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					American NIGHTMARE
Strategies for Preventing, Surviving & Overcoming Foreclosure
By Sylvia Alvarez and Walter Walker Jr.

The

YOU ARE NOT ALONE.
If you are reading this book you may be one of millions of homeowners today who find themselves in great financial distress over one of the most prized and sought after possessions most of us will ever own: our homes. This book was written to address and dispel the many myths about the foreclosure process, offer insights to the procedures used by lenders and share information about ways you may avoid foreclosure if you take action quickly. It is our hope that you will get some peace of mind and gain a clearer vision so that you can approach this situation armed with the knowledge you need to determine the best options for you and your family. As housing counselors for the Housing & Education Alliance (HEA), we saw a trend unfold in 2007, as the number of clients needing foreclosure prevention counseling skyrocketed. After Columbus Day 2007, we returned to our offices to find over 100 voice mails from people in financial distress, seeking help and relief from the prospect of foreclosure. At the time, we had been involved in assisting primarily first-time homebuyers with purchases, however, we also often helped clients who had purchased a home and subsequently ran into difficulty. Many of the people that contacted our office were referred to us by HUD, the local government or someone who knew of our willingness and capability to help those in need of housing counseling on other matters. As a HUD certified housing counseling agency with limited staff resources, we quickly realized we would not be able handle this level of intervention and counseling. We began to assess the local and national housing environment, and knew that not only did we need to address the crisis on a local level, but we also needed to share our experience and knowledge on a national level. More needed to be done to avoid a looming crisis. In our frustration, we decided to take action and write: The American Nightmare: Strategies for Preventing, Surviving and Overcoming Foreclosure

The American Nightmare | Strategies for Preventing, Surviving and Overcoming Foreclosure

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We have worked in the housing business for many years, helping first-time buyers achieve the American Dream. In 2007 alone, over 4,000 prospective homeowners took advantage of our programs and services. We have helped over 1,500 families purchase their first home “the right way.” Our focus has always been to assist those who wanted to own their home. Not only do we help families purchase their first home, we also teach them how to keep the home they buy.

Foreclosure

does not discriminate and crosses all cultural, financial and educational lines. We have provided foreclosure intervention counseling to all walks of life, from wealthy, experienced real estate investors to low-income first-time homebuyer families. The current economic environment only adds to the difficulties these families are experiencing. There are those who share in the general misery of this foreclosure crisis who have worked hard to get where they are and have found themselves on the brink of losing what they have worked so hard for. We have helped clients who were close to losing the homestead passed down through generations of their family. This is a nightmare for anyone who is going through it. We sincerely hope that by using the tools found in this book, you will learn to help yourself and others navigate through these very difficult times. We believe that knowledge combined with wisdom and sound choices creates power. Wisdom brings understanding of how to best use the knowledge learned. This book is not intended to take the place of good competent counsel from a lawyer and/or HUD housing counselor. It is, however, intended to give you some idea(s) of what happens during foreclosure and what steps you may take to avoid losing your home. Keep in mind this important fact: The lender does not want to take your home back. They are not in the real estate business. They are in the money lending or servicing business. What they want and need is your mortgage payment. However, if you fail to adequately and properly resolve the issue, they will take your house.

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Many people have benefited from this advice.

Almost lost her house after paying her mortgage payment for over 29 years
Mary contacted HEA after getting our name from the HUD website. She had been in her home for more than 29 years and had suffered a series of financial setbacks. She had not made a mortgage payment for six months when she came to her first counseling session at our office. We reviewed her documents and discussed her situation, including her mortgage terms, budget, income and debts and, most importantly, her attitude. (It is vital that if you are facing a substantial financial difficulty that you remain strong and focused on the result, if you want to keep your house.) We find that most people don't understand that they have options and needlessly lose their homes. Mary's case was assessed and she was directed to follow the instructions of her counselor and do exactly as directed. By following the steps detailed in The American Nightmare, and by being aware of all the options available to her, she was able to offer her lender a realistic solution that enabled her to keep her home.

