Foreclosure Prevention

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					Foreclosure Prevention
                 Tough Questions
   When facing foreclosure there are some very
    sensitive and tough questions that you must
    consider honestly…
       Is the financial difficulty likely to continue indefinitely?
       Are you beginning to recover from the financial set
       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.
          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 non-
 essential spending may need to be
          Crisis Budgeting
 Make   no mistake, non-payment of non-
  essential 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
                Crisis Budgeting
 Seek out all available resources for your
            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
   Mortgage = $1300.00           Gas = $81.00
   Auto #1 = $230.00             Water = $26.00
   Insurance = $76.00            Electric = $57.00
   Personal Loan = $295.00       Trash = $18.00
   Credit Card #1 = $121.00      Cell Phone = $120.00
   Credit Card #2 = $56.00       Internet = $40.00
   Student Loan = $50.00         Cable = $90.00
   Groceries = $450.00           Auto Fuel = $200.00
   Clothing = $200.00            Kids Activities = $60.00
   Haircuts = $40.00             Lottery = $20.00
                                        • Total Expenses
        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   expenses total $3530.00

 Monthly   deficit of $1203.00
  For Example – Crisis Budget
 Income    = $2327.00

 Expenses    = $2218.00
     Leaving $109.00 for repayment of past due
      mortgage payments
       For Example – Crisis Budget
   Mortgage = $1300                Gas = $81
        • $109 toward past due      Water = $26
   Auto = $230                     Electric = $57
   Insurance = $76                 Trash = $18
   Loan = no pay                   Cell Phone = no pay
   Credit Card #1 = no pay              • Land Line Phone = $30
   Credit Card #2 = no pay         Internet = no pay
   Student Loan = no pay           Cable = no pay
   Groceries = $200                Auto Fuel = $200
   Clothing = no pay               Kids Activities = no pay
   Haircuts = no pay               Lottery = no pay
                                          • Total Expenses
   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
       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

          1st point of contact after payment is late.

          Limited information.

          Limited options for assistance.

          Often serve as screeners for Loss
           Mitigation Department.
 Mortgage Company Departments

 Loss   Mitigation
            Loan Counseling; Loan Workout Dept.

            Several options for assistance.

            Minimize financial loss to mortgage .

            Often difficult to reach this department –
             Persistence, persistence, persistence.
 Mortgage Company Departments

 Foreclosure      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.
 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
    • Protects investor; borrower pays.
        Loss Mitigation Options
 Repayment      Plans

     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    Forbearance

     Not offered by all mortgage servicers.
     Approved reduction or suspension of
     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    Modification

     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.
   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
 Each    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.
 Foreclosure Assistance Scams
 Offers 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
 Any offers of assistance in which you did
  not make the first contact.
   Resources for Homeowners
 Mortgage  Servicer
 PMI Private Mortgage Insurance Company
 Legal Aid of West Michigan    616.394.1380
 National Consumer Law Center
 Community Action House        616.738.1170
 United Way 211 Hotline
  CAH New Program – Sept. 08
 Foreclosure Prevention Services
 Will reducethe 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
      MSHDA Save the Dream
 MSHDA     ARM Assist Refinance

    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

    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
              Mortgage Insurance
   Required for loans above 80% of the sale price
       Insures lenders against loss in the event that a
        borrow defaults on mortgage payments
   Can be cancelled when loan is at 80%
       This takes about 2 years of on-time payments based
        on appreciation of the house
   MGIC is one company that sells private
    mortgage insurance
     and
       Provides Mortgage Loan Counselors to help
        homeowners in foreclosure