V1 Foreclosure Process

Real Estate Solutions of South Florida, [email protected]

The Foreclosure Process and Homeowner Options

Presented By:Russell IrizarryShort Sale SpecialistMiami-Dade County, FL

www.ShortSaleClinic.com

Disclaimer

The content in this presentation is based upon our research, knowledge and experience. In no way is any information contained herein to be interpreted as legal or tax advice. To be assured of sound legal advice with regards to foreclosure, real estate, bankruptcy or agency laws, please employ the use of a competent legal or tax professional and/or your real estate broker.

Please consult your broker, accountant and attorney, as appropriate, for advice specific to your situation. Although every effort is made to keep this presentation current and relevant, it is your responsibility to seek guidance from qualified professionals in order to keep up with rapidly changing market conditions and periodic changes to the law.


The Foreclosure ProcessThe Foreclosure Process

The Foreclosure Process varies by State, and falls into two categories: Judicial, and Non-Judicial.

Non-Judicial – foreclosure process happens without the courts. (full discussion is beyond the scope of this presentation)

Judicial – foreclosure is processed though the courts, as in the state of FL.

(For detailed information on the foreclosure process in Miami-Dade County, go to: www.miamidade.gov/foreclosure)

3 Stages of Foreclosure3 Stages of Foreclosure

Pre-Foreclosure Public AuctionReal Estate Owned (REO)

(Private) (Public) (Private)

• Pre-Foreclosure is the period between the Bank’s Notice of Default (Lis Pendens) to the Borrower, and the property going to a foreclosure sale.





• Public Auction (the actual Foreclosure) is the 2nd phase. This is where the property is sold on the ‘courthouse steps’. (In Dade County at 140 W. Flagler room 908 daily at 11am)





• Public Auction (the actual Foreclosure) is the 2nd phase. This is where the property is sold on the ‘courthouse steps’. (In Dade County at 140 W. Flagler room 908 daily at 11am)

• REO is the final phase of the cycle. Here, the Bank has foreclosed and owns the property.

3 Stages of Foreclosure3 Stages of Foreclosure3 Stages of Foreclosure3 Stages of Foreclosure



In the Pre-Foreclosure stage, the homeowner has several options prior to the property going to Public Auction. Options can be categorized as follows:1. Staying in house (slowing or stopping

foreclosure)2. Moving from house

NOTE: The above timeline is a general approximation and will vary by bank

1st Missed payment

30 Days Late

60 Days Late

90 Days Late

120 Days Late

Bank hires an

Attorney

150 Days Late

180 Days Late

240 Days Late

Bank Auctions

property at Courthouse!!

210 Days Late

Notice of

Default Filed at County Court

Final Summary Judgment

Pre-Foreclosure TimelinePre-Foreclosure Timeline

Step 1 Step 2

Homeowner has more options (loan modification or re-finance)

Homeowner has less options

Foreclosures –Foreclosures – Did you Know? Did you Know?

• A homeowner who goes through foreclosure is ineligible for a Fannie Mae backed loan for 5 years thereafter, and an investor-owner is ineligible for 7 years.


• A homeowner who goes through foreclosure is ineligible for a Fannie Mae backed loan for 5 years thereafter, and an investor owner is ineligible for 7 years.

• Future mortgage loans and interest % rates will be affected because the foreclosed homeowner must answer “Yes” to the Form 1003 Uniform Residential Loan Application question “Have you had property foreclosed upon or given title or deed in lieu thereof in the last 7 years?”


• A homeowner who goes through foreclosure is ineligible for a Fannie Mae backed loan for 5 years thereafter, and an investor owner is ineligible for 7 years.

• Future mortgage loans and interest % rates will be affected because the foreclosed homeowner must answer “Yes” to the Form 1003 Uniform Residential Loan Application question “Have you had property foreclosed upon or given title or deed in lieu thereof in the last 7 years?”

• A foreclosure affects credit scores downward by 200-300 points, typical for over 3 years

Foreclosures – Did you Foreclosures – Did you Know?Know?

• Foreclosure stays on credit history for 10 years

Foreclosures – Did you Foreclosures – Did you Know?Know?

• Foreclosure stays on credit history for 10 years• Current and future employment may be affected as many

employers now require credit checks, particularly for employees in financial or sensitive positions.