Her house was nearly sold on the Court House Steps

HEA conducted a Homeownership Retention Class, an orientation and overview workshop on foreclosure, and unbeknownst to us in that class was someone who needed help in a desperate way. When Kathy attended a Homeownership Retention Class and foreclosure workshop she had not been able to make her mortgage payment for eight months. She was notified by her lender that she was going to lose her home to a Court Ordered sale in the next 5 days. Kathy thought there was no hope and knew her dream home would be sold to the highest bidder. We gave Kathy the same type of advice you can find in The American Nightmare and she called the loss mitigation department of her mortgage lender. Because she understood the language and process, she was able understand the lender’s point of view. As a result, Kathy was better equipped to work out her problem with the lender and keep her home.

TRUE SUCCESS

We want to share a few of their stories.

STORIES

The American Nightmare | Strategies for Preventing, Surviving and Overcoming Foreclosure

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Toni's Predatory Lending Story
When Toni came to see us, she explained that a friend referred her to a mortgage lender that recommended an adjustable mortgage. She was told she could refinance in six months to a year into a fixed-rate loan. She was pre-approved with a low payment and bought a home. Toni was very happy in her dream home until her mortgage adjusted one year later. When she realized she couldn't make the new higher payment, she knew she was in trouble. As it turns out, Toni had been a victim of fraud and predatory lending practices. After she read The American Nightmare, she realized she had options to help resolve her situation. She was able to ask the right questions. Like so many homeowners in trouble, she was completely unaware of what had been done to her. She also did not understand what the lender was saying to her when she spoke with them. The American Nightmare gave her the added boost of knowledge and understanding to work more effectively with her housing counselor and her servicer. Far too many people in trouble simply fail to understand their situation either because they have too little knowledge or understanding of what to do. The American Nightmare is intended to fill the gaps in your knowledge and help you better solve your problem.

The American Nightmare | Strategies for Preventing, Surviving and Overcoming Foreclosure

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YOU CAN ACHIEVE SIMILAR SUCCESS AND WE WILL SHOW YOU HOW.
Table of Contents
Page 17 Page 25 Page 29 Page 39 Page 45 Page 49 Page 57 Page 59 Page 72 Page 77 Page 109 Page 111 Page 121 Page 127 Page 130 Page 149 Page 183 Page 187 Page 253 How to Use This Book The correct method of understanding and putting to use the book as a reference guide What is Foreclosure? Understanding the legal term of foreclosure - just what does it mean? Judicial Foreclosure A method of foreclosure in common use in many states Phases of Non-Judicial Foreclosure Steps involved in this type of foreclosure Foreclosure from the Lender's Perspective How does the lender view foreclosing on a house? Principal Causes of Foreclosure Understand the most common causes leading to foreclosure What are your Options? What can you do if you are in trouble? Credit and Foreclosure Prevention Counseling Services Locate a knowledgeable professional, not a scam artist Avoiding Predatory Lending Practices Identifying and avoiding predatory lending practices in the market place Options if You Are in Default Managing a Financial Crisis Establishing a Crisis Budget
Strategies to employ to help work yourself out of default Developing a plan of action to work through a financial hardship Put your money where your problems are

Communicating With Mortgage Loan Servicers Speak the language of the mortgage company You May Avoid Foreclosure and Keep Your Home Steps to Take When You Can't Pay your Mortgage Rebuilding your Credit After Foreclosure Resource Guide
Steps you can take to help you avoid foreclosure What happens if you are unable to make your payments

If it all melts down, steps to rebuild your credit

Where to go, agencies to contact. Valuable information in one location Rules governing foreclosure in each of the 50 states Biographies of the authors of The American Nightmare

Foreclosure by State About the Authors

The American Nightmare | Strategies for Preventing, Surviving and Overcoming Foreclosure

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Jingle Keys
We know some people are feeling very desperate at the prospect of facing this terrible possible outcome. In many cases, families are simply moving out of their homes after mailing the keys back to the mortgage company. This is called “jingle keys”. Entire communities have turned into ghost towns because of foreclosure. Some subdivisions have only one or two families left. Homeowners have moved out leaving their dreams behind in ruin. Builders have abandoned projects, leaving the future of the community in doubt. A plague is sweeping across the land and there will be no quick or simple solution to this problem. We all must become more aware of the situation and prepare in as many ways as we can. We hope The American Nightmare will be one of the tools used by all who seek to keep their home and those who have not yet purchased their home who simply want to be better prepared for what could come.

