Saturday, December 8, 2007

5 New Rules of Foreclosures

We all remember the heady days from late 2003-2005. It was a market where, despite the realities, just about anyone could get into the investing or purchasing of a new home without really making all the motions necessary to protect themselves from the "worst case scenario. But just like common rules of economics dictate, markets with high profitability soon will get flooded with competition. Unfortunately, millions of innocent families got swept up in the rush, either buying property that had low "teaser" rates, or just plain buying above market price, sometimes both. Lenders point fingers at their financial pools and investors, many pointed the finger at Wall Street, real estate brokers, underwriters, and homeowners alike.

It hurt the situation even more that builders were going through periods of unprecedented and unrestricted growth. I used to conduct research of active neighborhoods and could see this influx of new homes NOT followed by an increase in jobs or demand. So what did everyone do? Teaser rates they advertised, sell the loan they said. Many unqualified people bought a loan and not a house.

In the wake of the "perfect" real estate storm which will most certainly reset the credit and commercial paper industry, there are new rules emerging from the federal government that we will be playing by for some time to come, many affect the average homeowner facing tough times

  • 1. Banks will want to choose who they will work with (but only to an extent) - As many banks wake up with a mortgage hangover, they will increasingly admit to a problem with the lending practices they they once used to drive business. They have the option of restructuring the loan or letting the deed pass to their loss mitigation departments. With an overflow of work, mitigators are increasingly coming to the table with markdowns already in hand. Bottom line, the banks and investors will take the worst hit from a foreclosure market and reset market price for homes they have in their inventory. So what does this mean for you? In the end, you can get a more receptive audience to your plight, you'll just have to prove your hardship to the bank.
  • As lending gets tighter, debt consolidation will become more widely available - The best way to save your house and your credit is to prevent foreclosure. When you receive a lis pendens (Notice of Default), ACT, and don't push it to the side. You will have to deal with it eventually. Think of your future and those around you. Fortunately, experts are already becoming trained in debt consolidation, forbearance, and other types of loan modification. With an action plan in place, your debt can be reduced quicker and easier than you thought. You'll save your house, keep the black marks off your credit, and breathe a sign of relief when it's all done.
  • Banks will need to see a history - In the coming months and years, it's my prediction that banks will try to work with only those that can prove steady employment, and rental history, so keep all your records in a safe, dry and clean environment. If you have a scanner, make all the necessary files available digitally so you can send them through e-mail. A solid rental history, referrals from old landlords, and a concerted effort to stop foreclosure and work with the banks shows good history. Trust me, you'll need this one!
  • Uncle Sam will step in (eventually) - The good news about the bad news is it's become so big that the next presidential debate will focus on the issue. Take comfort for a minute that, while it's bad to be in the sinking boat, you aren't alone, and the distress signal was received. Research shows foreclosure help is on the way, especially for those who only had a temporary hardship and are behind only a few months. There are bills and committees at work right now trying to restructure the industry. The government knows now that according to the Mortgage Bankers Association, 5.12% of outstanding loans were in default in the second quarter, a rate about 17% higher than a year ago. With that kind of epidemic coming, the government knows it's time to provide regulation to an industry that basically just had 3 years of partying, only to wake up with a bad hangover.
  • Your credit will matter more now than ever - Seriously, this is a big one. If you do one thing today, figure out your credit. It literally saves you thousands of dollars to be able to qualify for lower interest loans. Everything these days is based on credit, so secure your future by getting your credit report and securing it against ID theft or foreclosure. Take the hard steps necessary now to help promise the future. You won't regret it!

Wednesday, November 28, 2007

Short Sale - 8 Common Questions

If you are a homeowner (considering doing a short sale), be sure to find a REALTOR in your area who is knowledgeable and has experience doing them. If you are a REALTOR, you should strongly consider adding short sales to your repertoire.

Here are some of the top questions clients have asked about short sales.

1. What is a Short Sale?

In the world of Real Estate, a short sale refers to the sale of real property for an amount less than the amount owed on the property. In the short sale scenario, the bank agrees to accept less than the full balance due on the debt, and usually 'forgives' all or a large portion of the difference.

2. Who benefits from the Short Sale?

Short sales are a win-win situation. Lenders, Homeowners and REALTORS all benefit from the successful short sale. Mortgagors get the majority of their money back, Homeowners get the relief they need and are able to sell their property and avoid foreclosure, and REALTORS can facilitate the transaction and receive compensation (commission) from the sale of the property.

3. Why would banks forgive the difference?

To mitigate their losses, banks can accept a settlement of less than what is owed on the property. When faced with the option of getting the property 'back' through foreclosure, a short sale often makes a much wiser business decision for the bank.

4. This sounds too good to be true!?

Not really. Things that are 'too good to be true' usually don't make good economic sense. The short sale makes good common and financial sense for the banks who grant them. The fact of the matter is, Mortgage companies and banks are NOT in the real estate business. They are in the LENDING business. The last thing they want is that property back.

5. Can FHA, Conventional or VA loans receive a short sale?

Yes! I have successfully negotiated short sales for each of these loan types.

6. What is Negative Equity?

Also known as being "upside down" negative equity is the difference between the value of an asset and the outstanding portion of the loan taken out to pay for the asset, when the latter exceeds the former. For example, if your car is worth $10,000 and you owe $15,000 on it, you would have a negative equity of $5,000. Negative equity can result from a decline in the value of an asset after it is purchased.

Even if a person owes exactly what their home is worth they would still be considered 'upside down' since there are no resulting proceeds to pay the fees associated with selling the property (REALTOR fees, taxes, title, and other seller closing costs).

7. Why does my property have negative equity? Here are a few common reasons:

  • Person bought at the height of the market and the market has now declined or they paid more than the property was worth.
  • The area has become less desirable for any number of reasons, so property values have declined.
  • Person purchased the home with little or no money down and wants to sell within a few years of purchase... and the property value has not increased during that time. Therefore, costs associated with selling the property may create a balance due at closing.
  • Person refinanced the home (with a high appraisal value) and now has little or no equity.
  • Person bought in a brand new subdivision or recently developed area that has not been fully developed or has not appreciated (or has depreciated) in value.
  • The market is soft because there is too much builder inventory (new homes) or too many existing homes on the market (resulting in a buyer's market).

8. How long does a short sale take?

Short sale approval can take 45-60 days, with some lenders taking 90 days or more. During that time, all foreclosure activity, if any is typically placed on hold.

Thursday, November 15, 2007

Foreclosure Prevention - Tips To Keep Your Home!

Behind in your mortgage payments? Afraid of foreclosure? It may not be too late to save your home from the sheriff's sale. Contacting your lender is your first step. If you're only 1 or 2 months behind, there may several different options available to you. If you're 3 or more, the options are less, but there are still ways to save your homestead.

The first thing you'll need to know is if your loan is a fixed rate mortgage or an adjustable, sometimes called a variable rate. If you have a fixed rate loan but you've had some type of unforeseen crisis; illness, layoff, death of a family member, lenders may offer you different options than people who have an adjustable rate, or ARM, loan.

There are basically 3 options that lenders can offer to help you with a defaulting mortgage.

