Valley Real Estate

Foreclosure - your LAST option.

Foreclosure in Ohio can be a long (usually 4 to 6 months) judicial process by which your lender takes title to your home, then sells it to try to recoup its loss. The lender may also file a 'deficiency judgment' against you for any monetary short fall. In Ohio, the process will usually start after three payments are missed (although most mortgages will allow it after just one missed payment). 

We can't stress enough the importance of taking action before the foreclosure process begins, because once the complaint against you is filed in court,  your lender will usually do nothing to stop it. Regardless of your situation, there are programs to help stop or at least soften the stigma of  foreclosure and its long lasting effects on your credit and self esteem. And most of all, we remind  you that you do not have to face this problem on your own.

Disclaimer: Keep in mind that the HomeTeam are not attorneys. We can speak of foreclosure in the broadest of general terms, but not as to how they may apply to your specific circumstance. Please consult with a qualified attorney to discuss your particular legal situation. See "Hire an Lawyer" below.

Here are the steps you need to follow to avoid foreclosure:

Home Loan Modification

There is no denying that the 'mortgage crisis' has sparked a major rise in the number of homeowners that now face the risk of foreclosure. However, setting the 'sub-prime debacle' aside, thousands of homes end up in foreclosure each year for reasons neither the homeowner or lender could have foreseen: job loss or  business failures; divorce or sudden death of a spouse; health related issues; and myriad other expenses that are unexpected and unpreventable.

Are You Eligible?

See if you are among the millions of homeowners who may benefit from a refinance or modification of your current home loan.

Check Your Eligibility

If your worried about foreclosure it's important to remember that foreclosure is the LAST thing that your lender wants to do. It is a very costly, last ditch legal effort to cut its loss. Therefore, the situation is NOT HOPELESS! Your lender will try to work with you to bring the loan current, especially if your payment history has been consistent and timely.

As of March, 2009 The Home Affordable Modification Program is available to qualified homeowners. If you qualify, your monthly house payments may be considerably lowered. See here for a synopsis of the program.

In November of 2009 The U.S. Treasury Department  unveiled further improvements to the Home Affordable program ("Foreclosure Alternatives Program,") designed to streamline and encourage loan modification, deeds-in-lieu, and short sales rather than foreclosure. We encourage anyone worried about foreclosure to visit MakinfHomeAffordable.gov.

We'll repeat the overriding advice that we and all loan modification councelors give:  speed is of the essence. The sooner you make call for help, the sooner you can regain your peace of mind.

Contact your mortgage loan servicer at the first sign that you may have difficulty in making your mortgage payment. Explain your circumstances and ask to participate in a workout resolution. Even if the foreclosure process has started, it is sometimes not too late to reach out to your servicer. While working with your servicer, also contact a housing counselor (approved by the U.S. Department of Housing and Urban Development) to discuss your options. In Ohio, Save The Dream, Ohio's Foreclosure Prevention Effort is an excellent place to start. The HomeTeam will also take time to sit and speak with you concerning your options and show you explicitly where to turn for qualified help. There is never a charge for these services from any of these sources.

Foreclosure? Not an option!

If you're thinking of selling your home, and you expect that the total amount you owe on your mortgage will be greater than the selling price of your home, you may be facing a short sale.

A short sale is one where the net proceeds from the sale is not enough to cover your total mortgage obligation and closing costs, and you don't have other sources of money to cover the deficiency.  A short sale is very different from a foreclosure, which is when your lender takes title of your home through a prolonged judicial process and eventually sells it to recoup its loss.

If you are considering a short sale, keep these five factors in mind:

1. Consider loan modification first. We advise any potential client that if you are thinking of selling your home because of financial difficulties that are no fault of your own and you anticipate a short sale, first contact your lender to see if it has any programs to help you stay in your home. You will be surprised at the lengths lenders today will go to keep you in your home, and agree that you are eligible for a loan modification such as:

• Refinancing your loan at a lower interest rate
• Providing a different payment plan to help you get caught up
• Providing a forbearance period if your situation is temporary
• The good people at MakingHomeAffordable.gov can give you more information on loan modification

2. Short Sale. When a loan modification still isn’t enough to relieve your financial problems, a short sale could be your best option if:

• Your property is worth less than the total mortgage you owe on it.
• You have a financial hardship, such as a job loss or major medical bills.
• You have contacted your lender and it is willing to entertain a short sale.