What will you learn by reading The American Nightmare • We will explain the most common reasons people end up in foreclosure, and what you need to do to best insulate you and your family from this devastating outcome. • How to review and analyze your personal financial situation. • The impact of the choices you make. • What is the lender's point of view regarding your impending foreclosure and how you may have a more favorable outcome as a result of your discussion with the lender? • Some of the resources available to you, local and national, most of which are free or of little cost to you. • You will learn the steps which may be taken even if you lose your home in order to bring yourself back and rebuild in the future in order to purchase a house again. • You must develop mental toughness. This is not the time to lose faith in yourself. As long as you are able to make rational decisions and have some funds to work with, there may be hope for you. • Review your priorities with the entire family, and discuss what you are prepared to live without and how you are going to make ends meet during a difficult time. You will also find some of the content stated and restated several times while reading this book. This is intentional because it is often best to have certain information conveyed in a variety of ways.
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The American Nightmare | Strategies for Preventing, Surviving and Overcoming Foreclosure

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NOTE
There is a great deal of confusion regarding a change in

Foreclosure?
Foreclosure: a legal proceeding in which the bank or lender can take possession of and sell a mortgaged property when the borrower does not meet his or her contractual obligations, e.g. is delinquent on payments. Foreclosure remains on your credit report for seven years. There are two common types of foreclosure and they are judicial foreclosure and non-judicial foreclosure. A judicial foreclosure sale is conducted after a court has entered a judgment and order of sale and requires the filing of a lawsuit. A non-judicial foreclosure sale is a private sale conducted under the “power of sale” clause contained in the loan agreement. These two types of foreclosure will be explained in more detail in The American Nightmare. Additionally, the steps and phases of each type will be covered for further understanding of the reader. Deficiency Judgment: A deficiency is the balance of the debt after applying the proceeds from the sale of the property. If the lender does not recover the full amount due from the proceeds of the foreclosure sale, and assuming the debt has not been discharged in a bankruptcy action, the lender may pursue a Deficiency Judgment against you personally to recover the balance due on the loan.

What Is

the IRS law that requires a debtor to pay taxes on the amount of forgiven debt such as it might be the case if a lender were to forgive the unpaid loan amount from a foreclosure sale. The law allows the IRS to forgive the taxes only which may be due in such a case the debt would still have to be paid back if the lender requires.

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Your right to save your home from auction by simply bringing the payments current, as opposed to satisfying the loan, is a matter of state law and/or the loan documents. As a general rule, at some point during the non-judicial foreclosure process, your right to reinstate the loan by making the past due payments may cease. When that happens, you may have to pay off the loan entirely (including any costs and attorney’s fees incurred by the lender) and such payoff will generally have to occur before or at the auction.

Caution

CAUSES OF FORECLOSURE ARE MANY AND VARIED BUT THEY COMMONLY INCLUDE:
• • • • • • Loss of income Overuse/abuse of credit or credit cards Lack of understanding of the terms and conditions of the mortgage Divorce Illness Lack of understanding of your responsibilities as a homeowner

Poor understanding of the buying process and terms or conditions of your mortgage: A lack of understanding and education regarding the home buying and mortgage process can be one major source of ongoing difficulty. Not understanding how your mortgage works, or what is required with monthly payments, can lead to foreclosure. There are many different types of mortgages, each with different requirements. Insufficient escrow: This means you have an insufficient amount of money in your escrow account. Simply stated, there is not enough money to pay for property taxes and insurance premiums which are included in your monthly payment. For example, you bought a house and the taxes were a lot less than they should be and for whatever reason you did not know this - and as a result, you did not properly plan for the difference. Many home buyers fail to understand that the tax bill of the previous owner will not necessarily be their tax bill.