1. Loan Modification-with this option, the lender does an 'internal' refinance of the mortgage. They create a new mortgage, with new terms, usually from an ARM loan to a fixed rate, and roll the past due payments into the new mortgage. The lender will typically ask you to pay a percentage of the past due amount up front as a show of good faith. They must be able to see that the mortgage is sustainable by you, usually by giving them a thorough budget showing some discretionary income each month, before they will entertain this option. There are many budget worksheets available online or you can call a credit & counseling service to do this. I recommend a non-profit organization, such as: Consumer Credit Counseling Services, . Your mortgage may be for a higher loan amount with your past due balance rolled in, but if the interest rate is lower and fixed, it may not require a higher payment each month like some ARMs will.

2. Forebearance-this option allows the lender to take the past due amount and defer it to the end of the loan term. Let's say you owe $3,000 in past due payments. The lender may require you to pay, perhaps, $1,000 up front as good faith, produce a sustainable budget and then they take the remaining amount and put it at the end. If your payment is $500/mo, this would equate to an extra 4 months added to your term. If you have a 30 year term and have only 21 years left, now you would have 21 years and 4 months before your loan is paid in full. ($3,000-1,000 good faith = $2,000/500 = 4 months)

3. Repayment Plan-this is the most likely option that lenders offer if you show that you can support it. The lender takes the total amount due in late payments, sometimes late fees as well, and after you pay a good faith amount, they spread the remaining amount over a specific number of months to get you caught up. For example: you owe $3,000 but your budget shows you have $600/mo in discretionary income each month. The lender may want half of that discretionary income added to your regular payment over the course of the next 6 months. ($3,000 -1,200 good faith = $1,800 / 300 = 6 months.) If your normal house payment was $500, now it will be $800 for the next 6 months, then it will drop back to the normal amount of $500/mo. Frequently people agree to terms that are not manageable and they will then 'break' the plan. Once the plan is broken, the lender is less willing to create a new one. Make sure that if you agree to a plan, that it is one that actually can work for you, based on your budget. Giving the lender an unrealistic budget will create an unrealistic plan, one which you won't be able to meet and then you'll find yourself in an even worse situation.

4. Bankruptcy-filing for bankruptcy will stop foreclosure immediately. Bankruptcy laws have changed in the last few years so you should seek advice form a bankruptcy attorney before deciding on this option and should most likely be used only as a last resort.

Lenders don't want your house. They want their money. If you contact them early during your crisis, they will be more willing to help you keep your house. If you create a budget and discover that the new job simply doesn't pay enough or your spouse's injuries won't allow him/her to return to work for longer than expected, you have no savings and no family support, you may have to face other, more drastic measures.

1. Short sale- contact your lender and tell them that you have decided that you need to sell your house but that your neighborhood doesn't support your ideal sales price, maybe not even enough to pay off what you owe. The lender will usually order an appraisal to determine what your house should be worth in your area. They then may agree to accept the price that the appraiser indicates as its worth, which may be far less than what you owe them. Then if you get a buyer for that price, your mortgage company will accept it. If the price is much lower than what you owe, you should be prepared for a 1099 at the end of the year showing the difference between what you owed and what you sold for as income. Please see your tax advisor to discuss this possibility. Your credit report will be spared a foreclosure and will most likely show "settled for less than owed" type comment.

2. Deed-in-lieu-of-foreclosure- if you decide that there is no other option available to you, you may offer the lender a deed-in-lieu-of-foreclosure. You would sign over the deed to your house to the lender. Now your lender owns your house. This saves the lender the time and expense of foreclosing on you and they know that you plan to leave. They also know that they won't have to evict you, which can also be expensive. Some lenders have a program called 'cash for keys' as well where they pay you a small percentage to live in the house until shortly before the foreclosure auction or sale and maintain the house so the new buyer doesn't have excessive repairs to make. This cash is for your moving expenses, rent and or security for a new place to live. For this, you agree to keep the house 'broom-clean' when you leave. The lender does this so you have less incentive to destroy the house which may create a hardship for the lender to re-sell it.

3. Foreclosure- this is the last option, where the lender sends you a foreclosure notice and and eviction date. Each state has a different timeline for foreclosure and you should check in your state for the average time. Some states allow foreclosure very quickly, in as little as 3 months, you could be out of your house. Others take as long as 12-15 months to actually foreclose and evict. If you have decided that there are no other options available to you, start saving your money for the move but STAY in the house until you are forced to leave. There are almost NO lenders that will evict you during the winter months if you have no where to go. They would rather have you stay in the house with heat on and water running than have an empty house that the pipes could burst in before they're ready to sell it. Yes, they don't care as much about you as they do about the house at this point, so their generosity is not about you being out in the cold as the house having maintenance issues as a result of the cold weather and being in the off-season for selling it. So don't abandon the house just because you have decided there's no way to save it. Start making plans as to where you can go when the inevitable happens but stay there and save as much money as you can before that occurs. Be cooperative with your lender, it may buy you more time as well.

There are other options not outlined here such as: lease with option, renting the house for most of the payment if you can keep up with the rest so you can have it back when finances allow, taking in a roommate, or renting an extra room out, taking on a part time job, etc. to make ends meet. Check with your local resources, such as the Salvation Army, Red Cross, Angel Food Ministries, etc. to get help with utilities, food items, if your situation is temporary and to free up some funds for the mortgage until things stabilize. Check the Internet for assistance in your neighborhood or state initiatives. Ohio, for example has some of the best, including rescue loans, rescue funds, budgeting help, and more. Contact a non-profit counseling service for help also, such as 1-800-995-HOPE. While they don't have funds available, they can go through your budget and offer assistance in many ways.

Whatever you decide, there are ways to make the situation better, more acceptable and possibly save your house from foreclosure.

Sunday, October 21, 2007

How to Avoid Mortgage Foreclosure Scam

Are you facing problems with mortgage payments? Is your house slipping away from your hands? According to the data from RealtyTrac, more than one million homeowners have faced foreclosure this year, 27% more than this time last year. The following basic tips will help you to avoid mortgage foreclosure scam before it happens:
  • - Do not ignore your problem.
  • - Before making any decision of mortgaging your property you must know the mortgage rights.
  • - Be on guard by reviewing your finances and see where you can cut your spending to be able to make your mortgage payments regularly.
  • - Pay your mortgage debts before any other household expenditure or credit cards' payments or unsecured debts.
  • - When you are not able to pay your mortgage payments use your assets. You can sell your car, jewelry or a whole life insurance policy to help you reinstate your loan.
  • - Preserve your good credit. As your future ability to purchase item, property or rent requires a credit check. Keeping your credit rating from getting blemishes is very important.

Besides the above-mentioned basic tips the Federal Housing Administration, US Department of Housing and Urban Development have recently framed out the following guidelines:

Immediately contact a house-counseling agency if you are not comfortable to talk with your lender. Most FHA counselors are free of cost or cost very little. A counselor can help you review your financial situation, learn which workout arrangement is suitable for your family, protects you from future credit problems, provides you information on services and programs available in your area. Determine the ideal options available and negotiate with your lender.

Contact your lender as soon as possible. A lender will help you prepare a budget plan to ensure that you meet your monthly payments and see that you follow it strictly. This plan will show how much money is available to meet your mortgage payments. Do not hide any form of information from your lender. Make sure you read all the mails and letters send to you.

