Stop Home Foreclosure

ByDavid Chang

Foreclosing on a home you love can be a nightmare. It can be stressful and scary. Especially if you want to keep your home and you’ve already tried everything in your power to stop foreclosure. Despite losing your home you may be at risk for a deficiency judgment.

Deficiency happens when a lender forecloses and then sells the home but the sale price is not sufficient to cover the debt that is owed to the lender. This has become more common after the recent decrease in home values across the country. When a house is valued less than the debt the lender will be unable to recoup their loss. When this happens the lender may sue the borrower for the deficiency in an effort to collect their loss. A deficiency suit can take years and the lender may opt to sell the debt to a collection agency that will aggressively pursue the borrower in an attempt to collect the debt. Deficiency can make the difficult process of foreclosure much longer and even more stressful.

Your foreclosure attorney is likely to warn about deficiency and they may suggest you seek deed-in-lieu of foreclosure and negotiate out of your deficiency.

Deed-in-lieu of foreclosure is when you approach your lender and give them ownership of your home in an effort to avoid the foreclosure process. Because the lender has to agree to this it is wise to negotiate that they also waive your responsibility to any deficiency. They will be saving a lot of money on the foreclosure process so this may make them more likely to agree to release you of the deficiency.

In some cases the lender will not agree to this arrangement and the borrower has to either try to stop foreclosure and repay their debt or wait until they are foreclosed upon in the traditional way. Unfortunately even if you are foreclosed upon you may still be held responsible for the deficiency. Most states allow lenders to pursue debtors for the deficiency. There are some cases where debtors are protected from deficiency judgment when they foreclose on their primary residence. If foreclosure happens on a vacation home it is very common for the lender to pursue for the deficiency debt.

Speaking with a foreclosure attorney can help ensure that you understand all of your options and any restrictions when trying to stop foreclosure or negotiate out of the deficiency.

The Chicago bankruptcy lawyers of Chang & Carlin specialize in all issues surrounding bankruptcy and foreclosure. They can help you decide between chapter 13 and chapter 7 bankruptcy and help you stop foreclosure or handle your real estate needs and tax and IRS legal issues. Learn more about these services and request a free consultation today: http://www.changandcarlin.com/

Article Source:http://EzineArticles.com/?expert

“How does a short sale work?” The lender agrees to allow the borrowers to sell the property for market value. However, market value is typically less than what the borrower owes for the property.

There are several steps to a short sale. The first step is hiring a professional Real Estate Agent, who specializes in short sales. The process starts when the Agent submits a third-party authorization form to the lender, to act on behalf of the borrower along with a complete package. This package usually consists of the following documents: two months of bank statements, last year’s tax returns, a hardship letter, 4506-T Form, RMA package, W-2′s or a Profit and Loss, and utility bill for proof of occupancy. Although this may sound confusing, a professional Real Estate Agent, who specializes in short sales, is well aware of the necessary forms and should guide you through the process.

Once all the required documents are packaged to the lender, they can be sent for review. Upon confirmation that all the documents have been received by the lender, the file is move to a negotiator. The negotiator will negotiate the file by submitting the file to the investor that owns the note. The investor will either accept or counter the short sale offer. This can be done manually or electronically depending on the banking institution.

This process usually takes approximately three months to complete when there are no other “factors.” If there are any voluntary or involuntary liens, supplemental taxes or collection companies involved, such “factors” will lengthen the negotiation process.

In many cases there are two mortgages, a first and a second lien secured by the Real Estate. Both liens must be negotiated at the same time and two different packages will need to be submitted to two different banking institutions.

Any recorded liens against the property will need to be paid-off before the bank will issue approval. The bank will usually pay the pro-rated property taxes, but may not cover past supplemental taxes and penalties.

If the second lien is held by an independent collection company, this may also result in additional work and time delays. A collection company will usually want a higher percentage to settle the debt. This can get complicated depending on whether the property was used for investment or has a personal residence. If the property was used for investment, the remaining balance of the settled second lien, known as a deficiency balance, will be reported to the IRS and the borrower will typically receive a 1099 at the end of the tax year. Typically any settlement over $600 is reported to the IRS for a 1099. You should consult your tax advisor about tax ramifications as a result of any Real Estate transactions.

If the property is owner occupied, than the deficiency balance will often be forgiven, depending on your state. Also, a primary residence may apply to HAFA (Home Affordable Foreclosure Alternative) to receive a $3,000 credit from FreddyMac at the COE (Close of Escrow). This credit is used to assist homeowners with the expenses of moving out. However, when this credit is present there is a limitation to a second lien of 6% or $6,000.

If you are unable to negotiate the second lien because you are short on funds, the collection company may accept a lien release. The collection company will accept a partial payment to temporarily remove the second lien to close escrow. After the close of escrow they will re-post the unpaid deficiency balance to your credit report. This tactic is often misused and abused by collection agencies to collect more money from of the borrower after the close of escrow.

Lastly, make sure to get everything documented and in writing. Never transfer money or pay anything until you have a settlement agreement in writing!

If you have any further questions regarding Short Sales or other Real Estate needs, please feel free to contact me via phone or email below. I have been specializing in Short Sales, Foreclosures and Luxury Homes in Agoura Hills, Calabasas, Hidden Hills, West Hills, Woodland Hills, Tarzana, Encino, Sherman Oaks, Studio City, Toluca Lake, Burbank & Glendale for over 12 years. I hope my article was helpful in answering your questions.

Zevi Shafran

Broker Associate Ewing & Associates

Sotheby’s International Realty, Sherman Oaks, CA 91423

Cell: 818-974-2279

E-mail: Info

ByKarim El Sheikh

So you have already been in the market for foreclosures for quite some time, but are having a hard time getting good deals. That can be a frustrating experience but these simple tips can help you get there ahead of the pack and net you the best deals around. You may be experiencing very close bid auctions or find that someone else is already bidding before you can. Here is what you can do to find that great deal and make a killing:

Finding Deals
One of the most important parts of buying foreclosure property is getting the deal or finding the right type of property that you are interested in. Here are some ways you can easily find a deal.

1. Take out ads in the local paper, make flyers or advertise online that you are willing to help people avoid foreclosure. Make the potential sales come to you and here you do not have to do the convincing because the owners are already in a mind to sell.

2. Get a listing of notices of default and call them up. You may get great deals this way. You can also invest in a foreclosure listing service to help you find homes in foreclosure and more. See if you can also make offers online or work with a licensed agent who can help you get started.

3. Recruit others to your cause to help you look for good and viable listings. This can mean anyone from family to friends, to gophers who will look up listings for a fee.

4. Use free resources online like government listings, real estate listings and foreclosure listings that are readily available.

• County, city and sheriff offices
• Foreclosure listings on bank websites
• Loss mitigation listings
• Ads for foreclosures and sales
• Real estate listings

5. Work with a real estate agent licensed to help you find the type of foreclosure, short sale or purchase you are looking for.

6. Keep an eye on county auctions and other local sales that can net you great deals on foreclosures, tax sales or more. Remember that it may look competitive but actual bids are often between smaller parties. Set a limit to what you can spend and stick to it.

Feeling Guilt
You might be feeling twinges of guilt and as if you are taking advantage of unlucky homeowners during this process. Being fair and keeping in mind the best interests of the homeowner can resolve this, even if this means helping them straighten it out with the bank or mortgage lender. The right attitude and a gentle approach can also work wonders.

In instances like short sales or tax liens for example, you are actually helping the homeowner maintain a good credit rating without having to file for foreclosure, bankruptcy or have negative items listed on their credit report. So in a sense, you are doing a good deed.

Finding a great deal and getting rid of any guilt can help you find the best investment for your money.

Foreclosure.com is the top website for real estate investors and homebuyers. Search all foreclosures for sale in your area for a great deal.

