Phoenix Home Rescue

It used to be that as consumers purchasing a home and securing a mortgage we would think to ourselves, “Well, if something happens that I can no longer afford my home, I can always sell it and not lose anything.”

Who’d a thought?  Times have really changed - this economy and this real estate market bring many challenges to many of you. There are a lot of people, just like you who are struggling to keep up with their mortgage payments, but no longer have the equity in their home to “sell it and not lose anything”.  Today’s homeowner who has a mortgage is more than likely in a position that they owe more on their mortgage than they can get for their home if they were to sell.  This places a tremendous burden on these folks if they find themselves in a financial hardship.

Many of these homeowners feel like they have nowhere to turn.  Many of them are too uncomfortable to even discuss their circumstances with anyone.  After all, we were all raised to take seriously the commitment we made when we signed our mortgage and promissory note.  And these are, in fact serious issues.

However, there are circumstances where we have to consider whether we are going to make our mortgage payment or put food on the table.  It is unfortunate that our economy has come to this point, but the fact remains that this is the position that many people are in today – in most cases through no fault of their own - especially people in the retirement communities.  We are seeing more and more seniors whose quality of life and lifestyle has changed drastically due to the drop in the stock market.  Many people have had their retirement money invested in the market only to see it dwindle away to less than half of what they originally had put away.

According to national statistics 1 out of every 8 people is in danger of losing their home because of a financial hardship.  This means that you or someone you know may be having difficulties making their mortgage payment, and may be in danger of losing their home.

Many people may not be aware that there are programs available that may help people keep their homes instead of losing them to foreclosure.  There are programs that could allow people to modify their current mortgage.  There are also programs available that could help someone sell their home for less than they owe by working with their lender to accept less than is owed as final payment.  Avoiding scam in this process is paramount.  Unfortunately, there are many “companies” preying on people in distress with a myriad of schemes that will hurt the homeowner.

If you need help, and need housing and/or credit counseling, call Money Management International.  Their number is 866-515-2227.  They are a legitimate not for profit agency who is partially funded by the U.S. Treasury Department.  They can help you sort through the loan modification process and more.

For more information about the real estate sides of things, contact Lynn Otlewski 623-238-3875

Lynn Otlewski, SRS, CDPE, CSSN

RE/MAX Integrity REALTORS®

If you’re one of the millions who have lost a home to foreclosure, don´t lose heart. There’s still hope for your credit, and you may even be able to buy another home. First, find out exactly what your credit score is saying about you, and what you can do to minimize the damage.

The bad news
According to Andrew Housser, co-CEO of Bills.com, a free consumer portal of personal finance information, it’s true that foreclosure can have a grim effect on your credit score. “A foreclosure will cause a credit score to drop sharply, typically by 200 to 300 points,” he says. “That would drop a score of 700 – considered a ‘good’ score – to as low as 400 – considered pretty terrible.” The minimum FICO score is 340.

Most lenders rely on credit bureau data, although they do not all use FICO scores. Some use their own scoring models, but those tend to have the same inputs, which include payment history, debt, new credit, and others. “Lower credit scores can result in being denied credit, such as credit cards and car loans, and facing much higher rates for loans and even other items, such as insurance, that rely on credit scores,” notes Housser.

The good news
But that’s not the end of the story. Though a foreclosure can remain on your credit report for seven years, it won’t ruin your credit score for life, adds Housser. “If you keep all of your other credit obligations in good standing, your FICO score can begin to rebound in as little as two years. The important thing to keep in mind is that a foreclosure is a single negative item. If you keep it isolated, it will be much less damaging to your FICO score than if you had a foreclosure in addition to defaulting on other credit obligations.”

Alan M. White, assistant professor at Valparaiso University School of Law in Indiana, would agree. “The impact of foreclosure on your score diminishes over time, depending on whether you have other active, on-time accounts,” he explains. “Even FHA [Federal Housing Administration] will allow a new mortgage to be approved if a past foreclosure was more than five years old,” he explains.