FHA loans also provide alternatives and ways for borrowers to get help. These loans include mortgage modifications, special forbearances allowances, and other actions you can take to avoid foreclosure. Your lender has to follow FHA servicing guideline and regulation when it comes to dealing with FHA loans. You can report to the FHA's National servicing Center if the lender is not responsive.

Explore loan workout solutions with your lender when your problem is temporary. If it appears that your situation is long-term or will permanently affect your ability to bring your account current, if keeping your home is not an option, your lender will be willing to discuss and make arrangements to bring your loan current.

A forbearance option is often combined with a reinstatement when you know you will have enough money to pay, to bring the account current at a given date. The money may be from a hiring bonus, investment, insurance settlement, or tax refund. You can also make an agreement to pay the portion of the past dues plus your regular monthly payment each month until you are caught up.

One should be very careful with predatory lending schemes, as there are many frauds that will try to deceive you. Borrowers facing unemployment and or foreclosure are targets of predatory lenders because here the borrowers are desperate to find any solution.

Monday, September 3, 2007

Real Estate Mortgage Tips

Your own Real Estate is your greatest Investment. You might have heard the idea of making extra major payments to decrease interest and payoff your mortgage early. The concept might be simple, but it is frequently overlooked and seldom practiced. A typical promissory note amounts to absurd interest over thirty years. For example, on a thirty year $100,000 loan at 9%, you would pay over $189,000 in interest.

If you have a positive cash stream on your hire properties, deem using it to make extra principle payments. By making additional principle payments, even small ones, you could save drastically on interest. This is because interest is charged on the exceptional balance owed. For example, if you paid an additional $50/month the loan explained above, you will save $49,000 in interest and pay off the loan balance six years earlier. If you paid an additional $100 per month, you would save over $75,000 in interest and pay off the balance ten years earlier.

Save Money on Late Fees

If you are in risk of paying your mortgage late, send your payment via overnight mail. The cost of doing so is most likely much less than your late payment. For example, a 5% late fine on a $1,000 payment is $50. Sending the imbursement via Federal Express would cost you less than $15.

Tips when in Default

Watch for Bankruptcy. A borrower in evasion could run into federal court and file for insolvency to stop your foreclosure proceeding. Once the federal bankruptcy appeal is filed, the state court foreclosure taking place is subject to an automatic "stay". Simply have your lawyer march into federal court and ask the judge to have the wait lifted against you. However, if the debtor files for chapter 14 reorganization, he might be able to ask the court to force you to recognize a payout plan. Either way you would get paid, even if it means having to wait.

Think of "Deed in Lieu of." If you are in a mortgage state, a borrower could delay the scheduled for months by just filing an answer to the complaint, lifts any number of defenses, as well as improper service of the summons. If you are on speaking terms with the borrower, try and work it out. It might be cheaper for you to give up the back payments and even pay he to give you a deed in lieu of forecloses. That is, he gives you the property back and you spare him the discomfiture and credit damage of a foreclosure (as well as a possible lack judgment against him). Time is money when it comes to foreclosure, so use it wisely!

Sunday, August 26, 2007

Choosing A Foreclosure List

A good forclosure property list can make the difference between you getting a property that you really want and having someone else take it before you can get your hands on it. Investors know that they need a foreclosure list if they want to be successful, but the problem is that there are so many of them available that making a choice can sometimes be a bit tricky. If you are in this position, there are a few tips that you can follow. Use this guide and you will be able to find the home you are looking for a whole lot easier.

1. First and foremost, deal only with companies that are run by people that have been in business for at least ten years. There are a lot of companies that offer foreclosure lists that have no clue on what the real estate industry is all about. You want to make sure that you are only dealing with a company that has professionals compiling their lists. This will put your mind to ease from the very start.

2. Ask the company that you are considering how often they update their foreclosure list. You will not want to join up with a service that only updates their foreclosure list once or twice a year; this means that you will be chasing after stale leads. Make sure that the company you choose to work with has professionals who updated the foreclosure lists on a daily basis. By doing this you will ensure yourself of only seeing the properties that are available.

3. Test out the customer service department before you sign up with any service. Just like in any business, .the level of customer service is very important. You will want to make sure that you are dealing with a company that will meet your needs. If you have a question, it is important that you get a prompt, accurate response.

The company will have to have plenty of positive testimonials and references in order for you to consider them. This is important because if you can speak with somebody that has had success with a certain foreclosure list, you will be able to ask any specific questions that you may have. Top notch services usually have a strong following of investors that use them time and time again. Not all companies offer the same kinds of lists, so be sure you are dealing with a company that carries the types of lists you are looking for.

Sunday, July 29, 2007

Financial Help to Stop Foreclosure

When a person falls upon financial difficult times often through no fault of their own and they are behind on interest payments, they may need specific financial help to stop foreclosure on their homes. Nobody wants the sheriff to deliver a foreclosure notice so there are some things you can do that will assistance stop the foreclosure.

Often, you can avoid foreclosure through difficult work and not by sitting back and giving up. Here are particular steps that could help you get financial assistance to stop foreclosure.

Never ignore letters or phone calls regarding your delinquent mortgage bills. Contact the lender and explain your situation, as they may be able to work with you and know that you are really trying to make things right so offer you financial help to stop foreclosure. You may not qualify for aid if you abandon your piece of real estate so remain in your house.

When you work with the lender and your financial problems are temporary, the lender might be able to help with financial help to stop foreclosure. Often this is an one time loan, bringing your financial payments up to date.

Often a person can either extend the loan or refinance to stop foreclosure when interest payments are too high. The upside is that the monthly interest payments are smaller but the lender interest rates are higher. This could allow you to catch up on missed loan payments. Always be honest and upfront with the lender and they will work with you.

After examining your monetary position and the reason for your nonpayment, the lender could diminish the monthly payment or suspend payments temporarily.

Nobody wants to lose his or her home or have a lender foreclose on their homes. Be honest with your lender and by working with them and examining the opportunities available as it is possible to get the financial help to stop foreclosure.

Saturday, July 21, 2007

Foreclosure Law 101 For Homeowners

Foreclosure laws vary from state to state but here is some general tips about foreclosure laws. When a person falls behind on their mortgage payments and they have defaulted on their debt, the bank may foreclose on their property.

The bank does this by filing a lawsuit in order to get a court order to foreclose. Once the court declares foreclosure on the property, they auction it off, with the highest bidder buying the property. There is a waiting period between the date of the lawsuit and the foreclosure sale, which is often between three and twelve months based on the foreclosure law in the destination. They publish a foreclosure ad according to foreclosure law at least thirty days before the auction, once a week for up to three weeks. Before they position the first ad, the homeowner must acquire a sheriffs notice of foreclosure sale. Immediately after the sale, the sheriff gives the title/deed to the new owner.

If you have fallen on hard times and missed some mortgage payments, there is still a possibility to save your home especially if you have not received a foreclosure notice yet. Return all phone calls and answer any letters regarding your home. Go in and talk to the lender or bank. Often they would much rather work with you instead of foreclosing on your house.

Bringing in an attorney familiar with foreclosure law is often a wise move as they can not only act as intermediary at this very stressful time and cover your rights but also work with you on saving your home from foreclosure.