Article Source:http://EzineArticles.com/?expert

ByKarim El Sheikh

You know you have bad credit, so how can you afford to buy a foreclosed home? It can still be a really great deal and it all depends on how you juggle your financing. Bad credit often means higher mortgage rates, higher interest rates on loans or cards and often, it is a result of poor decisions or lingering debts that have not cleared from your credit report. However, some options can help you buy a home at a significant discount despite a low FICO rating. Here is how:

Significant Discounts
Buying a foreclosed property means you get a big discount off the market price and that can bring down the price of a) how much you have to get from a lender and b) your payments and interest rate.

The discount itself means that you can pay less in the long run. It also means you have more choices when it comes to homes. You can go for HUD homes or properties that have bigger discounts especially if you meet certain eligibilities.

Cash Payments
Many foreclosed properties, tax sales and real estate auctions settle for a cash deposit or down payment when it comes to settling the home. With others, you can pay cash up front, which negates the need for credit since you will not be taking out any loans whatsoever to finance the home.

When it comes to purchasing foreclosures, this is the scenario where your credit score will not affect the sale. All you have to do is win the bid or make the required payment in the required amount, which is often less than market value.

If you find that you need financing on the home, such as qualifying for a mortgage, then your credit score will affect your purchase. The lender may not approve you or may give you higher than average interest rates if you are able to obtain a loan. This is where you have to make a decision-wait till you can repair your credit or settle for a higher loan. In the current economy, lenders are more wary of lending simply because so many have defaulted on previous loans.

One way to check is to go through pre-approvals with the lender your interested in to see if you qualify for a loan. A note of caution: most pre-approvals show up on your credit report even if you do not go through with the loan and can drag your score down further.

The bottom line is it is possible to buy a foreclosed home even if you have bad credit but it may be a longer or more expensive process for you. But there is still hope. The prices are cheaper, the market values just a little bit more borrower and homeowner friendly and there is always a chance that you can improve your credit score later on.

Cash purchases are also a good bet for investment or purchase so you can focus your search on short sale homes, tax sales or some HUD properties that do not require a credit check from you.

Foreclosure.com is the top foreclosure listing website on the web. Search all foreclosures, preforeclosures, short sales, and more in your area.

Article Source:http://EzineArticles.com/?expert

ByKarim El Sheikh

First off, there is no magic bullet to repair your credit or increase your score within a few months or days. You have to be prepared for a somewhat arduous process that requires hours of paperwork, online negotiation, phone calls and in some cases, payments. However, repairing your credit score can go a long way towards helping you seal the deal when it comes to buying foreclosed properties-this guarantees that you always have some form of financing should you need it.

Your FICO score affects loan or credit approval or denial and impacts how high your interest rates will be every time you take out a loan. Simply put, the better your FICO score, the better your chances of securing a good car, home or personal loan at a good rate. It also means higher limits for credit cards.

1. Get a copy of your credit report. You can request free copies from any of the three credit bureaus such as Transunion or Experian at their websites. Check for outdated items that are still on your credit report that may be affecting your credit score, such as bankruptcies or foreclosures past seven years, liens, medical bills, credit card bills that have been paid off.

Call and dispute the item-this may take several calls between the credit reporting agency and the lender, bank or credit card company. Negotiate with collection agencies so that they remove the item once you have paid it off or made payment arrangements. Many agencies and lenders neglect to report once you are in good standing-but report quickly enough when you fall behind.

2. Get rid of old baggage. Strip down your credit cards to the essentials. Pay off or cancel cards with ludicrous interest rates or ones that you do not use. Make sure you keep a few and keep those in good standing. Look for cards with great rebates or other benefits to help you balance it out.

3. Make bigger payments. Do not fall into the trap of paying only minimum payments for your credit cards or loans. See where you can comfortably double or triple payments to pay off the principal and reduce future interest. Even an extra $20 a month can be a big help later on. Focus on loans that have the potential of racking up interest over time like student loans or mortgages.

4. Only go through forbearance or deferment if you are really hard up. Although stopping your loan for a few months may give you some breathing room, the capitalized interest will be added to the principal or amount of the loan. This means that you will be paying more interest on a bigger loan later on. Look for other options, such as interest only payments or lowering your payments instead.

Fixing your credit a little at a time can help you secure that foreclosed property you have been eyeing. Once you have some breathing room with debt, you can set aside money for down payments or other important purchases in your life. You can also consider REO or rent to own agreements if you do not have a mortgage to increase the chances of homeownership once you get out of that bad credit hole.

HUD homes provide opportunities to homebuyers that no other type of real estate can provide. Search all Government HUD homes for sale in your area for a great deal.

Article Source:http://EzineArticles.com/?expert

ByKarim El Sheikh

Secure your home by avoiding the beginner mistakes many first time purchases make when they buy foreclosed properties. This can be as little as neglecting an inspection, which can later on cost you fines and renovation costs or as big as forgetting to turn over deeds or titles or even paying certain taxes. Either way you can get stuck with a home that is rapidly turning into a psychological parasite, draining your soul and your money.

Location
Location is not everything but it also impacts the resale value and potential value of your home over time. Check for great neighborhoods, good schools and the like. Many times you can end up paying too much for a home in the “wrong” neighborhood that no one will be interested in buying later on. Look for homes that people want to live in and want to buy. Chances are if you do not want to live in it, others will not too.

Going DIY on Crucial Repairs
You may have good working knowledge of plumbing, but flipping a house with faulty plumbing, wiring or in a generally bad state when you promise the buyer they can move in as is can get you into trouble. You may violate city codes, for example and end up paying a hefty fine. The least that can happen is the new homeowner leaving you a trail of emails and knocking on your door, asking why their heating leaks or why the pipes are upside down.

Forgoing Permits and Not Being Up To Code
If you intend to renovate the home for yourself or to sell, remember to apply for permits and research fire and other codes. This means that you ensure a safe home to live in and avoid fees. Many buyers will automatically remove your house from the list if they find that you did work without a code. The worst case scenario is not just the fine, but you may end up sinking more money into the house because the city or county may require you to do the work again. So do it right the first time.

Not Create a Work Plan and Setting Budget
Write out a work plan for the necessary repairs that you need to do, if any. This way you can easily create a budget before you begin any work on the home. This will avoid the familiar trap of “Well, yeah I could have got a cheaper type of tile, but I forgot I had so much square footage to cover.” Having a budget gives you restraint and helps you keep the price down on your repairs so your resale profit will be that much higher.

Not Creating A Marketing Strategy
Once you are done with the fixer-uppers, it is time to sell. Do not expect a buyer to stroll in through the front door and declare that he or she wants the home. Create ads, put the house in listings and do everything you can to make sure the home is out there.

Take beautiful pictures of the finished home and if you are not working with a broker, take the time to answer inquiries and grant requests for tours. You never know, the kid who looks like he could not hold down a job may be the person who will hand over the check for thousands and close the sale.

Sheriff Sale foreclosures are available nationwide. Search all sheriff sales for sale in your county for a great deal on your next home.

Article Source:http://EzineArticles.com/?expert

After the housing market took a nosedive many people were not only left struggling to make their house payments, but many more have faced the cruel reality of foreclosure. Many people have speculated about the causes governing the foreclosure crisis. While there may not be a general consensus we can point to a few areas that may be able to help us develop a plan to help fight off foreclosures in the future.

Lending Problems

When the housing market began to flourish many people flocked to lenders to secure a mortgage. Although many people were approved, many more were denied due to poor credit scores. Just a few years ago, lenders required very high credit scores in order to qualify for traditional mortgage loans. The resulting compromise was to offer subprime mortgages. A subprime mortgage is one that offers higher interest rates and less favorable terms than a traditional mortgage, which was what applicants with less than stellar credit ratings were offered. People who got into subprime mortgages found themselves with inflating interest rates and loan terms that were less than reasonable at times.

Another lending practice that became popular in the early 2000s was adjustable rate mortgages. Chosen for their low introductory interest rates, these mortgages were a favorite among first time or low down payment homebuyers. The problem with adjustable rate mortgages is that the interest rate is set to follow an inflation schedule that can significantly increase the monthly payment over time. Many people failed to plan adequately for the increase in monthly costs, leaving many unable to support a rising mortgage payment.

Borrowing Problems

The lending industry isn’t all to blame for the foreclosure crisis. Many buyers claim their fair share of the blame in ending up in foreclosure. As many lenders began to open up mortgage terms for buyers, that would have previously not qualified, many people simply overspent on their home purchase. When interest rates lower, people tend to think they can spend more on buying a home. The problem? Even though a borrower can afford a mortgage payment now, they may end up in default at the first sign of financial trouble.

Economic Problems

The economy has not been nice to American’s for the past few years. Personal debt, unemployment and a drop in housing values have all become a normal occurrence for many of us. As the economy continues to dish out challenges, many people have faced unemployment or underemployment issues. With their paychecks on the line, some families simply cannot afford to maintain their mortgage payments. A family defaults and ends up in foreclosure, the neighborhood suffers in value due to the rise in foreclosures; it becomes a cycle. Even homes outside of foreclosure areas have found it challenging to maintain their value during this turbulent economy. Further, the lending industry may not be willing to negotiate a mortgage modification on a home with a sinking value.

Christopher Lee, of Lee Law Firm, understands that financial hardships can affect honest, hard-working people. His early experience growing up in a very blue collar family in a rural area of Indiana, made a significant impression on his business philosophy today. As a child, he watched his family struggle as money didn’t come easy and his parent work hard to provide for their family. As a foreclosure Dallas, Tx attorney his practice has given him the opportunity to directly impact the lives of many people.

Article Source:http://EzineArticles.com/?expert

Buyers get excited about the listed price of short sales when they see them online, but that excitement fades over the months–as they wait to hear back from the bank on their offer. Most short sale offers end with buyer disappointment. RealtyTrac recently reported that “Pre-foreclosure short sales took an average of 245 days to sell…”. That’s 8 months. Compared to a normal 30 day close–8 months is a lifetime. What is worse than that is that buyers can very often wait 4-6 months before the bank even considers a short sale offer in the first place. So, it’s not the closing process that holds things up as much as it is the first engagement by the bank that takes the longest period of time. Buyers can wait for months and months with no definitive answer on an offer from the bank.

Why to banks not want to address short sales? Why does it take so long? Well, first you have to understand what a short is to understand why a bank makes this their lowest priority of business decision. A short sale is essentially a request to a bank to take a loss on a property loan, where the home owner is still paying their monthly mortgage and has not gone into default or foreclosure. The home owner is usually still paying their home mortgage, but the home owner needs to sell their home. The problem is, they owe more money to the bank than the home is worth to a new buyer (i.e., they owe more to the bank than its current “market value”).

Here is an example of a potential short sale:

George bought a house in 2006 for $200,000.George has been paying his mortgage payments every month.George decided he needs to sell his house now.George discovers that all the houses like his house, same size, same age and condition, are now worth only $150,000.Buyers are buying houses like George’s house all around him for $150,000.George has a problem.George owes $180,000 to the bank on his home.George is “Up-side-down”. He owes more than his house is worth.To sell his house, he will also have to pay Realtor fees and closing fees, totaling about $11,000.So, George and his Realtor start asking the bank to cover the difference between what he owes and what a buyer may be willing to offer to him on his house.Here are the numbers:House is worth $150,000 to a new buyer.George owes the bank $180,000.That is a $30,000 “short” fall.Plus the cost to sell is another $11,000, making the short fall $41,000.George’s Realtor has a buyer interested in the house at $150,000So what does he do?George’s Realtor team starts calling the bank to ask, beg, plead with the bank to forgive the $41,000 difference, and allow him to sell the house as a “Short Sale”. To do this, the bank has to either make up the different (the loss), and/or get George to agree to pay the bank back some portion of the $41,000 short fall.