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Just a couple of places to go for help
Credit Counseling: A credit counselor is a professional trained in credit intervention who can advise you on crisis budgeting, payment plans, and strategies for saving your home. Housing Counselors: If you are in default on your mortgage loan, you may receive counseling assistance from a HUD approved housing counselor in resolving your mortgage problems. HUD approved housing counseling agencies will not give you monetary assistance, but they can and will be of tremendous help in setting up a dialogue between you and the mortgage company, which may lead to you keeping your home. You can contact the mortgage company yourself, or do so with the assistance of a housing counselor, if you are not sure what to say or how to say the right thing.

The American Nightmare will show you how to reach a HUD certified housing counseling agency in your area at little to no cost to you.
By making use of the information found in The American Nightmare you can follow the steps outlined and use the resources of the agencies described, such as the HUD Housing Counseling Agencies in your local area, you may be able to solve your problem(s). The first step in the process is to develop the appropriate mind set. Be strong, be disciplined, focused and honest with yourself. This is not the time to put your head in the sand and ignore your problem(s). The authors want to strongly state that they are not offering a solution to all problems in The American Nightmare. There are some situations that will not be solved simply by reading any book. The authors have spent years using these techniques and have made every effort to make this book as complete as possible. We strongly encourage you to read the book more than once. Remember, you are facing a complex issue and the more tools you can bring to the discussion the better you will be prepared in being an aid to those you ask for help.

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There are those who will call or send you letters in the mail describing all of the ways they will help you with this problem. Not everyone has your best interest in mind. Some people may simply want to separate you from your money, or worse, your house. Be sure to talk with a HUD Housing Counselor in your area before you agree to give someone your money or agree to sign any document(s) that could lead to the loss of your home. Signing a “Deed” of any type, agreeing to allow someone to “purchase” your home in order to “lease it back” to you, or accepting an offer to refinance your mortgage with the promise that you can refinance it again in a few months, could all lead to the LOSS OF YOUR HOME.

Caution

Avoiding Predatory Lending Practices
If you are in a distressed condition or are being threatened with foreclosure, you are likely to be exposed to unscrupulous firms that may want to take advantage of your financial crisis. You must be on the alert to avoid false or misleading programs that are advertised as “THE” remedy for foreclosure. BE SKEPTICAL of any firm that contacts you about refinancing or loan consolidation. Firms soliciting loans via “door-to-door” sales and even mass-mailings are not always trustworthy. In the Unites State,s mailings have become very creative and, in some cases, unscrupulous companies attempt to represent themselves as government officials or even your mortgage lender in order to get your attention. If you have doubts about a firm you should check the business name with your state attorney general, the banking commission, and the local consumer complaint hotline. NEVER SIGN DOCUMENTS, especially those related to your home, without fully comprehending what is contained in them. You should also AVOID ANY OFFER TO SELL YOUR HOME WITH AN OPTION TO BUY IT BACK. Selling your home means giving up your rights as a homeowner. BE CAREFUL OF ADVERTISED SCHEMES TO SAVE YOUR HOME FROM FORECLOSURE, or personal solicitations to help you avoid it. Never, ever send an application or processing fee to a lender or servicer who advertises “Bad Credit, No Credit, No Problem” and then provides a toll free (800, 888, or 877) or toll (900) number for you to call.

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You may see road signs that advertise “I/WE WILL BUY YOUR HOME IN ANY CONDITION!” These companies or individuals will buy your house, but they will make an offer for a value far below what the normal market will support. In other words, an amount far less than the actual amount your house is worth. Any proposal from a company seeking to consolidate all of your debts into one loan should be carefully analyzed before being accepted. Loans involving contractor fraud usually include a balloon payment, multiple refinancing, a high interest rate, high loan broker fees, credit insurance, excessive points, excessively high late charges, pre-payment penalties, or high closing costs.

