in this chapter: refinance sell and bring cash to closing lender workout short sale deed in lieu of...
Post on 29-Dec-2015
216 Views
Preview:
TRANSCRIPT
In this chapter:• Refinance• Sell and bring cash to closing• Lender workout• Short sale• Deed in lieu of foreclosure• Foreclosure• Do nothing and walk away
2. Options for Distressed Homeowners
2-1
• Homeowners current with mortgage may be able to refinance to 30- or 15-year fixed-rate loan via Home Affordable Refinance
Refinance
2-2
Eligibility Criteria for Home Affordable Refinance
2-3
Home
Existing mortgage
Borrower
• Owner occupied• Is one- to four-unit home
• Owned or backed by Fannie or Freddie
• LTV is above 80% but not more than 125%
• Current on existing mortgage• Has income to support new
mortgage payments
2-4
Sell and Bring $ to Closing
2-5
• Although many homeowners may not have cash to cure deficiencies, they may have liquid assets:
> U.S. Treasury bonds
> Individual retirement accounts (IRAs)
• Homeowners encouraged to seek professional advice
Lender Workout
2-6
• Workout options include:
> Forbearance
> Reinstatement
> Repayment plan
> Loan modification
> Sign over property to lender
2-7
Eligibility Criteria for Home Affordable Modification
2-8
Home
Existing mortgage
Borrower
• Owner occupied• Is one- to four-unit property
• Unpaid principal balance ≤ $729,750 for one-unit prop.
• Originated on/before 1-1-09• Payments exceed 31% gross
monthly income
• Experiences fin. hardship• At risk of imminent default
or in default
Home Affordable Modification
2-9
• Borrowers put on 3-mo. trial period w/modified interest level and mortgage payment.
• If borrower is successful in making payments, mortgage servicer executes agreement with new interest rate.
Short Sale
2-10
• Situation where seller:
1. Owes more on loan (and any other liens) than sale of property will produce
2. Is unable or unwilling to bring $ to closing
• Lender has not yet foreclosed on property
Why Short Sales Are Preferable to Foreclosure
2-11
1. Lessen impact that foreclosure can have on surrounding community
2. Won’t damage distressed owner’s credit as much as a foreclosure
2-12
Foreclosure Alternatives
2-13
• For borrowers who meet eligibility criteria for Home Affordable Modification, but don’t qualify for modification or complete process
• Documentation will be standardized and incentives will be offered to borrowers and servicers to facilitate short sales
2-14
Incentives • $1,000 for servicers for successful short sale or deed-in-lieu-of-foreclosure
• $1,500 for borrowers/homeowners to help with relocation expenses
• Up to $1,000 toward cost of paying junior lien holders to release liens
Foreclosure Alternatives
2-15
Features • Depending on market, up to one year to market and sell the property
• No foreclosures may occur during marketing period
• Servicers may not charge fees to borrowers to participate
• Servicers may not negotiate lower commission after offer has been received
Foreclosure Alternatives
Deed in Lieu of Foreclosure
2-16
• Occurs when borrower agrees to trade property to lender in exchange for cancellation of note
• More likely to work in states where there is long foreclosure timeline
• In declining markets, lenders less likely to consider deeds in lieu
Foreclosure
2-17
• If homeowner is facing foreclosure, real estate professionals should instruct homeowner to contact lender immediately
Do Nothing or Walk Away
2-18
• Walking away from property eventually leads to lawsuit to foreclosure
• Homeowners who are ready to walk away should contact their attorney for advice
top related