So, why do Short Sales take so long to happen? Why do most short sales fail? The answer is very simple. Put yourself in the bank President’s shoes and tell me what you would do. Here is the situation that I just described from his point of view:

George agreed to pay off the full amount of his $200,000 loan.George still owes $180,000 on this loan.George is still making monthly payments every month.To sell, George has to pay the bank and pay closing costs.George is asking for the bank president to write him a check for $41,000–at no charge.Most banks don’t like giving away money–so what do they do? Nothing. No response. No answer. No $41,000 check.

Our friend “George” is one of MANY MANY people who are asking for forgiveness of large amounts of mortgage debt in the US today. Banks get requests from Realtors and home owners every day, asking for the bank to forgive the debt and cover the short fall in their home value. In a short sale, the home owner is normally still making payments or maybe just missed their first payment or two. When the home owner stops making payments, banks normally start their foreclosure process. At that point the bank has to take action. This is a “non-performing loan”. The bank is forced to take possession and attempt to re-market the property independently of the home owner. But as a short sale, there is very little motivation for the bank to act and lose so much money while the home loan is still “performing” as written.

This is a very sensitive matter today. With so many home owners struggling with devalued properties, and banks trying to manage foreclosures and per-foreclosure short sales, the decisions are difficult and the process is long and drawn out. Most buyers and most sellers never make it to the 245th day to see a short sale actually happen. And banks don’t normally even respond to short sale requests during the first several months of calls. When the bank does start talking to the home owner, it is a long, painful, and difficult waiting period for both buyer and seller. Both parties must stay in the game for a short sale to actually happen. This is not for the faint of heart or impatient, and anyone who tells you that banks are better now about handling short sales and banks are giving away money in 60-90 days, just simply does not understand how banks work, or why a bank president would rather deal with a foreclosure, than have to deal with the ambiguity and problems of a short sale. At least with a foreclosure, the bank president does not have to justify why he signed off on the loss. It was no longer his choice.

Austin has been lucky during the past couple of years. Compared to the nation and hard hit areas, we have had a very small percentage of foreclosures and short sales.

Disclaimer: I am not a CPA, Mortgage Banker, nor am I in the field of Finance. If you believe you are in a situation of a potential short sale or pending foreclosure, or having problems making payments on your home mortgage loan, please do not consider this blog article to be advice to you or your situation. This should in no way be considered advice. This is simply a description of situations and stories that I see every day in the business of helping clients buy and sell Real Estate in Austin Texas. If you have questions about your particular real estate needs, don’t assume that this is advice to you or someone you know. Call me, and Let’s talk. If I can not help you, I should be able to find someone who can. – TT

Austin Real Estate Secrets is an insider look at the local Real Estate Market, and to the extent that any local market plays a role in the collective national market, a resource for all buyers and sellers looking to make good on their Real Estate investments. A little bit of all the things that make our city and this business unique and challenging.

Article Source:http://EzineArticles.com/?expert

In a time where so many Americans are worried about losing their homes to foreclosure, many good loan modification companies are dedicating all of our time to help save homes. The best way for homeowners to avoid foreclosure and stay in their home is a loan modification. A loan modification will change the existing terms of the loan and reduce the interest, principal, or make the term longer, in order to make the monthly mortgage payment affordable. The government is even getting involved by creating programs like the Making Home Affordable Program, which can lower your interest rate to 2%. President Obama is on TV every other day telling the banks to help struggling homeowners that have experienced financial hardship or are in a subprime loan, in order to make the payment affordable for borrowers long-term. The government guidelines are very concise and reasonable for the mortgage industry to follow, in order to help as many homeowners as possible avoid foreclosure.

The basic criteria to see if you can even get a reduction in your mortgage payment, is to see if your mortgage payment is over 31% of your gross monthly income. (before taxes) Lowering a borrowers mortgage payment to 31% of their gross monthly income, can lead to a 10%-40% reduction in their payment. This savings on a mortgage payment is a great way to turn homeowners’ financial situation around so they start having a positive cash flow each month.

