What should I do if I am facing Foreclosure
What if I am facing foreclosure?
Participating servicers may not refer a loan for foreclosure sale or proceed with a foreclosure sale on an eligible loan until the homeowner has been considered for HAMP and, if eligible, a trial modification offer has been made. Participating servicers must use reasonable efforts to contact homeowners facing foreclosure to determine their eligibility, including in-person contacts at the servicer's discretion.
Foreclosure sales may not be conducted while the loan is being considered for a modification or during the trial period. Additionally, once a homeowner has entered into a trial period plan by submitting the first trial period payment, the servicer may not take the first legal action to initiate a new foreclosure.
Getting into the process of the Short Sale
The short sale process can be very lengthy and taxing on the homeowner. Liens against real estate can include the primary lien, second liens, home equity lines of credit, and special assessment liens, such as: homeowner’s association special assessments. All lien holders involved will typically need to approve the application for the short sale.
Part of the short sale process will involve the lender ascertaining the market value of the property, either by obtaining an appraisal or a Broker’s Price Opinion (BPO). One of the most important things a homeowner will need to prepare is a short sale package. This must be completed and must contain a letter outlining to the lender what the hardship is and why the homeowner is in need of a short sale. As a reminder - there are no standard packages or requirements. Every lender will treat a short sale differently.
This can take several months to process and sometimes will require several levels of approval. This process can be very stressful for the homeowners as well as the “new” buyer which we will address later in this course.
If there are second liens or if a creditor has mortgage insurance on their loans, these parties may object to the amounts that the other lien holders are receiving.
Unpaid principal balance by number of units:
Your servicer will apply a Net Present Value (NPV) test to determine whether the value of the loan to the investor will be greater if the loan is modified (factoring in the government's incentive payments). If the modified loan is not of greater value, the investor and servicer may still modify the loan. However, modification in such cases is not required. Please note: Your servicer may re-run the NPV test before the modification becomes official if they receive new information that could affect the value of the loan).
The Home Affordable Foreclosure Alternatives (HAFA)
HAFA helps homeowners who cannot keep their homes. This program may offer an option of a short sale or deed-in-lieu of foreclosure. A homeowner may be eligible for HAFA if they meet the following criteria: