your purchase price on hand as a down payment (amounts vary with each auction and its ground rules).
These auctions, unlike the traditional foreclosure public auction that reclaims the property for the lender, also have open houses in advance of auction dates so that potential buyers can view and arrange inspections of the property they are interested in.
I recently bid on a house that the former owner paid $790,000 for in July, 2005. Opening bid was $329,000; winning bid was $505,000.Someone got an excellent deal.
There are many firms handling this type of auction for the lenders. One of the best known is Hudson & Marshall. You can find them online.

More Help May be Coming

In an announcement on Wednesday, March 12, the House Business Affairs subcommittee, chaired by Barney Frank (D-MA), announced a plan to assist homeowners facing possible foreclosure. Much more broad based and realistic than an earlier one put into use by the Treasury Department, the plan will potentially assist a larger number of homeowners facing default and foreclosure. It will also mandate more limits on the lenders involved than existing plans so that they are more directly involved in the assistance envisioned. REMEMBER: at present, this is only a proposed bill; it is not yet law. But it is a start. Keep watching here.

Another way to invest in foreclosures

I've previously discussed the pros and cons of buying properties at the public auctions when the lender actually is foreclosing on the property. As the national foreclosure crisis has continued to grow, another opportunity has become quite common, and, to a degree, without some of the risks that the "auction on the courthouse steps" has. This is what the auctioneers call the Foreclosure Auction. More properly, it should be called the Post-Foreclosure Auction because the properties auctioned off in these auctions already have been foreclosed upon and the banks owning them are resorting to an auction because the owning banks have subsequently been unable to get them sold.
The process is usually a one or two day auction run by a professional auction company. For sale are hundreds, sometimes thousands, of properties that have one thing in common--they are bank-owned foreclosed properties. Often more than one bank's foreclosed properties are included in an auction. In most cases a brochure giving some details of all of the properties to be auctioned are made available to anyone wanting them. Usually a series of open houses is held before the auction, and buyers can even have inspections done before the auctions. Unlike the "courthouse steps" auction, these post-foreclosure auctions even allow escrow periods to provide time for financing and title searches.
At the auction, each property is put up to bid, usually with a minimum starting bid. After that, it's traditional auction--highest bidder wins and owns the property. At a typical one of these auctions, the action is loud and fast--approximately 25 properties each hour are sold, and the auctions usually last most of the day and into the evening.
As for values, typical winning bids seem to average anywhere from one third to just over half of what the claimed recent values are for the properties sold. There are a number of auction firms specializing in such auctions, and they can be Googled for further information on time and location of the upcoming auctions.

Trouble Finding Help?

We have previously mentioned for those of you worried about foreclosure, that it is increasingly possible to have the bank holding your mortgage modify the terms of the mortgage, making it easier for you to make the payments and make them on time. You basically have to call the bank and tell them of your problem, and, with proof of why you're in the situation and how you can get out of it, get them to modify the terms of your loan.
The big problem for many in this situation, it turns out, is that the lenders haven't been making it easy to find the right people to talk to at the bank. Freddie Mac, in a recently released report, said that 57% of all delinquent borrowers didn't even know they had options to alleviate their troubles. Defining delinquent borrowers as those at least a month behind in their payments, the survey found that many knew nothing about what options might exist or what, if any, applied to them in any given case.
These statistics could drop now as an industry group established to help ease the crisis, Hope Now, recently completed a mass mailing of 500,000 letters to delinquent borrowers. These letters directed the homeowners to a toll free counseling telephone number, (888) 995-4673, where they could get direction and assistance in possibly resolving their individual situations.
With numbers of defaults and foreclosures continuing to increase, and costs and losses to banks rising with every new foreclosure, it behooves the banks to make such assistance more accessible than they did previously. Every foreclosure avoided benefits BOTH sides--the banks and the homeowner whose house is at risk.

Alternatives to foreclosure

When you can't make the payments any more, for whatever reason, you do not necessarily have to go through a foreclosure. We've previously discussed some ideas here. There are others in tighter situations. It may seem unavoidable, particularly when you owe more than the house is worth, but there are alternatives. The most common of these is the Short Sale. It is called this because the bank holding your mortgage agrees to let you sell the house for whatever it's now worth and they agree that they'll accept less than they are owed if that's all the property can bring on the open market. In essence, the bank comes up 'short'. This doesn't mean that all is suddenly wonderful and rosy again. There are a few things to be aware of in such a situation. First, a short sale will still result in a hit on your credit record--just not as sever a hit as a full foreclosure. Second, you will likely incur a tax liability. Tax law considers any debt forgiven (your unpaid mortgage amount, for example) as regular income and taxes must be paid on it at regular income tax rates. Consult your tax advisor on this aspect. But, a short sale may still be better than waiting for the foreclosure. You at least can get on with your life, and at less a disadvantage than a foreclosure. Call your Realtor to discuss the idea. Make certain that he or she is experienced in this type of transaction. Just being a Realtor may not be enough, due to the fact that the process is very specific as to what a lender will want from you to agree to allow you to do such a sale. Ask your Realtor if they have experience in the field, and, if not, if they or their broker can refer you to someone who does have that experience. Then work with them. Good luck.