Reasons to homeowner to avoid foreclosure - Posted by Smitty

Posted by Brad Crouch on March 11, 2006 at 20:11:15:

Dear Curious,

Sure! Lots! Would you like to buy one or two? Maybe you could put
them in a PACTrust?

Brad

Reasons to homeowner to avoid foreclosure - Posted by Smitty

Posted by Smitty on March 09, 2006 at 20:58:43:

What reasons should a homeowner facing foreclosure consider working with an investor specializing in short sales? The obvious answers are damage to credit report and potential tax liability (1099 form) should the lender choose. Any other reasons?

Re: Reasons to homeowner to avoid foreclosure - Posted by gman

Posted by gman on March 12, 2006 at 01:31:06:

You don’t think a lender can issue a 1099 for the forgiven amount if a short sale is done?

As for damage to credit report, the many 30 day lates, 60 days, and 90 day lates have pretty much taken care of that too. Not to mention the fact that people will pay their mortgage and utilities before other creditors, so I can just about guarantee you the actual foreclosure isn’t going to do a lot more damage.

I’ve said it before, quit promising to help people with their credit. You are going to end up on the wrong side of a lawsuit. Some savvy person is going to deal with you, then turn around and sue you under the CROA. It’s a matter of time before this happens.

Re: Reasons to homeowner to avoid foreclosure - Posted by Rich

Posted by Rich on March 10, 2006 at 14:09:26:

Explain to the homeowner that the bank has the ability to come after them for the difference if it sells at auction for less than what is owed. That includes harrassing phone calls, and GARNISHED SALARIES!
That usually gets them to deal…:slight_smile: If they’re still not interested, go to the next one, after all, you’re doing THEM a favor! The worst thing that you can do is waste time working a short sale with a seller who’s not totally on board with you.

Richie

Re: Reasons to homeowner to avoid foreclosure - Posted by Brad Crouch

Posted by Brad Crouch on March 09, 2006 at 22:37:20:

Smitty,

At any time in the future, if/when the homeowner in question ever
applies for another mortgage, he will have to answer the question on
the mortgage application, “have you EVER been through foreclosure or
gone through bankruptcy?”

If he says “yes”, there is very little chance his application will be
approved. If he says, “No”, this constitutes loan fraud, and if
discovered (at ANY time), he could do time. There is no statute of
limitations.

Brad

Re: Reasons to homeowner to avoid foreclosure - Posted by TNinvestor

Posted by TNinvestor on March 09, 2006 at 21:05:27:

Investors will usually provide assistance in finding a place to live, provide a truck and some helpers to assist in moving, and provide some moving money just to name a few.

Re: Reasons to homeowner to avoid foreclosure - Posted by phil

Posted by phil on March 10, 2006 at 17:25:20:

As a Mortgage Banker I can tell you this absolutely NOT TRUE. Yes, you do have to answer the question truthfully but it does not mean that you can’t get a mortgage.

If you can show me that you have had at least 24 months of good new payment history and have taken steps to improve your credit I can get you financed. True, it may not be the best current rates but even if you have to get a higher rate mortgage for 12 months and make your payments on time for another 12 months you can refinance to a current and much lower rate. I finance people one day out of bankrupcty and also do bankruptcy refinances to get them out.

Foreclosure is far worse than Bankruptcy on your credit but give it 24 to 36 months of on time payments and you can still buy a house. Even worse than Bankrupcty is using a Non-Profit Credit Counselor. We treat them worse than a Bankruptcy.

Re: Reasons to homeowner to avoid foreclosure - Posted by lukeNC

Posted by lukeNC on March 10, 2006 at 07:09:38:

Thats not much to sway a homeowner, you can still buy a house very shortly after a foreclosure. I have seen it countless times. People get foreclosed on, then maybe a year later are buying another home.

Most people in foreclosure want someone to stop the bad guys from calling and possibly help them move and/or stop the proceedings. And hopefully get something out of it.

7 years, not ‘ever’ - Posted by Farby

Posted by Farby on March 10, 2006 at 24:06:13:

The 1003 Uniform residential loan application, which is used by virtually every lender, says the following:

“Have you had property foreclosed upon, or given Title or Deed in lieu thereof in the past 7 years?”

And, since a short sale has the same net effect as Deed in lieu, I would say that a short sale should be classified as a Deed in Lieu, but I don’t know if that is or is not actually the case.

Re: Reasons to homeowner to avoid foreclosure - Posted by John Corey

Posted by John Corey on March 10, 2006 at 03:45:06:

While any of the above is possible it is not what every inventor does. It is what an investor might offer.

Also note that if we are talking about a short sale it is not legal to provide the present owner with cash. At least that is what the lender shorting the loan will require. You could buy something from them but the lender does not want to see the ‘bum’ making a profit at the lender’s expense.

John Corey

Re: Reasons to homeowner to avoid foreclosure - Posted by Brad Crouch

Posted by Brad Crouch on March 10, 2006 at 18:55:30:

Phil,

In the original post, Smitty asked, “What reasons should a homeowner
facing foreclosure consider working with an investor specializing in
short sales? The obvious answers are damage to credit report and
potential tax liability (1099 form) should the lender choose. Any other
reasons?”

He was given answers by Rich and TNinvestor, that were not very
helpful, in my estimation.

So I provided an answer that said that one reason a homeowner might
rethink the possibility of allowing a house go to foreclosure would be
the difficulty in obtaining a future mortgage. And how mortgage fraud
might become an issue if the homeowner told a lie on the mortgage
application.

Farby had a good response, but did not look thoroughly enough at the
1003 Loan Application to see the “killer” question.

Regardless of that error, you chimed in, saying she was “exactly right”,
which indicates to me that you too, have not spent much time with the
1003 Loan Application. She was definitely in error.