You may be able to pay some of the missed payments and/or set up new monthly payments. At times, the bank will even allow you to refinance to reduce your monthly payments. As stated earlier, banks really do not want to foreclose on a home if they do not have to. Ask queries, seek help on foreclosure law and be aggressive about keeping your home.

Learn more about fundamental foreclosure law basics and other advice if you or someone you know is in a potential foreclosure situation.

Saturday, July 14, 2007

Stop Foreclosure Proceedings - How To Stop Foreclosure On Your Home Now

Are you or someone you know trying to stop foreclosure? If you own you property or properties and you're headed down the foreclosure route, you need to stop foreclosure on the property that you own before it becomes a real problem that could affect many other parts of your life. It's not uncommon for people in this situation to ask themselves what is happening, and why is it happening to me?. This is a natural reaction. Foreclosure generally tends to happen if you fall behind on your payments, your mortgage to the bank or payments to a lender that you have borrowed from.

Foreclosure Debt vs Credit Card Debt

This kind of debt is quite different to credit card debt or default on other personal loans. In the case of foreclosure, once you fall just one to two payments behind on your mortgage for instance, you rapidly begin to enter into foreclosure proceedings. You’ll still have some time before the organization you owe completely takes your home from you (if it goes that far); however, if you don’t stop foreclosure you will lose your home and damage your credit record.

What’s The Best Solution For Me?

If there’s a guaranteed way to stop foreclosure it’s to pay the amount you owe on your mortgage or other debt, e.g. tax lien. If for instance you’re behind on a couple of payments, it’ll take those two outstanding payments plus any applicable late fees and other charges to get you back to square one and stop foreclosure from happening on your home. While this may appear as common-sense, it’s often difficult for people behind on payments due to a lack of funds. The situation can be even worse when you have no way of getting extra money to pay down your own other debts.

What If I Approach The Bank?

You can certainly try, but you need to understand this hard truth.

The bank is really only interested in stopping foreclosure if you either pay off the entire debt that you owe (and this is the entire mortgage most of the time) or if you bring yourself up-to-date on your monthly payments.

What's My Worst Case Scenario?

If you’re unable to make your monthly payments, selling you home may be the only solution you have to stop foreclosure on your home. Do you have other assets that you might be able to sell to make payments on your mortgage? While you may not want to do this, it may be an option to consider.

A lot of banks and financial gurus warn against people in the situation where they want to stop foreclosure from borrowing money either from family and friends. Borrowing against credit cards to settle your debt if you want to stop foreclosure is also not advised because you may simply end up with even bigger financial problems.

If you simply don’t have the money required to pay off your debt, you’ll be wise to sell your home to someone that’s willing to buy it off you quickly. The benefit from this is that you’ll be able to save your credit and avoid legal proceedings against you.

If things do get to this stage, selling your home may understandably be quite a difficult decision – but something you might have to do. If there’s any way that you can get current on your mortgage, any way at all, it should become a priority so you keep your home and stop foreclosure. If you fail to take the necessary steps, the chances are that you won’t be able to stop foreclosure on your home.

Foreclosure is a terrifying thing and is hard to deal with. These tips and those you'll find in the Ultimate debt Guide will help you stop foreclosure on your home in the quickest and most efficient way. But you must take action -- No matter how small.

Tuesday, July 10, 2007

How To Avoid Foreclosure

Unfortunately, everyone runs into a time of life when money is tight and juggling finances is a serious challenge.
For individuals owning a home, they could be in a position of having the home foreclosed for lack of payment. If you have found yourself in a compromising position but desperately want to do what you can to save your home, the good news is that avoiding a foreclosure is possible if you know how.

A foreclosure means that the mortgage company or lending institution for your home can take it back to resell if you fall behind on payments. When this occurs, you have several options. First, you can go through a process to keep your home. Second, you can sell the home on your own and then pay off the loan plus any fees. Third, you can allow the home to go through foreclosure where they sell the home and you are responsible for any difference between the price the house sold for and the payoff balance.

If you fall behind on payments and begin to receive letters from your mortgage company, most importantly, NEVER ignore them. Instead, call the number provided on the letter and talk to a representative, explaining the reason why you fell behind. Just as with you, the mortgage company wants you to keep your home. After all, foreclosure is a hassle for them, expensive for them, and not something they want to do. Therefore, they will usually work closely with you to provide all possible options.

A Special Forbearance involves the mortgage company providing you with a temporary reduction or even a suspension of your monthly mortgage payments. If you have recently lost your job, had a reduction in income, or your living expenses have increased unrepentantly, this option may be ideal.

Another option is a Mortgage Modification. With this option, your mortgage is refinanced or the term of your loan extended. The way this program is designed, you have an opportunity to become caught up on payments. A Partial Claim is another possibility whereby your mortgage company would help you secure an interest free loan from HUD, which helps you bring your mortgage to a current payment status.

Remember, if you fall behind, rather than worry about foreclosure, talk to your mortgage company to see what programs you would qualify for so you can stay in your home. Never ignore the problem, because you likely have several viable options to fix your foreclosure problem.

Sunday, July 8, 2007

Finding a New Way to Sell

From Arizona.

A growing number of homeowners behind on their mortgage and facing foreclosure are finding a way to sell despite the glut of Valley homes for sale.

They are turning to "short sales," which are similar to regular home sales except a deal is worked out in which the lender accepts what the house is appraised for or what it will currently sell for instead of what is owed on it.

So a homeowner would sell the house to a buyer willing to pay the current market value of the home, and the lender takes a loss on the rest.

Short sales are the latest trend for metro Phoenix's slowing real estate market, and housing advocates are advising struggling homeowners to contact their lender about a sale before falling into foreclosure.

As foreclosures rise, lenders are more motivated to do the sales because they at least get most of what they are owed.

Homeowners don't get any equity from the sale, but they also don't get a nasty foreclosure mark on their credit record. And although lenders lose out on money they're owed, a short sale lets them avoid a costly foreclosure on the home.

"Short sales are the buzz in the market now," said Tom Ruff of Information Market, a research data firm based in Glendale. "With foreclosures climbing and homes prices falling, short sales are bound to climb."

There is no way to track the exact number of short sales closing in the Valley because they show up on public records as a regular sale between a buyer and a seller. But real estate market watchers say they are seeing an uptick.

For the Valley's housing market, a short sale means one less foreclosure at a time when the number of people defaulting on their mortgages has tripled from a year ago.

It also is one fewer hit to Valley neighborhoods, where foreclosures are pulling down housing values.

Short sales lower an area's "comps," or comparable sales prices, too, but not as badly.

For some homeowners, they are the best option.

A brother and sister from California recently approached Phoenix real estate agent Brett Barry about their house here in the Valley. The pair paid $597,000 for the investment home in Tatum Ranch at the height of the housing market in 2005. Now, they can no longer afford to keep it. And with a record number of Valley homes for sale, their chances of selling the home for what they paid are slim.

"I ran the numbers, and the house won't sell for more than $495,000 now," said Barry, of Realty Executives. "They didn't put any money into it. They have an interest-only loan. They could only rent it for about $1,800 and month, but their payment is $3,500."

He told them they could do one of two things: Work out a short sale or call the lender and hand over their keys.