Thousands of homeowners are now getting approved for mortgage modifications and have been given the option to stay in their homes. Whether borrowers are educating themselves on how to get approved or they are hiring honest loan modification companies to show them how to get qualified, now is the time to get the financial relief that has been offered by the government and banks. There has been a lot of bad press about loan modification and the results from attempting to get approved for one. There are more happy homeowners everyday because they are getting approved for loan modifications, which is lowering the monthly mortgage payment and stopping the foreclosure on their homes. The good loan modification companies are trying their best to turn the negative media talk about the results for applicants, into positive press by assisting struggling homeowners to get approved.

Many homeowners that have received help and were approved for their loan modifications are coming forward to speak about their positive results. Some people are getting on camera to talk about their positive experiences and others are writing about them.

If you want to watch these happy homeowners on video talking about how they were able to save their homes because of a good honest loan modification company, then click on this link: http://www.loanmodificationmanagers.com/testimonials.html

Article Source:http://EzineArticles.com/?expert

The rate of foreclosures continues to increase with an estimated 14,000,000 plus Americans faced with making a decision to default on their payments. Most homeowners seek loan modifications initially, but their lenders have been less than cooperative is granting principal reductions which the homeowners need to stay in their homes.

The lenders know that statistically, homeowners who are granted loan modifications default within 6 to 9 months and the lender must again start a foreclosure proceeding, negotiating a deed in lieu of foreclosure or entertaining the idea of a short sale. All of these solutions to the loan modification default are time consuming and can be very expensive in the case of foreclosure as the solution.

Typically, a loan modification involved the homeowner applying for some relief from his mortgage payment. His lender would structure a mortgage payment that would be lower for a short time period, usually less than one year. The reduction in interest that was charged on the new payment would reduce the payment but often the lender would tack on the lost interest payments to the back-end of the mortgage. Whatever the final type of mortgage payment reduction, the one thing that lenders were not doing was principal reductions of the mortgage due.

This has begun to change with lenders realizing that they are taking back homes that become a burden on their balance sheets and their management capabilities. If the homeowner is given enough of a principal reduction that his monthly payments are comfortable for him, he will stay in his property and make the payments. The loan is then a performing asset on the lender’s books and do not negatively impact his balance sheet – a win-win for all parties involved.

But by giving a principal reduction, the lender is giving up a substantial part of the money they originally loaned. The answer to this dilemma is what is called a Shared Appreciation Modification. In this loan modification, the lender takes into account the hardship of the homeowner and his ability to pay his “new” mortgage payment.

The new payment has been constructed primarily from a principal reduction of the mortgage amount due, but may also include an interest rate reduction. The amount of the new loan is often a percentage of the current market value of the property – usually 90% to 95%. This reduction is given over a period of years, usually at least three so the homeowner doesn’t sell, or refinance immediately and walk away with a profit. This program gives the homeowner a chance to stay in his home and have a future that even includes making money on his sale.

The difference in this modification and other loan modifications is that the homeowner’s new loan documents include a provision that when the property is sold, the lender will get part or all of the gains above the new mortgage amount. For example, if the new mortgage amount is $100,000 and the property is sold for $150,000 in five years, the lender would get 25% or $12,500 of the proceeds of the sale and the homeowner would get $37,500.

The actual percentage of the profit distribution is negotiable at the time of the modification and not before the sale so make sure if you are offered a Shared Appreciation Modification, that you read the fine print in the contract and the new mortgage documents. If you decide you want to try for a loan modification on your home, ask your lender if this special modification is available.

If you have two mortgages with different lenders or you have an equity line with a different lender than your mortgage, this transaction can take time and be more complicated. Always ask your lender questions you don’t understand and don’t ignore or hide from their telephone calls; this is sure to cause a foreclosure action to take place.

Dave Dinkel has over 35 years experience in real estate investing which has given him a unique perspective into the real estate market. http://www.DaveDinkel.com is the place to interact with Dave Dinkel. You can read some of the latest informative Real Estate articles he has written. Here you can discover and educate yourself on topics ranging from foreclosure, For Sale By Owner(FSBO) Sales, Credit and much more.

Article Source:http://EzineArticles.com/?expert