The following are the lenders qualifications to modify your loan. Most borrowers will meet these requirements. Keep them in your mind, when speaking to the lender.

o Commitment to the Lender
o Commitment to the house
o Ability to pay (the most important requirement)

A great hardship letter must be included in your loan modification package to the lender, before the lender will even consider stopping your foreclosure.

The hardship letter must include the loan number, primary cause of default and a detailed summary of what caused the hardship that allowed you to become defaulted in your mortgage, and your current ability to pay the mortgage.

An example of all of the elements needed in a compelling Hardship letter includes:

Loan No. _______________
HARDSHIP LETTER:

What is the primary cause of your default? (Check all of those that apply)

[ ] Death/Illness of Mortgagor
[ ] Death in Family
[ ] Marital Difficulties
[ ] Property Problems
[ ] Reduction of Income
[ ] Excessive Obligations
[ ] Employment Transfer
[ ] Unemployment
[ ] Inability to Rent
[ ] Inability to Sell
[ ] Military Service
[ ] Business Failure
[ ] Reduction of Income
[ ] Fraud
[ ] Payment Adjustment
[ ] Payment Dispute
[ ] Other ________________________________________________

Please take a few minutes to briefly state below what hardship or difficulties have occurred that caused you to default on your mortgage. If a series of events brought about this financial crisis then begin with the first event and explain how this series of events combined to create the default. Be aware that without fully understanding your hardship, the lender may not be able to help you.

Where possible, please provide support for the hardship (i.e., unemployment paperwork, separation agreement). Should you need more space to write, please attach additional pages. It is important that this letter convey what caused you to fall behind on your mortgage payments.

By: K. Patrice Williams

About the Author:

K. Patrice Williams has a BA in Economics as well as a law degree. She has successfully managed both residential and commercial multi-million dollar income producing assets and budgets for more than 10 years. As a 1st year law student, Patrice established a real estate development and consulting business and acquired over 30 rental properties. As the housing market values decreased- like millions of other Americans-her properties were negatively impacted by shifting ARM’s, combined by a sluggish economy. Patrice has researched and personally implemented almost all of the pre-foreclosure techniques detailed in the book: “6 Simple Steps to Avoid Foreclosure”. http://www.avoidforeclosuremanual.com

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If you owe more than your house is worth, what are your options?
One is that you can keep your home and continue making payments.

Eventually inflation will increase the value of real estate and you should be okay. This may take five, ten or fifteen years but it will happen. More inflation is pretty much guaranteed.
Of course, one can question the wisdom of paying every month on an asset that is falling in value and that is not worth what you are paying.

There is an ethical and moral issue here. I won’t touch that one because you have to do what you are personally comfortable with.
My job is to give you some options, and let you decide what you want to explore further.
Because many homeowners face further complications.
They cannot afford their existing mortgage. They may have an ARM that is resetting. Or a balloon payment that means a mortgage must be refinanced. But in today’s market that may be impossible.

For people who cannot afford their monthly payments and cannot refinance, and who owe more than their house is worth, a short sale may be the answer. More about short sales in a moment.
Deed in lieu seems preferable. In deed in lieu, you deed your house to your mortgage lender and that ends the foreclosure process. What could be simpler and more obvious?

But hold on.

The lender may still go after you in court for their financial losses. And they often report deed in lieu on your credit report like a foreclosure. Sometimes you can negotiate this.
But the simple fact is that lenders do not like doing deed in lieu of foreclosure, especially if you owe more than your house is worth. You have to realize that you think you have a problem (and you do), but your lender has a problem also.

And deed in lieu does not solve your home loan lender’s problem. They are not in the business of owning houses. If they accept a deed in lieu they must fix up your house and market it and sell it. That is a problem for them. It costs them many tens of thousands of dollars in additional losses.
You can solve that problem for them by doing a short sale. You sell the property to a buyer and the lender agrees to accept the proceeds that the buyer pays as full payment of the mortgage loan.

The mortgage lender may still come after you for their financial loss, unless you get them to agree otherwise. And the lender may make a bad report about you to the credit bureaus — or they may not. You can negotiate all this.
With short sales in lieu of foreclosure you are fixing the problem for yourself and for the mortgage company. They may take a loss but at least they get out of a non-performing loan. You get out from under and you can even buy another house with little or no money down and bad credit, if you know how to.

It is the best of all worlds given a tough situation.

By: Richard Geller

About the Author:


And also get instant access to my free 25 page acclaimed report Keep Your Home which shows you how to lower your mortgage payments without refinancing, inside information about avoiding bankruptcy while slashing your debts and much more. And see questions about short sales and how to get your lender to say yes or visit www.HomeSaleRelief.com for a free 20 minute course: stopping foreclosure, cutting debt without bankruptcy and more. Nothing to buy — it’s all free and quality information you won’t find elsewhere.

