With the Right Steps Foreclosures can be Avoided
June 17th, 2009
The trick is that with the right steps foreclosures can be avoided. All it requires is a cool brain and steady mind. Foreclosures need not be the end of the road.
Those whose loans have gone underwater are one of the worst victims of the foreclosure crisis. It means that the value of their property has fallen to be less than the loaned amount. This happens because of the play of many factors – none of which is in the hands of the borrower. The prices of houses in the locality fall because of the blight in the neighbourhood dotted with vacant foreclosed houses as well as bad borrowings made. The borrower often takes loans more than he or she can afford.
Some of the loan types that have been peddled are largely to blame – option ARM, refinance of equity and of course the sub-prime mortgages. Once the loan balance becomes more than the current value of the houses the situation is said to be ‘upside down’. It is difficult to extricate oneself from this situation and invariably one sells the house for less the value paid for it. Even then some options are there for those borrowers who have negative equity.
One practical route to take is to opt for short selling. It depends on two ifs – the lender agreeing to it and the finding of the buyers. If the lender does not give permission then the sale cannot happen. Moreover it is better to take a written permission because legally the lender can pursue the borrower even after the sale to realize the balance dues.
Another warning is to take the advice of a legal expert. The loan amount that is forgiven by the lender in the case of a short sale is often taxable as earned income. Lately laws are being changed. Only an expert will know the recent position.
It needs a lot of time and paperwork to get the lender agree to a short sale. The sale has to be handled by a realtor. It is no easy task to get a buyer considering the present mood of the market. Only a professional will be good at it.
Finding out who the bonafide lender is presents another challenge because many banks act as mortgage collectors or servicers to investors. The investors are scattered not only across the country but also round the globe.
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