Now you seem to take the stance that the homeowner in question has
no reason to fear the foreclosure process, because you are saying that
the homeowner can get a new mortgage even though he is a deadbeat
with a proven track record of forecolsure.

Smitty originally asked for reasons he could give to the homeowner, to
"consider" NOT allowing the foreclosure to happen.

So what you seem to be saying, is that YOU will be happy to arrange a
mortgage for him (the deadbeat homeowner).

Did you miss the part about Smitty looking for reasons he could give to
the homeowner, why the homeowner SHOULD NOT allow a foreclosure
to happen?

Now you say, “As a Mortgage Banker I can tell you this absolutely NOT
TRUE.”

Exactly WHAT is “not true”? Does the 1003 Loan Application, used
extensively in the Real Estate field, not say in section 8 paragraph e, "
Have you directly or indirectly been obligated on any loan which
resulted in foreclosure, transfer of title in lieu of foreclosure, or
judgment?

(This would include such loans as home mortgage loans, SBA loans,
home improvement loans, educational loans, manufactured (mobile)
home loans, any mortgage, financial obligation, bond, or loan
guarantee. If ?Yes,? provide details, including date, name, and address
of Lender, FHA or VA case number, if any, and reasons for the action.)

Is this “NOT TRUE”? Is this question really NOT on the 1003 Loan
Application?

Or is the statement that a future mortgage might be difficult to obtain,
“NOT TRUE”?

I’m just trying to figure out what is actually “NOT TRUE” here.

I’m sure you are a mortgage banker, as you say . . . and you DO say
that all of the questions on the 1003 form DO have to be answered
truthfully, so what is your point? That in todays financial climate, the
homeowner has nothing to fear from a foreclosure? Shortsighted, to
say the least.

Are you trying to say that mortgages are available . . . even to
deadbeats? Well, if that’s what you mean, then I’ll have to agree to that
because lenders are so desperate to lend money these days, they’ll
probably find a way to get almost anyone funded, as long as they can
fog up a mirror.

But can you guarantee that this will last? Right now the financial
climate is such that this may be possible, but what about in a few
years, when the deadbeat homeowner is looking for another mortgage?

So exactly what is “NOT TRUE”? And how long will this remain untrue?

Please do not give advice that will ultimately get someone in trouble.

Brad

Re: 7 years, not ‘ever’ - Posted by gman

Posted by gman on March 12, 2006 at 01:40:06:

What difference does it make if it shows on a credit report? If a lender pulls a full factual report on an applicant they will see it anyway. This applies to loans over 150K.

Re: 7 years, not ‘ever’ - Posted by Brad Crouch

Posted by Brad Crouch on March 10, 2006 at 14:20:03:

Farby,

You are reading # VIII (b). Read down a little further to # VIII (e):

e. Have you directly or indirectly been obligated on any loan which
resulted in foreclosure, transfer of title in lieu of foreclosure, or
judgment?

(This would include such loans as home mortgage loans, SBA loans,
home improvement loans, educational loans, manufactured (mobile)
home loans, any mortgage, financial obligation, bond, or loan
guarantee. If ?Yes,? provide details, including date, name, and address
of Lender, FHA or VA case number, if any, and reasons for the action.)

Please notice there is no time limit.

Brad

Re: Reasons to homeowner to avoid foreclosure - Posted by Griffith

Posted by Griffith on March 10, 2006 at 11:22:41:

“Bum!” - now that’s a little harsh. What about the person who needs to sell because they’re getting divorced, or lost their job, and the house has depreciated or been destroyed (e.g. Katrina)?

I know what you mean, though. The bank doesn’t want the borrower to profit while they suffer a loss.

Griffith

Hey Brad, Have you bought a house yet? - Posted by Curious

Posted by Curious on March 11, 2006 at 17:48:29:

Just wondered.

Re: Reasons to homeowner to avoid foreclosure - Posted by phil

Posted by phil on March 10, 2006 at 23:18:26:

Nope ur right I was wrong, kinda. It is implied but not said EVER. So I’ll give you that one. But yes, that is what I’m telling you, Lenders are giving loans to people who fog mirrors.

I did put a qualifier on it thought. I said that as long as they can stop being “deadbeats” and make timely payment for a few years, lenders have programs for financig them.

What’s amazing to me is that the rates for those deadbeats is 9% to 12% which are rates I would have killed for a few years ago. I just ain’t right. We should lock em all up and throw away the keys to all the houses those dirty rotten foreclosure scum who got laid off and had to deliver pizza to feed their families. Who needs em? How dare they buy our perfectly good houses and live in our neighborhoods.

Thank God for Forgivness.

Re: 7 years, not ‘ever’ - Posted by Farby

Posted by Farby on March 10, 2006 at 20:54:21:

You are right it does say that. Seems redundant, probably because it is redundant. But… I still feel that someone who sells their property via a short sale would have have to answer ‘yes’ to that question, because they were obligated by a loan which result in transfer of title lieu of foreclosure. So it would be a misrepresentation to reference this specific question when advocating a short sale if a short sale is still going to obligate them to say ‘yes’ to this question.

Re: Reasons to homeowner to avoid foreclosure - Posted by Dell Webb

Posted by Dell Webb on March 11, 2006 at 17:21:12:

WOW two schools of thought here. Mark Sumpter, who has a foreclosure course claims he pays personal items from the seller with a Bill Of Sale and even lists the amount on the HUD form.
Personally, I buy, (with a Bill of Sale) personal items such as lawnmowers, washers, dryers, etc, from the homeowner in foreclosure and give them the money after closing. I ALWAYS make sure they get at least a couple grand. I think it’s the least an investor making thousands can do and please, don’t give me the argument about how we’re helping them out of foreclosure etc. You just have to figure that cost into your deal.