Lenders can benefit

Most lenders prefer short sales because foreclosures cost them time and anywhere from $30,000 to $50,000 per house in legal, appraisal, marketing and servings fees. A short sale gets a home off their books and typically costs a lender less than a foreclosure.

At a recent foreclosure-prevention town hall meeting in Phoenix, the director of National Initiatives for mortgage giant Freddie Mac encouraged housing advocacy groups and lenders to steer people toward short sales if their only other option is foreclosure.

"We have an investment to protect as well as a moral responsibility to help people avoid foreclosure," Christina Diaz-Malones said.

A few years ago, most Valley homes to go to the foreclosure auction block enticed multiple bids from investors. But now, lenders are taking back 80 percent of the homes they are foreclosing on. Investors have stopped bidding on many houses because they can't make money on a resale.

To be eligible for a short sale, homeowners must prove they can't pay their mortgage because of some type of hardship such as a job loss, medical expenses, death of a spouse or, sometimes, too much debt.

But homeowners should be careful about confusing a short-sale plan with a foreclosure rescue scheme.

Once a homeowner misses a payment or two, a lender files a notice with the Maricopa County Recorder's Office to start foreclosing.

Many groups track those filings to try to buy foreclosure properties. But recently, some groups have begun preying on people about to lose their homes.

Many of the offers of help are thinly veiled schemes to get homeowners to sign over their house to groups that strip away any equity. Often, the homeowners then are required to pay rent until they can refinance and get their house back. But the rent is usually more than their old mortgage payment, and they wind up getting evicted.

Joann Hauger of Community Housing Resources of Arizona said groups that really want to help homeowners don't typically solicit them. More housing advocates such as Hauger are advising people to seek a short sale now instead of losing their home to foreclosure.

"Almost everyone we are seeing now for default counseling owe more than their house is worth," she said.

The hit homeowners take on their credit score is much less on a short sale than on a foreclosure.

A homeowner involved in a short sale will see an 80- to 100-point drop on his or her credit score. A foreclosure is a 250- to 280-point hit, said Randy Kutz of Phoenix Heritage Real Estate Group, HomeSmart. About 70 percent of his business now is short sales.

"Banks don't advertise they are open to short sales, but banks don't want to take the homes back," he said.

People who are able to do short sales will have a tax hit.

The difference between what a homeowner owes and what the bank gets for the house is typically treated as income for the seller. That's taxable income for the homeowner that will show up on a 1099 form from the lender.

The lower sales price from a short sale won't please too many of the homeowner's neighbors. It will show up like any sale and often will be a considered a comp for the area that other buyers and sellers use as a benchmark for home prices.

But housing market watchers say a lower comp or short sale is much better for a neighborhood than a home repossessed by the bank at a foreclosure auction.

"Foreclosed homes can quickly turn into empty eyesores with green pools, yards full of weeds and debris when lenders take them over," Barry said. "A short sale means a new owner for the home and one less foreclosure black mark for the neighborhood."

Free Foreclosure Workshop

Tuesday, July 3, 2007

Debt Elimination For A Better Financial Tomorrow

Debt elimination is an important step for securing a better financial tomorrow.
Its important for securing your financial future - if there is no debt elimination, then there is no capital to build upon. With debts mounting, one can't save or invest for the future. Therefore when you really require money for the future, there is none for you. Money depreciates in value as inflation continues to rise. Therefore the same amount of money will not buy the same amount of goods and services in the future.

Securing the future of the children - if you have family obligations, whether they are children or your parents, you would want to give them a secure future. This means paying for your children's education, medical bills etc. In these situations, you would want fastest progress. After there is elimination of debt you can secure a future for your loved ones. Having a good credit rating - if there is no debt elimination, then you will have an adverse credit rating. This means that it will become difficult for you to apply for more loans and debts.

Banks and other lenders will be wary of lending to you. Even if the lenders give you loans, there will be a high collateral value or high interest rates. Thus you will be stuck in a debt trap. Where you will be borrowing just to repay the old debt. This is known as a debt trap, therefore its very essential that debt is eliminated, thus debt elimination gives you leeway to plan for your future. Debt elimination should be done continuously and with a conscious effort. Therefore don't take small debts as they add up to big debts. Try to make expenditures out of the available cash in hand, this means that you are not living on credit. Thus one should strive for debt elimination at the earliest.

Saturday, June 30, 2007

Foreclosure Prevention Hotline aids troubled borrowers

When Emilio Gutierrez missed a third mortgage payment on his Thornton-area home late last year, he knew he was headed for serious financial trouble.

But after calling the Colorado Foreclosure Prevention Hotline and meeting with an Adams County housing counselor, Gutierrez worked out a repayment plan with Countrywide Home Loans, his mortgage provider.

"If you have the desire to save your home, call that hotline," Gutierrez said. "You have to be willing to make the sacrifices."

About 16,000 people have called the hotline since it started last October, according to the Colorado Division of Housing.

About half of callers take the next step of meeting with a housing counselor, said Ryan McMaken, a spokesman for the division.

Of that group, about four out of five are able to avoid foreclosure, McMaken said, although that doesn't mean they necessarily keep their homes.

About a third of those who meet with a housing counselor still lose their homes in short sales, in which the lender agrees to accept a sales price below what is owed on the mortgage.

Several factors help borrowers who go through the hotline to work out better terms with lenders.

Counselors screen out troubled borrowers who are too far behind to help or who aren't honest about their financial situation.

That helps loss-mitigation agents at the mortgage companies who are typically loaded down with 200 to 300 files each and are eager to prioritize, McMaken said.

"It shows the borrower is really engaged. That makes them move up the list," McMaken said.

Financial mismanagement, an unsuitable mortgage loan and unsteady work in the circuit-board manufacturing industry combined to put Gutierrez behind, said Mary Ellen De Los Santos, housing counseling coordinator with the Adams County Housing Authority.

Last October, Gutierrez got a better-paying job as a service technician for microfilm equipment. He was also motivated to make the necessary sacrifices to catch up, she said.

Gutierrez and his wife, Cecilia, share the mortgage on a duplex with their daughter. Their failure would have brought her down as well.

Gutierrez, 55, adds that he doesn't want to face the prospect of retirement as a renter, something he has been most of his life.

"We had too much of our lives and heart in that place," he said.

The couple bring home about $3,000 a month. They are meeting their share of monthly mortgage payments of $1,000 a month and paying another $700 a month to catch up on the missed payments.

They should be current by the end of August.

The Gutierrez family, however, won't be out of the woods even then. Their adjustable-rate mortgage resets sharply higher next March, from a 7.13 percent interest rate to above 10 percent, De Los Santos estimates.

Gutierrez hopes De Los Santos can help him refinance out of that situation as well, once a $10,000 prepayment penalty on his current loan expires.

"I still get up at night," Gutierrez said. "It is hard for me to sleep. I am dealing with it one day at a time."

How to get help

Call the state's Foreclosure Prevention Hotline. 877-601-4673

Tuesday, June 19, 2007

Coping With Foreclosures: Homeowners Need Help

The deepening sub-prime home mortgage crisis was underscored by the Mortgage Bankers Association’s yesterday when the MBA reported that the percentage of payments 30 or more days past due for sub-prime adjustable-rate home mortgages have risen 1.31-percent in the first quarter of 2007.