OPTIONS IF YOU ARE IN

DEFAULT

Several options may be available if you are in default on your mortgage. Many of the industry terms may be used interchangeably, although the specific option or “tool” available may vary by the type of mortgage, i.e. FHA, VA, conventional, etc. Almost all types of mortgages contain provisions for the following general options: forbearance agreements, reinstatement plans, and loan modifications. These options may assist you in curing the delinquency, retaining homeownership, and preventing foreclosure. The final decision regarding any help available to you will be made by the “Investor” or note holder (lender/servicer). Their decision will be based in part on your previous payment history, current debt load, and other factors that will indicate your ability to repay the loan if they provide a way out. All mortgage types contain several alternatives that may be available to you. Although you may not be able to retain ownership, you can attempt to mitigate the consequences of a foreclosure by utilizing one of the following options: pre-foreclosure sale, short sale or compromise offer, loan assumption, or a deed-in-lieu of foreclosure.

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The following contains information on some of the options available to you if you are in default.
• • • • You should contact the Lender/Servicer first and make a good faith effort to resolve the problem. Before making contact with them, go over your current bills and tally up your income. Prioritize what needs to be paid, and when. Eliminate any excess, and reduce your expenses so that you are in a position to show the Lender/Servicer you have taken stock of your situation and are making a good faith effort to reduce spending. • You must have some type of a plan to make good on your promise to repay, and it may require that you make difficult decisions.

DEBT Repayment Plans
If you are in default one option is to establish a repayment plan agreement. Two main issues are considered in developing a repayment plan: future payments, and past due payments (also called arrears). In one type of repayment plan you agree to make monthly mortgage payments as they are due, together with a partial monthly payment on the arrears balance. For example, you may be able to pay one and one fourth of the monthly payments for a predetermined length of time until the loan is current. This type of loan is recommended when you have a temporary financial crisis and can afford to pay some extra money in your monthly payment. Of course if you are having or have had financial problems for several months, you may or may not be in a position to make such payments. Instead, you may ask the lender or servicer for a temporary interest rate or payment reduction. You can ask the Lender/Servicer to do a variety of things, but anything you agree to do must be in writing. Further, you may be asked to show proof that you have the ability to make good on any agreement you enter into. We cannot stress enough the simple requirement that you read and respond to the correspondence you receive from your lender/servicer. Take action even if it seems painful at the time. Doing nothing could be worse.
The American Nightmare is invaluable not only to those facing foreclosure, but anyone who is presently a homeowner or is so much as contemplating homeownership needs to read and heed The American Nightmare in order to insulate themselves from potential problems down the road.

The American Nightmare | Strategies for Preventing, Surviving and Overcoming Foreclosure

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About The Authors

1.8 MILLION AMERICANS LOST THEIR HOMES TO FORECLOSURE IN 2007 AND 2008 IS EXPECTED TO BE WORSE!
Homeownership has long been called the American Dream, but today, millions of Americans are finding themselves in financial distress and in danger of losing the most valuable thing they will ever own. Millions more have already endured the hardship and humiliation which accompany foreclosure. The sad thing is, most of those tragedies were avoidable! Homeowners, armed with the proper information and guidance, can stave off, survive and even overcome something which is rapidly becoming epidemic. The key is education, but until now there was no definitive source for such information. The new book American Nightmare fills that void and not a moment too soon! Co-Authors Sylvia Alvarez and Walter Walker, Jr. analyze the reasons people find themselves facing foreclosure, take the reader through a step-bystep analysis of their situation, and present options for overcoming each obstacle. They present both encouragement and practical solutions, including everything from how to fill out the appropriate forms to where to go for professional aid and counseling. Their expertise comes from years of experience, running the gamut from time spent in the mortgage and real estate arenas to their current posts as officers of the Housing & Education Alliance (HEA). This book will obviously be invaluable to those who are currently in danger of losing their homes, but surprisingly it does not end there. The authors also offer post-foreclosure strategies for rebuilding credit and even how to buy a home again, this time the right way. Moreover, anyone who is so much as contemplating homeownership needs to read and heed The American Nightmare in order to insulate themselves from potential problems down the road. If such a book had been available a year ago, there is no telling how many families would have been spared from the specter of foreclosure. It is time to move forward and make sure the next generation of homeowners is spared a similar fate!

The American Nightmare | Strategies for Preventing, Surviving and Overcoming Foreclosure

Sylvia Alvarez and Walter Walker Jr.

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