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If you are struggling to find a buyer for your home who will pay you enough to cover your mortgage payoff, you are not alone and there may be a solution for you. A short sale can be very useful in these types of situations and they are becoming increasingly common as the real estate market has been taking a bit of a “beating” as of late. A short sale is when you sell your home and the lender agrees to accept a balance that is less than the full amount that you owe them. Now why would the lender agree to accept less than the full amount that is due to them? This is a very good question. First off a short sale benefits the lender by getting the property off of their books and saving themselves from the possibility of having to foreclose on the property. If the lender has to foreclose on the property, the amount of time and money they will need to put into the process will be quite considerable. Therefore, by agreeing to allow you to sell your home for less and take what the market will give you, helps you out and helps the lender out.

If you are in this situation then working with a real estate agent who is familiar with short sales will come in quite handy. A real estate agent who is knowledgeable and experienced in short sales can really make this process go much smoother and can give you a better chance at getting your short sale request with the lender approved. Once you have a bona fide offer made on your home that is not enough to cover the cost of the mortgage, you need to contact your lender and request a short sale. You will need to send in your request to the lender with all of the details of the sale along with your request for the short sale itself. Once the lender receives your request they will review it and all applicable documents and information and make a decision as to whether they will accept your short sale request or not. An experienced Realtor can give you assistance with this request to give you the best chance for it to be approved.

Once your request for a short sale has been approved and the home is sold, you are relived of any further obligations to this home and mortgage. The lender will release you from any remaining balance and you will be done. However, there has to be a drawback to this, right? You can’t just get out of this “scott-free” can you? Yes, there is one drawback. Normally, the mortgage lender will provide you with a 1099c, a cancellation of debt form, in the amount of the shortage of money that they received from the short sale. This does not mean you have to pay any money back, but what it does mean is that you will have to report this on your taxes for the appropriate tax year and this amount will be treated as “normal income” and you will have to pay taxes on it as though you had earned the money during that year. A small price to pay to be able to get away from your home mortgage debt without a foreclosure affecting your credit.

Therefore, if you have any thoughts that you may have a hard time selling your home for what you owe on the home, you may want to ask around to some various Realtors if they have had any experience dealing and assisting with short sales before you decide on which one to sign a contract with. This may help out in the long run, if necessary.

By: David Zwierecki

About the Author:


The author of this article, Dave Zwierecki, is the President of First Security Financial Services and has over 10 years of experience in the credit and mortgage lending fields. For more information and tips please visit http://www.gofirstsecurity.com or http://www.nomoneydown123.com/Ohio/short_sale.htm

Stop Foreclosure – Save Your Credit

For decades, real estate investors have been making millions helping people in financial trouble. One method that many investors don’t fully understand is the short sale.

As a real estate investor, you’ll run across a number of homes that are currently in foreclosure and in which the seller has no real equity. That typically means that if you want to buy the property, you’ll have to negotiate with the lender directly. Since lenders are often willing to take considerably less than retail for foreclosure properties, such transactions are generally referred to as short sales, and though they can be frustrating, short sales can generate significant profits, as well.

One of the most frustrating parts of short sales is simply locating the person with the power to negotiate the sale. Although the names vary, most lenders have a department that handles short sales. You’ll probably spend a considerable amount of time on the phone while you’re referred back and forth within the organization until you finally find the right person. However, once you’ve found that person, you can often negotiate an attractive deal.

But why would a lender sell a property at a below-market price with special terms? The answer is pure economics. A short sale allows the lender to avoid a number of the costs they typically incur during the foreclosure process, such as attorney’s fees, eviction costs, property damage, and the costs of listing with a real estate agent. So, to get a good buy, your task is to convince the lender that it’s in their best interest to accept your offer.

The first thing the lender will be concerned with is how much the property is worth. To find that out, they will generally hire either a broker or an appraiser to physically inspect the property and then offer a price opinion. You may be able to help your cause if you can offer your own price opinion, based on pertinent sales information in the area.

It will also be helpful to provide as much negative information about the property and the area as you can. Be as specific as possible about the drawbacks to the home, the neighborhood, the local economy, or anything else that will show the home in the worst possible light. You can also provide bids from contractors as to how much it will take to repair or upgrade the home, in order to further illustrate how much the lender will be saving by selling the home to you.

The lender will also want to know about the current borrower’s situation. This may require you to work with the borrower to create what’s called a hardship letter, giving intimate details on how difficult it will be to continue making the mortgage payments. It can be a time-consuming and tedious process, but it can pay big dividends. The lender will often require a written contract between you and the seller to make sure the seller doesn’t make any money on the sale. Your first bid may be rejected, but you can often get a better deal than you’d get with a regular seller, because lenders have no emotional attachment to the property.

Short sales can be frustrating, but they also offer the potential for excellent profits.