Alternatives to foreclosure
Of course, it’s preferable to avoid foreclosure altogether. Here are some ways to accomplish that goal. (Keep in mind, however, that many of these options require you to resume normal mortgage payments at some point. If you can’t afford to resume payments, it may not be worth the effort required to stop or reverse the foreclosure process.)

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  • Lender negotiation: If there is a reasonable expectation that you will be able to resume making regular mortgage payments within a relatively short time frame, the lender may be willing to work with you to establish a payment plan to bring the loan current. “Especially in today’s market, this is a greater possibility,” says Housser. “Many individuals are having trouble due to an unexpected job loss, medical expenses, divorce or other personal trauma. If the situation has some resolution so that the regular payments may be able to be met again, it is worth it to call the lender.”
  • Forbearance agreement: For a temporary hardship, the lender might grant you a forbearance agreement to lower – or eliminate – payments for a limited time.
  • Loan modification: This entails a permanent change to the loan, such as lowering the payment and extending the loan’s term or incorporating any delinquencies into future payments. “Lenders are more willing to discuss this now than they were before,” adds Housser.
  • Deed-in-lieu of foreclosure: In this case, the lender takes ownership of the home, but that will not eliminate the negative impact of a payment delinquency or foreclosure that has already begun. “Bankruptcy remains on a credit report for 10 years, but it can offer a way to become current in payments, which will improve the credit score,” White notes.
  • Refinancing: It may be possible to refinance a mortgage for a lower interest rate and/or monthly payment. But if you have already had late payments on a mortgage, the interest rate offered may be too high to lower your monthly payment. Housser recommends using online rate comparison sites and calculators to determine the “real costs of refinancing.”
  • Short sale: In a short sale, the lender accepts less than the mortgage debt when the property value has declined. “A short sale will prevent foreclosure,” says White. “However, if it takes place after foreclosure was initiated, the foreclosure and the related delinquency in payments will be reflected on the credit report.” The only way to protect the credit score fully is to maintain monthly payments until the house is sold.
  • Chapter 13 bankruptcy: If the loan default is past the point of being resolved with the lender, you may file for chapter 13 bankruptcy protection. This protection requires you to resume making regular mortgage payments but allows the arrearage (being overdue in payment) to be repaid over the course of the chapter 13 plan.

All things considered, a foreclosure won’t ruin your credit rating forever. It will lower your credit score and remain on your credit report until you’re able to re-establish good credit, however, which takes time and careful planning. Consider your home purchase wisely.

Lynn Otlewski

RE/MAX Integrity, REALTORS

623-238-3875

lynn@valleyreadvisor.com

I know that REALTORS(r) have been advising their clients for years to either video or take photos of their belongings to make a record of the things they own.  I also know that most of you probably have not done so.  I would like to share with you what my brother is going through as I write:

He lives near Atlanta, Georgia and a few days ago they had horrendous thunderstorms.  My sister in law was at home with their two boys when they heard a huge clap of thunder and the lights and phone went out.

A few minutes later a neighbor came knocking on their door to let them know that their attic was on fire due to being struck by lightning.  Being a major storm, there were 5 other homes in the area that had been struck by lightning and also on fire.  Theirs was the last one to get hit and the last one the fire department was able to get to.  The home has been deemed a total loss due to fire, smoke and water damage.  They will have to strip down to the foundation and rebuild a brand new home.  Nothing was salvageable.

So now they have the daunting task of digging through each room and taking photos and an inventory of their belongings that are now soaked, smoked and ruined.  Each day they are working on this task brings more and more emotional turmoil - finding video recordings of the kids and other family that are ruined (and of course irreplaceable) bringing up even deeper feelings of loss.  The insurance company is requiring them to do this in order to have their things replaced.  Their kids have been with them and they just completed their rooms today.  The emotions they must be feeling right now must be terrible.

This is probably the hardest way to have to deal with the aftermath of a fire or other great property loss.  Imagine not having to go through that after such a loss.  This is why I am now passionate about the idea of logging all your belongings via videos or photos.  Having this done already would prevent having to go through what my brother and his family is going through right now.

Lynn Otlewski, SRS, CSSN, CDPE
RE/MAX Integrity REALTORS
lynn@valleyreadvisor.com
www.valleyreadvisor.com
623-238-3875

This weekend I received a call from a family member living outside Arizona, who was trying to get information for one of their in-laws about selling a home that is worth less than they owe.  I asked him a few questions to get an idea of whether or not this homeowner would qualify for a short sale or if they just want to sell their home and know they can’t get what they owe.  There is a difference.

To be eligable for a short sale on your home, you MUST be able to show the bank a hardship.  These might include loss of a job, substancial loss of income, large involuntary increase in expenses (such as major unexpected medical expenses) are the most common causes of a hardship.  In other words, you need to become “unqualified” for your mortgage.  Each bank determines hardship on a case by case basis.

I explained all this to my family member.  He said that his in-law had a huge drop in income, which in and of itself does not create a hardship.  It depends on what her expenses are.  They are not behind on their mortgage payments at this time, but has been advised to stop making payments.  I would NEVER advise that a homeowner just stop making payments.  There are other steps you can take.  She has also been advised to just move and walk away from her home.  NEVER would I advise this either!  There are other steps you can take.

I told my family member to have his in-law call me and I would refer a CDPE (Certified Distressed property Expert) agent to them in their area. 

Your home is probably the most valuable investment you have.  It is important to trust your asset to someone who knows what they are doing.   Your credit rating is just as valuable.  Your insurance rates are based on credit scores, your interest rates on your credit cards are based on credit scores.  Your ability to buy a car, buy a home, rent an apartment even changing jobs are all based on credit scores.  A forclosure on a credit report is worse than a bankruptcy.  It stays on your report for more than 7 years.  It follows you for a long time.  A short sale stays on your credit report, but in most cases only prevents you from purchasing a home for 2 years as long as everything else is paid on time.

This is why it is so important to entrust this investment to an agent who understands the process, the qualification standards and the best way to proceed for your circumstance.    

The latest statistics show that 1 out of 8 homeowners are either in default, or about to default on their home mortgage.  There is a very good chance that you or someone you know is experiencing a hardship.  Please let them know that there is help available.  In most cases, we can avoid foreclosure.   Sometimes, depending on circumstances, we can even find a way for you to keep your home. 

Give me a call.  If you, or someone you know, are out of state or out of my area, I can refer  a CDPE agent to you.  If you, or someone you know, are in my market area, I would love to help.  

Lynn Otlewski, CDPE
RE/MAX Integrity, REALTORS®
623.238.3875
lynn@ValleyREadvisor.com

Many people don't realize that if they have taken a home equity loan / line of credit (second mortgage) and they need to sell their home because of a hardship, that both the first and second mortgage banks must approve a short sale. 

In some cases, the bank holding the second mortgage are not giving approval.  If they are, they are conditional approvals which require a promissory note at closing, or a cash payment (sometimes partial, sometimes in full) at closing.  We are seeing this mostly for second mortgages which were not used as purchase money mortgage.  In other words, if you didn't use the second to buy the home, but used it to buy furniture, pay bills, buy a car, or anything else besides being part of the mortgage at time of purchase.

However, we are also seeing some of these same banks - with a little bit of persistance on our part - willing to negotiate after they have sent these conditional approvals or outright denials.  No gaurantees, but it does happen.

This is why it is so important to use an agent to help you with your short sale that is well trained and knowledgeable about your options with short sale listings.  Knowing who to call and what to say is vital in this process.

So if there is anything I can do to help, please let me know.  If you do not live in the Phoenix area, that's okay, I will gladly help you find an agent in your area that is skilled in this process. Just give me a call...

I am here to help...