That’s an increase to 15.75-percent from the 14.44-percent delinquency rate of last quarter, a “sizable increase” according to Doug Duncan, the MBA’s chief economist.

Federal Reserve Chairman Ben Bernanke foresees further increases in delinquencies and foreclosures for at least a year into the future.

This striking jump in delinquencies is combined with equally high foreclosure numbers. The share of mortgages that are at some point in the foreclosure process increased by 1.28 percent—the highest rate since the first quarter of 2004, and the fourth quarter in a row with an increasing share of mortgages in foreclosure.

What’s more, the share of mortgages that started the foreclosure process increased to 0.58 percent in the first quarter of 2007. This is the largest share of mortgages entering foreclosures in a given quarter, the first time on record that this ratio has increased for four quarters in a row, and the largest four-quarter increase on record.

Clearly action is needed to help homeowners who have sub-prime mortgages find some financial relief. The Center for American Progress is proud to be part of that effort.

Following our March release of our report From Boom to Bust: Helping Families Prepare for the Rise in Subprime Mortgage Foreclosures, which predicted the present conditions of the failed housing market and prescribed federal policies to reduce the impact of negative consequences, members of the House and Senate turned to the report for policy guidance. Among our recommendations:

  • Provide federal grants to expand and enhance current mortgage assistance and foreclosure prevention programs and low-interest mortgage assistance to eligible borrowers.
  • Allot federal funds to target key cities and states facing the highest risk of mass foreclosure.
  • Include provisions to ensure federal agencies assess the effectiveness of each program every three years.
  • Strengthen programs that aid families while their mortgage contracts are renegotiated or the property is sold on the market so that the homeowners’ credit ratings are salvaged, allowing for the possibility of future homeownership.

A number of members of Congress see the merits in several of our proposals. Sen. Jack Reed (D-RI), for example, has introduced legislation that would provide better federal housing assistance to low and moderate income families. Similar legislation in the House is under consideration. Separately, Sen. Charles Schumer (D-NY) has proposed a $300 million emergency foreclosure workout plan.

The Center applauds these legislative moves and looks forward to our complete set of recommendations being adopted by the full Congress later this year.

Sunday, June 10, 2007

Foreclosures often lock out renters

Foreclosure doesn't always hurt only the person whose name is on the mortgage. More renters are turning to support agencies for help.

Kimberly Edwards found out the duplex she was renting was in foreclosure only when a notice written in legalese was taped to her door. But its meaning was crystal clear: She and her two sons had to vacate the premises the next day or go to court.

As it happened, the property had been in foreclosure when she moved in and the six-month grace period was up. Edwards, a 29-year-old single mother in school with plans to become a paralegal, was paying her portion of her subsidized rent to a man who wasn't making mortgage payments.

Edwards is one of a growing number of renters being displaced because their landlords are losing their investment properties to foreclosure.

While there is no estimate of the number of renters being forced to move because their buildings are in foreclosure, workers on the front lines -- from foreclosure prevention counselors to tenants organizations -- say that starting last year, they began hearing from significantly more people caught in the foreclosure crossfire. The problem has been getting worse.

The number of investment properties entering foreclosure suggests the problem is widespread, although it is unclear how many of those were vacant. Hennepin County estimates that in the first quarter, about 45 percent of foreclosed properties could have been rentals, up from about 33 percent in 2006. Ramsey County estimates 43 percent in the first quarter.

Beth Kodluboy, executive director of the Minneapolis tenant advocacy group Home Line, has seen a steady increase in foreclosure-related calls. Through early June, the group took 77 calls -- as many as it did in all of 2006.

Cheryl Peterson, senior mortgage foreclosure prevention counselor for Twin Cities Habitat for Humanity, said she's been getting more and more calls from renters in the past year. "They don't know what to do," she said. Neither does Peterson, who is set up to work with homeowners, not tenants.

When displaced renters call, she explains the complicated and lengthy foreclosure process. She does what she can to refer renters to organizations that may be able to help with legal matters or with new housing, such as Legal Aid or tenant advocacy groups. Peterson also gets "a lot of calls from people who own several properties in north and south Minneapolis." she said. "Juggling the financing of multiple mortgages ... is beyond the foreclosure counseling programs's area of expertise because it's a business venture."

She blames the increase of investment property delinquencies on a mixture of subprime lending and small-time landlords who "couldn't afford the properties to begin with," and were dreaming of making it rich in real estate. But many took on more debt than they could afford, their adjustable mortgage rates spiked, or they couldn't find renters. They stopped making repairs. Then utilities got shut off.

Some landlords continue to pocket rent long after they stop paying the mortgage, allowing a tenant to learn of the foreclosure only when a deputy knocks on the door to hand them a foreclosure notice.

Telltale signs

Tenants advocates say that clues of foreclosure typically show up long before that.

For Edwards, the first sign that something wasn't right at the duplex at 36th Avenue and Washburn Avenue N. came in August, when the water was shut off for a couple of days. Her landlord, who lives in Colorado, also was slow to have a handyman come and fix the radiators, which were blazing hot in summer.

There were other signs. "He couldn't rent the other half of the duplex and the house was on the market, too, the entire time," Edwards said.

The court granted her 30 days to vacate, which gave her until just before Christmas to leave. "My kids didn't have a Christmas," she said.

Happy with the neighborhood, where she said "it was OK for my kids to ride bikes up and down the street," and lacking money to move, she tried to convince the bank holding the mortgage to let her pay rent directly to it and stay. But she recalls being told "absolutely not, because they didn't want to be a landlord."

Wednesday, May 23, 2007

Debt Elimination Starts With Credit Cards According To ChristiaNet (, the world's largest Christian portal with twelve million monthly page loads, offers valuable information to readers about the best ways to get started with debt elimination. Now that the holidays are over many consumers find their mailboxes filled with bills from purchases made with credit cards. Creditors send out numerous offers to consumers during the holidays for the purpose of enticing them to buy now and pay later. Unfortunately most of these offers involve high interest and various other fees that make it hard to pay off balances. President Bill Cooper, with, offers some advice to consumers, "The best way to tackle debt elimination is to start by making more than the minimum monthly payment on charge accounts." (

Various ideas towards debt elimination have been provided by readers from ChristiaNet. One person suggests, "Refrain from some non-essential activities for a short period of time and use that money to make debt payments." Non-essential activities might include anything that is not a necessity. Make a list of activities or expenses that can be eliminated until credit cards are paid off. Consider canceling cable services and other entertainment related activities.

Accumulating debt should serve as a learning experience for consumers to do things differently in the future pertaining to gift giving and making purchases on credit cards. A concerned Believer on ChristiaNet said, "Use cards for emergencies only, use cash for everything, don't spend beyond your means." Educate yourself on the tactics used by banks and finance companies to entice consumers to accept offers that lead to indebtedness. Live on a realistic budget by listing debts in relation to income.