Copyright ? 2006 Jeanette J. Fisher

By: Jeanette Joy Fisher

About the Author:


Jeanette Fisher helps beginning real estate investors fix houses using interior design secrets for top dollar sales. Free ebook: “The Truth about Making Money Flipping Houses” at http://www.doghousetodollhousefordollars.com

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Homeowners facing foreclosure in California have approximately 120 days from the Notice of Default (about 4 months) in order to resolve their outstanding mortgage debt. When a homeowner finds themselves in this situation, the most proactive step a homeowner can do is to act in a timely manner to get a realistic look at what their options may be. There are many choices that a homeowner can choose from in order to best reduce the overall loss during the stressful financial situation they may find themselves in; however, denial shouldn’t be one of them.

In the slew of options that are available, there is a little-known transaction known as a “short sale” which to some homeowners in foreclosure may seem like a dream come true. Short sales occur when a lender allows a homeowner in default to sell a house for less than the total value of the loan. In many cases, the lender then forgives the remaining portion of the debt. But before a homeowner who finds himself in foreclosure gets too excited about what seems like welcome debt relief… there is a catch.

So what’s the catch? Lenders may claim whatever debt they’ve forgiven as a loss on their taxes and issue a 1099 form to the homeowner; in this case the seller, for the total amount. In other words, the forgiven debt is taxed as earned income and depending on the loss and the homeowner’s (and potential seller’s) tax bracket it could mean a significant increase in their taxes. A homeowner should definitely check with his accountant for this information. On the other hand, if a property is sold under a short sale, the lender may require the buyer to make up the difference, either through a personal obligation or a collection for the remaining balance often referred to as a deficiency judgment. According to Barron’s banking dictionary, the definition officially is… ” A court order authorizing a lender to collect part of an outstanding debt from foreclosure and sale of the borrower’s mortgaged property or repossession of property securing a debt, after finding that the property is worth less than the book value of the outstanding debt.”

While lenders will traditionally pursue other loss mitigation methods to work with the homeowner, when it seems very unlikely that the homeowner will be able to pay pack the debt– the lender may choose to agree to a short sale in order to avoid further financial losses. Admittedly, this “win-win” situation involves parties who have already resigned themselves to losing their home and walking away from their obligations with a lot less damage to their credit. And as for lenders, they know that repossessing the home (probably with a declining value) will cost them thousands of dollars to maintain, refurbish, market and sell, with no guarantees that it will recoup the same amount it might have gained from a short sale. By the same token, homeowners understand that foreclosure will not only take away their home but also deliver a “black eye” on their credit that will stay that way for at least seven years. With that in mind both parties may be willing to negotiate a short sale; however, the lender ultimately has the last word on whether this is an option they will allow.

Another good reason that a short sale might be desirable is that the surrounding neighborhood and community at large may benefit from homeowners opting for short sales instead of foreclosure, as these types of sales are not as heavily discounted as foreclosure auctions. These sales may help “mitigate drastic decreases in the values of nearby properties.”

For a homeowner considering this option, there will be a lot of details that will need to be addressed and negotiated with the lender. If your bank agrees to a short sale, the homeowner then hires an agent to find a buyer for the house, sells the house at a loss, and with the bank’s approval, they agree to take the loss incurred. To be sure, as trying as it may be under the circumstances, a homeowner should try to maintain courteous and professional communications with their lender at all times. This open communication can markedly improve the possibility of a timely, smoother transaction and adequate solution for all parties involved. A homeowner will literally be racing against the clock and anything he or she can do to facilitate the process, will result in a much more positive outcome than it might otherwise be.

In addition, the homeowner should be diligent to find a professional realtor who understands short sales well and has the experience in working with lenders and banks before giving the potential realtor the listing and hiring him or her to sell his house. As paperwork intensive as a regular real estate transaction can be, the paperwork and negotiation process will escalate during a short sale and lenders will be scrutinizing for any irregularities in the transaction. Not surprisingly, too many distressed homeowners often try to sell their properties to family members or other relatives. A lender will be wary of potential buyers with a vested interest. As a result, a homeowner will need a professional who understands loss mitigation procedures and the ins and out of short sales and is able to successfully negotiate with the lender.

Where exactly did short sales come from? While the history is not very clear, the idea grew out of the down market of the early 1990s, when lenders were eager to find new loss-mitigation tools to avoid becoming real estate investors and property managers instead of what their core functions were as banks–lending money and collecting interest.

Once the boom began and foreclosure rates dropped, few people needed short sales. Now, as adjustable loans begin to reset and with many real estate markets currently in decline, short sales are beginning to show up in the market again.

By: Nef Cortez

About the Author:


Nef Cortez has been a licensed real estate broker and has held various positions in the real estate and mortgage industry for over 25 years. If you would like to read more of Nef’s pithy and timely advice (with the latest info on local foreclosures), visit his website at Chino Hills, CA homes or read his blog at Southern California Real Estate Blog [http://www.nefcortez.com/newhomes]

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