Lynn Otlewski, CDPE
RE/MAX Integrity, REALTORS®
623.238.3875
lynn@ValleyREadvisor.com

For all the attention credit scores get, they are generally misunderstood by consumers.

First, they are not a factor in everyday life.  The credit score matters only when you take out a loan, such as for a car, a house, education, or new credit card.  It is considered when you apply for a new job and get insurance.

Here’s how a score is calculated:

·         35 percent:  Your financial history, whether you paid on time and if not, how late you were and how often.

·         30 percent:  How much you owe on each account and how much of your credit limit you have used.

·         15 percent:  Your credit history, how long you have had each account

·         10 percent:  Types of credit, such as home loans, car loans, and credit cards.  Secured loans are best

·         10 percent:  New credit, how many new accounts or credit checks you have had by present or prospective lenders.  A credit check knocks about 15 points off your credit score.

Some points to remember:

·         A credit score doesn’t reflect your whole financial picture.  You might have a lot of savings, assets and investments, but they don’t count.  How much you owe and whether you pay on time is what counts on your credit score.  Also taken into account are the ratios of unused available credit to used available credit.

·         The FICO score is the most widely used score, but it isn’t necessarily the one you might see advertised.  There are three credit bureaus:  Equifax, Experian and TransUnion, all of which sell their own scores. 

·         A history of late payments is wiped off your credit score after seven years.

·         Good credit lasts at least 10 years, even if the loans are paid off.

·         You will probably never have a score of 800 or more, but the high 700’s is generally considered good credit.

·         If your score is in the 600’s or low 700’s, you should try to raise it by paying on time and reducing the amount of debt you have in relation to the amount of credit available to you.

For information about how a Short Sale or Foreclosure on your home affects your credit, visit:  www.phoenixhomerescue.com

Lynn Otlewski, CDPE

RE/MAX Integrity, Realtors

Cell:  623-238-3875

Fax:  800-573-2416

Wow, many people were caught off guard by the changes in their credit scores after applying for a loan modification.  Consumers need to be aware of the affect that loan modifications, short sales, and foreclosures have on their credit scores.  All of these options will have an affect. 

Here is a link to an article talking about loan modification in particular.

Still have questions?  Not sure which option is best for you in your situation?

Give Lynn Otlewski a call. 

623-238-3875

www.phoenixhomerescue.com

There is a new document put together by legal counsel for the assocition.  There are some really good tools included for Arizona homeowners who are considering a shortsale or who are simply trying to avoid foreclosure.  Included in this document, are links to many government assistance agencies, including a link to the Arizona State Task Force Foreclosure Workbook.  This is a must read and must complete workbook if you are truly looking for options.

If you or someone you know could benefit from this information, please be sure to pass this blog post along and contact Lynn at 623-238-3875 or email at:  lynn@ValleyREadvisor.com

The Short Sale Seller Advisory contains 3 main sections of information.

1.  Before proceeding with a short sale -

1. Understand A Lenders Options Upon Loan Default
2. Be Aware of Predatory "Rescue" Scams & Short Sale Fraud
3. Contact a free HUD-approved housing counselor or contact your lender directly
4. Obtain Legal Advice
5. Obtain Tax Advice

 2.  Options other than Short Sale -

1. Loan Workout
2. Loan Modification
3. Refinance
4. Deed-in-lieu of foreclosure
5. Workout Sale
6. Bankruptcy
7. Foreclosure

3.  Short Sale Considerations

1. Contact a qualified real estate professional
2. Investigate documention and eligibility
3. Determine the amount owned on the property
4. Determine the fair market value of the property
5. Consult legal counsel
6. Understand that the short sale may not discharge the debt
7. Obtain tax advice
8. Be aware of the impact on your credit score
9. Understand that there may be a waiting period before you can buy another home
10. Review the Arizona Association of Realtors short sale forms

Lynn Otlewski

623-238-3875

lynn@valleyreadvisor.com

www.valleyreadvisor.com

www.phoenixhomerescue.com