Pre-Foreclosure OptionsPre-Foreclosure Options

Two Categories of Options:

1. Staying in House

2. Moving from House


1. STAYING IN THE HOUSE Refinance: The borrower pays off the existing mortgage

loan with proceeds from a new loan with more favorable terms. (must do before missing payments)




Repayment Plan: The borrower is allowed to catch up on missed payments by making more than the monthly payment until the amount is brought current. (very difficult to do if the financial problem is not temporary)




Repayment Plan: The borrower is allowed to catch up on missed payments by making more than the monthly payment until the amount is brought current. (very difficult to do if the financial problem is not temporary)

Forbearance Plan: Bank allows you to skip monthly payments temporarily, or make partial payments for a specified time. Missed payments may be added to principal or become part of a repayment plan or loan mod. (can only do if financial problem is temporary)


1. STAYING IN THE HOUSE Loan Modification: Allows for changes to the original

terms of a borrower’s promissory note, which may include an adjustment to the interest rate %, an extension of the loan term, or adding missed payments to principal.



Short Refinance: Allows for the forgiveness or ‘write-off’ of a certain amount of the principal balance, and a refinance of the remaining amount.




Short Refinance: Allows for the forgiveness or ‘write-off’ of a certain amount of the principal balance, and a refinance of the remaining amount.

Bankruptcy: A borrower’s loan may be changed from the original terms based on a Loan Modification as part of a court-approved reorganization plan. Chapter 7, Chapter 13, Chapter 11. (Speak to an attorney, do your research!!)



1. STAYING IN THE HOUSE

A Final Note: All the above options for staying in the house have one thing in common – the homeowner MUST be in a position to make some sort of reasonable payment that is agreeable to the Bank, and make it on time every month.

(A great website for finding out if you are eligible for any of the above options to keep your home is: http://www.makinghomeaffordable.gov/)

2. MOVING FROM THE HOUSE Deed-In-Lieu of Foreclosure:

Allows for the owner to voluntary transfer a property to the bank without going through the full foreclosure process. Same as a ‘voluntary repossession’. Shortens the process for the bank, with less costs. Same negative impact on credit as a foreclosure, black mark for 7 years. Court not involved. Not an option if there is more than 1 mortgage or lien on the house.


2. MOVING FROM THE HOUSE The Short Sale:

Bank agrees to accept less than what is owed to settle the mortgage in full (a discounted pay-off), and release its lien upon the sale.

Two conditions must exist:1. There must be little or no equity in the

property.2. Homeowner must prove a legitimate hardship.


2. MOVING FROM THE HOUSE The Short Sale:

Bank agrees to accept less than what is owed to settle the mortgage in full (a discounted pay-off), and release its lien upon the sale.

Two conditions must exist:1. There must be little or no equity in the

property.2. Homeowner must prove a legitimate hardship.

There are clear advantages to a Short Sale versus a Foreclosure for both the homeowner and Bank in virtually all situations.


Short Sale BenefitsShort Sale Benefits

• Sellers gets home sold, removes their burden, and allows them to move on with their lives.


• Sellers gets home sold, removes their burdens, and allows them to move on with their lives.

• Credit ratings are not as ruined as compared to a Deed-In-Lieu, or a Foreclosure Action. Sellers can regain their financial stability much sooner, and qualify for a new mortgage easier and quicker at some time in the future.


• Sellers gets home sold, removes a major burden, and allows them to move on with their lives.

• Credit ratings are not as ruined as compared to a Deed-In-Lieu, or a Foreclosure Action. Sellers can regain their financial stability much sooner, and qualify for a new mortgage easier and quicker at some time in the future.

• Short Sale can be negotiated so there is no deficiency judgment. Mortgage lien will be satisfied (per lender’s approval).


• Sellers have a greater sense of personal dignity by having their home sold, versus losing the property to foreclosure.


• Sellers have a greater sense of personal dignity by having their home sold, versus losing the property to foreclosure.

• The 1099-C received by the sellers for the amount of debt relieved by the lender is non-taxable if the home is their primary residence. The Mortgage Forgiveness Debt Relief Act of 2007 eliminates taxation on debit forgiveness if the residence was owner-occupied. (See your accountant for details.)


End of Part I

Also see the following videos on the Short Sale process:

Part II - The Short Sale Process and What We Do

Part III - Short Sales Frequently Asked Questions

Contact Us today to discuss your options and for further information on the Short Sale Process

www.ShortSaleClinic.com

Documents

V1 Foreclosure Process