FORECLOSURE PREVENTION PRESENTATION

							Foreclosure Prevention

Tough Questions
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When facing foreclosure there are some very sensitive and tough questions that you must consider honestly…
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Is the financial difficulty likely to continue indefinitely? Are you beginning to recover from the financial set back? Is homeownership still a viable and affordable option? Would your family be better off in a less expensive rental situation at this time? Are there non-essential expenditures that can be eliminated from the household budget? Will you be able to stick with a crisis budget?

What is a Crisis Budget?
A crisis budget is a revised budget that focuses on only the expenditures that are essential for a healthy environment for you and your family.
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Food Housing Medical Needs Transportation

Crisis Budgeting
 Understanding

that each family may have numerous expenses outside of the essentials listed on the previous slide, crisis budgeting is concerned first with providing for the basic needs. Other expenses such as cable, internet, cell phones, credit payments, and other nonessential spending may need to be eliminated.

Crisis Budgeting
no mistake, non-payment of nonessential expenses will have a bearing on your credit score.  Foreclosure will have a larger negative effect on credit scores.  There may be resources available to help with utility payments that reach shut-off status.
 Make

Crisis Budgeting
 Seek

out all available resources for your family.
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Food Stamps Medicaid Cash Assistance Homelessness Prevention Programs Discount and Thrift Stores – groceries and hard goods Angel Food Ministries – groceries United Way 211 hotline Church and religious services Etc.

For Example – Expenses
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Mortgage = $1300.00  Auto #1 = $230.00  Insurance = $76.00  Personal Loan = $295.00  Credit Card #1 = $121.00  Credit Card #2 = $56.00  Student Loan = $50.00  Groceries = $450.00  Clothing = $200.00  Haircuts = $40.00

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Gas = $81.00  Water = $26.00  Electric = $57.00  Trash = $18.00  Cell Phone = $120.00  Internet = $40.00  Cable = $90.00  Auto Fuel = $200.00  Kids Activities = $60.00  Lottery = $20.00 • Total Expenses $3530.00

For Example – Income
 Due

to the loss of one income the current net monthly income for the Smith Family has been reduced to $2327.00.

 Current
 Monthly

expenses total $3530.00
deficit of $1203.00

For Example – Crisis Budget
 Income

= $2327.00 = $2218.00

 Expenses
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Leaving $109.00 for repayment of past due mortgage payments

For Example – Crisis Budget Revisions
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Mortgage = $1300
• $109 toward past due

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Auto = $230 Insurance = $76 Loan = no pay Credit Card #1 = no pay Credit Card #2 = no pay Student Loan = no pay Groceries = $200 Clothing = no pay Haircuts = no pay

Gas = $81 Water = $26 Electric = $57 Trash = $18 Cell Phone = no pay
• Land Line Phone = $30

Internet = no pay Cable = no pay Auto Fuel = $200 Kids Activities = no pay Lottery = no pay • Total Expenses $2327

For Example - Further Cuts
 In

this example the Smith family is able to cut expenses and not jeopardize utility payments. However, if the mortgage company demands more than $109/month to be paid on arrearages the Smith family could rotate which utilities to pay each month and seek assistance from community resources for utility payments.

Foreclosure Process
First Month Late
Mortgage company will make contact by phone and/or mail.

Second Month Late
Mortgage company will persistently call all contact numbers they have to try and reach you.

Foreclosure Process
Third Month Late
Mortgage company will mail an official notification of impending foreclosure or mortgage acceleration.

Fourth Month Late
Mortgage company will refer the delinquent mortgage to foreclosure attorneys.

Foreclosure Process
Sheriff Sale Date
Attorney schedules approx. 6 weeks after receiving the delinquent mortgage file.

Redemption Period
Typically a six month period to bring mortgage current (including all legal, attorney and late fees). Michigan law provides that redemption period
will be no less than 30 days and no more than 1 year.

Mortgage Company Departments
 Customer

Service

• 1st point of contact before payment is late.

• Limited information.
• No considerable assistance options. • Notify this dept. if payment will be late!

Mortgage Company Departments
 Collections
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1st point of contact after payment is late.

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Limited information.
Limited options for assistance.

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Often serve as screeners for Loss Mitigation Department.

