Facing foreclosure: make sure to get good representation
Jessica White/DC Columnist
Issue date: 12/14/08 Section: Business
The MAPFC now offers a six month Foreclosure Consultant certification program, with a focus on the law and ethics.
According to Smith, a foreclosure consultant would first meet with the homeowner to determine if the property can be saved through a forbearance agreement or loan modification with the lender. If the homeowner's debt-to-income ratio is above 60%, the home must be sold. While the homeowner can work out a forbearance agreement or loan modification without the help of a foreclosure consultant, the foreclosure consultant may be able to negotiate better terms with the lender. "But if the homeowner fails to pay according to the new terms, the home goes straight into foreclosure," cautioned Smith.
In the case of my questioner, his debt-to-income ratio is too high to qualify for a forbearance agreement or loan modification. Since there is no equity in the home, and sellers in this market generally pay seller concessions plus the standard transfer taxes and real estate commissions, the lender would have to agree to a short sale, meaning that the property will be sold for less than the amount owed.
"The bank can pursue a deficiency judgment against the home owner, meaning the homeowner would be financially responsible for the unpaid balance of the loan; it can do nothing; or it can '1099' the home owner, meaning that the unpaid balance is considered as taxable income by the IRS (and reported as such by the bank)," said Smith. In the case of the questioner, he owes $454,000. The house also has a current appraisal value of $454,000. Say he accepted a purchase offer of $425,000, and on top of that paid a six percent commission to the realtors involved plus paid for three percent of the buyer's closing costs. In that case, the bank would receive a total of $386,750 and the questioner could be pursued by the lender for a deficiency of $67,250 or have that amount reported to the IRS by the lender as taxable income.
"Home owners facing foreclosure must be careful in choosing who they work with. A homeowner should never pay (anyone offering to help them) for anything in advance. … In the case of a loan forbearance agreement or loan modification, that means that no charges should be paid until the bank responds to the offer," emphasized Smith.
Just as with appraisers and home inspectors - training, certification, and membership in an association at least provide some level of accountability that otherwise would not exist.
Jessica White, also known as "Ms. Mortgage Maven," is a mortgage consultant with Tenacity Mortgage, a division of Tenacity Group, the Capital Region's leading financing, real estate advisory and tenant condominium-conversion company. Call her with your questions at 202-607-4449 or e-mail her at Jessica@msmortgagemaven.com. You can also apply online at www.msmortgagemaven.com.
According to Smith, a foreclosure consultant would first meet with the homeowner to determine if the property can be saved through a forbearance agreement or loan modification with the lender. If the homeowner's debt-to-income ratio is above 60%, the home must be sold. While the homeowner can work out a forbearance agreement or loan modification without the help of a foreclosure consultant, the foreclosure consultant may be able to negotiate better terms with the lender. "But if the homeowner fails to pay according to the new terms, the home goes straight into foreclosure," cautioned Smith.
In the case of my questioner, his debt-to-income ratio is too high to qualify for a forbearance agreement or loan modification. Since there is no equity in the home, and sellers in this market generally pay seller concessions plus the standard transfer taxes and real estate commissions, the lender would have to agree to a short sale, meaning that the property will be sold for less than the amount owed.
"The bank can pursue a deficiency judgment against the home owner, meaning the homeowner would be financially responsible for the unpaid balance of the loan; it can do nothing; or it can '1099' the home owner, meaning that the unpaid balance is considered as taxable income by the IRS (and reported as such by the bank)," said Smith. In the case of the questioner, he owes $454,000. The house also has a current appraisal value of $454,000. Say he accepted a purchase offer of $425,000, and on top of that paid a six percent commission to the realtors involved plus paid for three percent of the buyer's closing costs. In that case, the bank would receive a total of $386,750 and the questioner could be pursued by the lender for a deficiency of $67,250 or have that amount reported to the IRS by the lender as taxable income.
"Home owners facing foreclosure must be careful in choosing who they work with. A homeowner should never pay (anyone offering to help them) for anything in advance. … In the case of a loan forbearance agreement or loan modification, that means that no charges should be paid until the bank responds to the offer," emphasized Smith.
Just as with appraisers and home inspectors - training, certification, and membership in an association at least provide some level of accountability that otherwise would not exist.
Jessica White, also known as "Ms. Mortgage Maven," is a mortgage consultant with Tenacity Mortgage, a division of Tenacity Group, the Capital Region's leading financing, real estate advisory and tenant condominium-conversion company. Call her with your questions at 202-607-4449 or e-mail her at Jessica@msmortgagemaven.com. You can also apply online at www.msmortgagemaven.com.
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