While there are many ways to tackle debt, choosing the right one may be confusing. Some of these include consolidation, negotiation, obtaining a home equity loan, counseling, and others. Christian services are available to consumers and some offer free advice. Bankruptcy is more difficult for consumers to qualify for because of changes in the law and there are companies out there that offer unrealistic promises that ultimately cannot be delivered. Some services promise negotiation with creditors for lower interest rates and lower balance payoffs. However, consumers can do these negotiations themselves without paying a fee for services. For more information, visit:

Thursday, May 10, 2007

Foreclosure - What Can We Expect

With the wealth of information and statistics flooding the market it's surprising to see that homeowners are not preparing themselves a little better. A study recently conducted by the Center for Responsible Lending predicts that 1 in 5 subprime loans issued in the past two years will enter some stage of foreclosure. This will be an estimated $164 billion cost to homeowners.

In addition to subprime loans, another driving force is the housing market, appreciation has come to a complete standstill in some states and some states are entering the negative zone. This is going to have a bad effect on the housing market as a whole and is only going to increase the quantity of foreclosures in the coming year.

With homeowners doing their homework on the foreclosure rates and different loan types contributing to this increase, they are less willing to try these creative loans methods that were common in 2005. Lenders are being warned to be more selective when reviewing the initial loan application to ensure that the homeowner can afford the loan 2 years from now. This foreclosure epidemic is having a negative impact on the mortgage industry as well as all other real estate professionals that are not working in the foreclosure arena.

Looking ahead and 2007 the foreclosure rate is expected to double from 2006. With 1.4 million homes entering some stage of foreclosure in 2006 that means that almost 3 million foreclosures are expected.

These predictions are grim to say the least. Not only for American homeowners grasping to their "American Dream" but also for those real estate and mortgage professionals not offering foreclosure prevention type alternatives. On the other hand there are some real estate agents and mortgage brokers that have realized that adding foreclosure prevention type services is not only going to increase their bottom line but insure that these clients of theirs come back themselves and refer others as well. Diversity in the real estate and mortgage industry is a must coming into 2007. Without the ability and foresight to diversify, incomes for these professionals are going to feel a strong pinch in the coming years.

There are companies that offer partnership and/or training on foreclosure prevention alternatives and they are seeing a flood of brokers and agents stepping up to the plate. In a recent interview with the president of Freedom Foreclosure Prevention Services, LLC, Jeff Segal, he stated "It's not only imperative for mortgage and real estate professionals to add to their current services, come 2007 it will be absolutely necessary if they want to survive this injured market. In the past six months our company has developed a unique partnership program that works well for these professionals to offer services and actually experience relief in this economical whirlwind we have all been experiencing. If they have clients coming to their front door that are facing foreclosure and they can't offer a solution, they send these clients away and will never lay eyes on them again or their business. If they are able to offer a viable and ethical solution, even if they are just referring them to someone, they are securing that client's rapport, business and the most powerful advertiser still today - word of mouth referrals. Its time they realized that diversification is going to be the life raft of 2007 for most of these folks."

He has created a unique opportunity for real estate and non real estate professionals so they can expand their current services and offer foreclosure prevention assistance.

It is refreshing to know that there are still people out there looking out for the homeowners. Hopefully, in 2007, we will see more Americans helping Americans. It's the only way to survive the market that lies ahead without losing sleep over possible unethical practices just to stay afloat. As a nation it is important to stand together through this foreclosure epidemic and fight back for our fellow Americans.

For more information on Foreclosure Prevention Service, you can click here.

Tuesday, May 8, 2007

The Debt Elimination Dilema

The total American consumer debt reached $2.4 trillion in 2006.

There are literally hundreds of ways to eliminate your debt. You can't turn on the TV, listen to the radio, open a newspaper or click on a web page link without hearing or seeing the latest miracle method to get you out of debt.

Some of these methods can actually be very effective. For example, a debt consolidation loan using the equity in your home can significantly reduce the interest you pay each month.

Others like debt settlement or debt negotiations can have a negative impact on your credit rating. Some companies promise to help you rebuild your credit rating after settlement but this is a slow process no matter whether they do it or you do it yourself. This method, along with bankruptcy should only be considered if all other options fail.

Before you consider any option to eliminate your debt you need to find out why you are considering this in the first place. Simply obtaining a loan or settling your debt is not going to solve the problem for most people.

The odds are good that once you have your debt under control you will start piling it on again. This is because most people take these actions without a plan to prevent this from happening again.

Another important point that you should consider is that for some there is no need to go through a 3rd party for help with your debt. It's very possible that you have all the money you need to pay your debts and other expenses and have the ability to impact the interest rates you pay.

I'm not just talking about a budget but a real plan for what you want your money to do for you. A budget is just part of the process. A real financial plan starts with setting your long and short term goals and working backwards from there. Every financial decision you make should be directed toward achieving your goals.

Your budget will simply be a tool to show you what you have and what your obligations are. Most importantly, it will put you in control of your finances so that you can make educated decisions regarding your spending and savings.

There is absolutely nothing wrong with consolidating your debt to get out from under those high interest rate credit cards. But if you are not careful you may end up with the consolidation loan payment and even more credit card debt.

If you are dead set on using one of the debt elimination methods to reduce your payments, take the time to consider what you are going to do differently in the future to make sure you don't wind up in the same situation, or worse in a year or so.

By: Terry Rigg

Monday, May 7, 2007

Foreclosure Stopping

You’ve just received a terrifying telephone call from your lender. He or she has threatened foreclosure on your beloved property and says there’s nothing you can do to stop the proceedings. But before you start to pack up your belongings, rest assured that there are several ways of foreclosure prevention, including those below. Some cost money and some are free.

1. Foreclosure Mediation - Probably the most popular and common with people who can't pay all the past due mortgage payments at once. This service negotiates with the lender to move those payments to the back of the loan (pending you have the proven income to make the current payments). It is essentially like getting a grace period.

2. Negotiate a Repayment Structure Yourself - This is definitely the cheapest way, but can be frustrating if your lender doesn't have a helpful "loss mitigation department" or a "hardship" program. It can be viewed the same as if you were going to fix your own car. First you have to learn about the car, then fix the car. As with car repair, most people would rather hire a specialist to handle their financial affairs.

3. Deed in lieu of foreclosure - This is where you realize that you can't pay for the house and you voluntarily give the house back to the lender. This still is subject to a deficiency judgment yet counts as a "less serious" foreclosure on your credit.

4. Sell your house - This is a great way if you feel you can get what you owe out of your house. Remember to include the standard 6% realtor fees when calculating your take home. You can negotiate the buyer to pay some of the realtor fees, but it is rare.

For assistance on stopping foreclosure with the mediation services mentioned above, click here.

Sunday, May 6, 2007

Mortgage Industry Working on Foreclosure-Prevention Fixes

Congress and private lenders are looking to create new tools to help prevent mass foreclosures in the ailing subprime sector nationwide. Tomorrow on Capitol Hill, a House financial services subcommittee will discuss alternative programs to assist home owners who bought more than they could afford at the height of the housing boom, and who are now facing sharp payment increases they cannot afford.

Last week in the Senate, the Joint Economic Committee issued a report suggesting that the Federal Housing Administration (FHA) might play an important role in transitioning subprime borrowers out of high-cost, adjustable rate loans and into fixed rate government insured mortgages.