Mortgage Company Departments
 Loss

Mitigation
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Loan Counseling; Loan Workout Dept. Several options for assistance. Minimize financial loss to mortgage .

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Often difficult to reach this department – Persistence, persistence, persistence.

Mortgage Company Departments
 Foreclosure
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Department

Ensures that all applicable time lines, processes and laws are followed during foreclosure process. Specific information. Continues foreclosure process until instructed by Loss Mitigation Dept.

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Terms
 Servicer
• Facilitates the loan. Sends statements, receives payments, controls contact with you the borrower.

 Investor
• Purchases loan on secondary market • Sets guidelines for servicer.

 Insurer
• Mortgage Insurance or PMI Private Mortgage Insurance. • Protects investor; borrower pays.

Loss Mitigation Options
 Repayment
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Plans

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Standard plan is 3-18 months of increased monthly payments. Delinquency continues until plan complete. Late charges continue. No “grace” period. Down-payment typically required.

Loss Mitigation Options
 Special
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Forbearance

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Not offered by all mortgage servicers. Approved reduction or suspension of payments. Must qualify for alternative loss mitigation option or be able to make loan “current” at end of forbearance period. This is the only option that can allow for an unbalanced budget.

Loss Mitigation Options
 Loan
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Modification

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Most used loss mitigation option. Delinquent amount is added to loan principal. Interest rate and/or terms may be modified. All foreclosure and attorney fees must be paid before approval. Mobile home loan modification may vary.

Loss Mitigation Options
 Partial

Claim

• FHA loans only. • Grants a “silent” second mortgage of delinquent amount. • Must be last option. • All foreclosure and attorney fees must be paid before final approval is granted.

Loss Mitigation Options
 Pre-Foreclosure

Sale

• Servicer may be willing to postpone sheriff sale in order for borrower to sell property. • Only if buyer is present.

Loss Mitigation Options
 Short

Sale

• Sale of property for less than the total amount owed to the mortgage investor. • Property must be listed with a realtor. • Purchase offers must be submitted to the mortgage servicer for approval. • No action will be taken to obtain losses from borrower.

Loss Mitigation Options
 Deed-In-Lieu

Mortgage investor may be willing to take possession of property to satisfy debt.  Property has to have been listed on real estate market for 60-90 days with no offers to purchase.  This is a rarely utilized option.
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Cautions
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BE COMPLETELY HONEST! Stay as calm as possible when speaking with mortgage servicer or insurer. Have all financial information available. Document all circumstances leading to the delinquency situation. Document all contacts with servicer or insurer. By not adhering to the work out plans, you are waving any grace periods and future work out assistance will be denied.

More Cautions
loss mitigation option has bearing on credit scores.  Bankruptcy is more difficult to obtain and is not generally a good option anyway.  Work out options require stable income that is likely to continue.  Borrower must be “recovering” from the initial cause of delinquency.  Second Liens.
 Each

Foreclosure Assistance Scams
to facilitate loss mitigation for foreclosure mediations for an up-front fee.  Offers to purchase home and sell back on land contract with excessive fees and interest.  Any offers of assistance in which you did not make the first contact.
 Offers

Resources for Homeowners
Servicer  PMI Private Mortgage Insurance Company  Legal Aid of West Michigan 616.394.1380  National Consumer Law Center nclc.org  Community Action House 616.738.1170  United Way 211 Hotline
 Mortgage

CAH New Program – Sept. 08 Foreclosure Prevention Services
 Will
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reduce the number of foreclosed primary residence properties through:
Assessing a clients’ situation Establishing a household budget Assisting in loss mitigation process (explaining options, assisting in paperwork, negotiating with mortgage company) Continued follow-up and budget counseling as needed

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MSHDA Save the Dream
 MSHDA

ARM Assist Refinance

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Converts an adjustable rate mortgage to a fixed-rate loan Can reduce mortgage payments and provide stability in monthly housing expenses Rate on adjustable loan must be increasing or projected to increase Must meet income and sales price limits

MSHDA Save the Dream
 MSHDA

Rescue Refinance

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Assists with a refinance for those who have had late payments on their mortgage Cannot be more than 3 x 30 days late, and must be current at the time of application Must meet income and sales price limits