3. Hire a Qualified Team. The first step to a successful short sale is to hire qualified real estate professionals and a real estate attorney who has experience in short sales. The HomeTeam (SFR Certified) together with the legal staff of 1st Title Escrow and Land Title Agency brings you both. Short sales have proliferated only in the last two years, so it will be difficult to find practitioners who have closed a lot of short sales. You want to work with a team who can demonstrate a proven working knowledge of the short sale process and who won't try to take advantage of your situation or pressure you to do something that isn't in your best interest.

4. New Federal Guidelines. Long awaited and much needed federally mandated guidelines are now in place which, if correctly adhered to, will normalize and hasten the short sale process. You may even be eligible for uo to $1,500 in moving expenses as well has having the 'shortfall' of money you may still owe the primary lender after the sale (known as a deficiency judgment) completely forgiven. However, even if you decide on representation other than the HomeTeam, we recommend that you do not try to go it alone.

5. Be wary of scams. You should NEVER have to pay for this service. The lender will pay us a fair commission out of the pay-off proceeds at closing - not you. To date, only 25% of short sales have been successful. You need competent representation to up the odds in your favor. To date, we have a 100% success rate.

Want more information? Start here and then call the HomeTeam:

• Foreclosure need never be an option. Your Short Sale Alternatives.
• Short Sale Questions and Answers
• Home Affordable Foreclosure Program (HAFA)
• Government Forms and Guidelines

Terms You Need To Know

Know the meaning of these terms or concepts before you call your lender.

Adjustable Rate Mortgage (ARM): A mortgage loan or deed of trust that allows the lender to adjust the interest rate. The rate change is agreed to at the inception of the loan.

Amortize: Repayment of debt with payments of both principal and interest calculated to pay off the debt at the end of a specified time period.

Balloon Mortgage: A mortgage with installments of principal and interest that do not fully amortize the loan. The balance of the mortgage is due in a lump sum, usually at the end of the term.

Buy-down Mortgage: A mortgage with a below-market interest rate that results in lower monthly payments. A buy-down is made by the lender in the form of “points”in return for money received from the builder, seller or homebuyer. It can be 'temporary' lasting for two or three years, or 'permanent' for the life of the loan.

Cash for Keys: A deal a lender may make with a homeowner or tenant of a foreclosed property. The homeowner or tenant gets a cash settlement in exchange for vacating his/her foreclosed home and leaving the home in good condition.

Convertible ARM: An ARM that may be converted into a fixed-rate mortgage within an agreed upon time period. There is usually a fee when the loan converts.

Deferred Payments: Payments the lender agrees to postpone as part of the workout process when facing foreclosure.

Debt To Equity Ratio: The percentage (ratio) of a homeowner's monthly gross income that goes toward paying debts. DTIs include house payment (interest and principle), property taxes,  hazard insurance premiums, and association fee payments. The total of these combined are often referred to as PITIA.

Lenders further refine DTI ratios as 'Front End' or 'Back End.'

Front-End DTI Ratio is calculated as follows:

[monthly house payment (principle and interest)] + [property taxes] + [homeowner's hazard insurance] + [condo or association fees if any] / [gross monthly household income]

Back-end DTI Ratio is calculated as follows:

[monthly house payment (PITIA - the front end DTI as discussed above)] + [second mortgage, home-equity loans or home-equity lines of credit payments if any] +  [credit card payments] + [auto loan or lease payments] + [alimony] + [any other payments on credit accounts or loans] /  [total gross monthly household income]

Equity: The net value of an asset. In terms of your home, the difference between the value of the property and the amount you owe on the mortgage.

Escrow: Sometimes called impounds or reserves. Money or documents deposited with a third party to be delivered upon fulfillment. For example: a borrower deposits money with the lender to pay taxes and insurance on a property when they become due.

Fixed Rate Mortgage: A mortgage where the interest rate and payments remain the same for the life of the loan. Typically 15 or 30 years.

Forbearance: The lender agrees not to take legal action if a homeowner arranges to pay the amount owed on a mortgage by a specified date.

Foreclosure: A legal process where a mortgaged property is sold to recover the amount owed.

Refinance: The payoff of an existing loan with a new loan using the same property as security.

Repayment plan: An arrangement in which the borrower makes additional payments to pay down the past due amount while still making regularly scheduled payments.

Workout: Also called restructure. An alternative to foreclosure. Can include loan modification, short sales or forbearance.