Private mortgage firms are also ratcheting up their own "loss-mitigation" efforts, reaching out to borrowers heading for-but not yet in-serious delinquency. EMC Mortgage Corp., a subsidiary of Wall Street bank Bear Stearns, announced creation of a roving 50-person "Mod Squad" team of loss-mitigation and workout specialists. Named after a popular TV program from the late 1960s-early 1970s, EMC's Mod Squad plans to work in dozens of cities with borrowers individually, and to reach out through community and credit counseling groups.

The squad's goal will be to modify the terms of mortgages to better fit borrowers' actual economic situations today. Among the optional forms of modification will be lowering interest rates, switching from floating-rate to fixed rate, restructuring payment schedules and deferring repayment of arrears. EMC is not offering the program solely out of the goodness of its heart, however. Foreclosures cost bond investors around $80,000 per case, whereas a loan modification may cost just a small fraction of that.

Tom Morano, global head of mortgages for Bear Stearns, said "proactively avoiding foreclosures can reduce the severity of losses, benefiting both homeowners and bondholders. (It's) a win-win proposition."

Meanwhile, attention is being focused on new foreclosure prevention concepts that go beyond loan modifications and do not require "short sales" of properties or deeds in lieu of foreclosure to satisfy the owner's debt. One idea is being discussed on Capitol Hill was proposed by a Virginia-based loss-mitigation firm, Lyons McCloskey LLC. The program is a variation of FHA's "partial claim" option, where money is advanced to bring a borrower's loan account current. The advance is structured as a second lien against the property, but carries no interest rate and must be paid from the proceeds of any future sale of the house.

In the Lyons McCloskey plan, seriously delinquent borrowers would be refinanced into fixed-rate mortgages insured or provided by FHA, the VA, Freddie Mac or Fannie Mae. The refi costs and any arrears on the previous mortgage would be treated as a "soft second" lien with no interest payments due. FHA would partially guarantee the second lien, and the bondholders or investors would assume the risks on the uninsured portion.

Full payment of the lien would not be due until the house sold or the homeowners had the financial wherewithal to pay off the debt.

The key to this program, according to Bob Lyons and Joe McCloskey of the loss-mitigation firm, is that it has the capacity to handle situations where borrowers are able to make mortgage payments at a lower interest rate, but are shackled with arrears that they can't afford to repay and mortgage balances in excess of the current home value.

Some legislation would likely be required for any FHA role in this or other new programs, but housing leaders in both the House and Senate appear ready to consider foreclosure-prevention remedies as part of pending FHA reform legislation.

The Debt Elimination Plan

As the first step to eliminating debt from your life, I suggest you create a Debt Elimination Plan in order to get a clear picture of your debt situation and track your progress.

If your bills are in a scattered and disorganized state, I suggest that you first take the time to gather all of your outstanding bills from every corner of the house. Read Getting Organized to learn how to turn an out-of-control mountain of bills into something more manageable. Then, you will be ready to create your Debt Elimination Plan.

Now that you have a separate file folder for each debt after Getting Organized, you will need a simple, spiral-bound notebook for this next step. In this notebook, you will outline and track the progress of your Debt Elimination Plan.

On the first page of the notebook, list all of your outstanding debts by creditor and amount. You may choose to list them in alphabetical order. I recommend listing them in order of outstanding balance, with the creditor owed the highest balance listed first. Once you've listed all your debts on that first page, add up the outstanding balances to get a bottom line figure for the total amount of debt you owe.

For the time being, include only unsecured debt on your list. Do not include secured debt--this is debt that is secured by collateral, such as your home mortgage or your car loan. You will first want to get a handle on unsecured debt, such as credit card debt. Unsecured debt is the real killer.

Now that you've listed all your debts on the first page of the notebook, you will now assign each debt its own page on the following pages of the notebook. At the top of each page, write the creditor's name and the current amount of the outstanding balance.

For each creditor, you are now going to use a calculator to determine the percentage of your total debt represented by that particular creditor. For example, if your total debt is $15,000, and you owe Ace Credit Card Company $6,750 of that amount, you are going to divide $6,750 by $15,000 and discover that Ace Credit Card Company's outstanding balance represents 45% of your total debt. Do this for each creditor and note the creditor's percentage at the top of that creditor's individual page. When you are done, if you add up the percentages, the total should be 100%.

The next step will be to determine the amount of your Debt Repayment Fund, which is how much you will be paying into your Debt Elimination Plan each month.

Once you establish a monthly amount to be paid into your Debt Elimination Plan, you will pay a percentage of that amount to each creditor each month. For example, if Ace Credit Card Company represents 45% of your outstanding debt, Ace Credit Card Company will receive 45% of your Debt Elimination Plan funds each month.

Keeping a Debt Elimination Plan notebook is a simple and easy way to create a snapshot of your debt situation and to track your progress in eliminating all that nasty debt. Also, having a Debt Elimination Plan notebook provides a great psychological boost--it gives you something concrete to look at whenever you doubt that you are making progress! Before you know it, you will be debt free!

If you want help with a Debt Elimination, Sign in The Debt Elimination Today. This simple, user-friendly software program will solve the problem of debt elimination for you.

Getting Organized

The first step in any good budget or debt elimination plan is to get organized. If you are anything like me, you have become so overwhelmed with it all that you may have lost control. You may have no idea how much you owe and to whom. As everyone knows, if you cannot afford to pay a bill when it comes in, the next best thing to do is to toss it into a drawer or a box and ignore it.

My challenge to you today is to get organized.
For this challenge, you will need one of those portable file boxes and some 8-1/2" by 11" file folders (the more colorful, the better).

Step 1: First, go through all of those closets and drawers and boxes and pull out each and every unopened envelope and neglected bill and gather them all in one place. Once you have done this, I want you to go through and open them all, each and every one of them, and separate them into stacks by creditor.

Step 2: Next, organize what you have left. Go through each stack one at a time. Open up any unopened statements and start throwing away as much of this stuff as you possibly can, including unneeded envelopes and multiple copies of statements. Keep only what you really need, such as very important correspondence and the most recent invoice or statement relating to that particular debt.

Step 3: Finally, organize the statements and other papers in chronological order. Using one file folder for each different creditor, file the papers flat in the folder. You will then have one neatly-organized folder for each debt. Organize the folders in the portable file box. Keep out only the most recent statement for each debt and either paperclip this stack together or put it in a file folder of its own.

Avoiding debt is in many ways an emotional and psychological issue. When we feel overwhelmed by a situation, the effect can be to become so paralyzed that we take no action at all. By getting rid of the multiple copies of statements and collection notices and payment reminders, and keeping only what we need, we are left with a manageable stack of bills. We can then begin to deal with our debt situation one step at a time.

As we begin to address the issues of budgeting and debt in our lives, we may find ourselves needing to go through these same challenges periodically. Maintaining a good budget or a debt free lifestyle, like dieting, requires a lifetime commitment to change. It is far too easy to fall back into bad habits and to lose track. So, it is helpful to all of us to go back to basics every now and again and to reassess our financial situations.

I strongly suggest that you do something immediately toward taking this first step, even if it is only to go and pull your shoebox full of bills out of its hiding place under your bed. Any first step that you take right now, right this minute, will improve your chances of following through.

If you want help with a Debt Elimination, Sign in The Debt Elimination Today. This simple, user-friendly software program will solve the problem of debt elimination for you.