Foreclosure or Shor Sale
Statistics indicate that we've only seen the first wave of foreclosures in New York. The mortgage industry creates new types of loans to conform to new laws and maximize their profits. The entire country has witnessed the fruits of sub-prime mortgage these past two years, as homelessness rises. There are other loan products, just as ugly, that have not yet started affecting homeowners. Bait and switch loans will continue to come to light but what can be done about it? What can homeowners do once they've left the grace period and their mortgages balloon?
The answer is, "it depends." It depends on your income. It depends on your goals. It depends on your willingness to act. If your goal is to keep your family together in your home, that's possible with some work and planning. If your goal is simply to keep your family together in any descent home, then you have more options. This entry discusses foreclosures and short sales, and touches on mortgage modifications.
Please, note that the following is not intended to be legal advice. Furthermore, there is no attorney-client relationship. Everything written below is merely my opinion about the state of the law.
Mortgage Modifications
The option that I recommend to my clients first is a mortgage modification. Many homeowners have already tried this option. If you have not yet looked into this option, I suggest caution. Please be aware, that only licensed professionals in good standing should negotiate with your lender. A mortgage modification can only be done once. If you hire someone, make sure it is a knowledgeable person who can really lower your monthly payments to an affordable level. Please, see our blogs about Suing Your Lender or Mortgage Modifications for more resources.
Foreclosure
New York Foreclosures are a very formal process. You may receive a letter after three months of missed payments requiring you to pay in full and “answer”. This is the time to hire an attorney if you intend to keep the house. An attorney can look at your mortgage documents to find mistakes and use those mistakes to negotiate lower monthly payments with the lender.
An attorney can write the requested “answer” to the court (not the lender). Your lender will gladly take any money you send after this letter is sent to you, but the foreclosure may continue unless you repay the entire loan amount. An attorney can use the law to give you more time to stay in the home while you come up with a repayment plan.
As I mentioned above, these negotiations determine if you'll keep your most valuable asset, hiring a licensed professional in good standing is often the most cost effective thing to do. They know the tricks to getting you monthly payments you can afford. (Some loan modification companies declare success for lowering a monthly bill by $50!)
Short Sale
Short sales are a popular way to avoid foreclosure in New York. However, short sales affect credit ratings about as badly as bankruptcy or foreclosure. When you sell your most valuable asset below market cost, you’re telling credit rating agencies that you are resorting to a drastic solution to get out of unmanageable debt. They will likely lower your credit score a lot if you sell your home below market value.
A short sale may cost you a lot of money if you don't have a buyer lined up already. You will likely pay lawyers, brokers and others to sell your home successfully. The home seller is the only party to the short sale that pays, but does not profit.
The other little known fact about short sales is that lenders often refuse to forgive the deficient amount in writing. Without a signed writing saying that the debt is forgiven, you will still be liable for the deficiency. Many banks do one of two things: sell it to a debt collector who hounds you for payment; or the lender will take it as a loss on their books and force you to pay taxes on it with a 1099 form. Some people don’t even know that they have to pay taxes on the short sale deficiency until the end of the year when the 1099 form comes in the mail. Foreclosure and Bankruptcy avoid this tax issue neatly.
This blog is for general info purposes only and is not legal advice. It does not create an attorney-client relationship. Please, consult an attorney of your choice concerning the details of your case.
The answer is, "it depends." It depends on your income. It depends on your goals. It depends on your willingness to act. If your goal is to keep your family together in your home, that's possible with some work and planning. If your goal is simply to keep your family together in any descent home, then you have more options. This entry discusses foreclosures and short sales, and touches on mortgage modifications.
Please, note that the following is not intended to be legal advice. Furthermore, there is no attorney-client relationship. Everything written below is merely my opinion about the state of the law.
Mortgage Modifications
The option that I recommend to my clients first is a mortgage modification. Many homeowners have already tried this option. If you have not yet looked into this option, I suggest caution. Please be aware, that only licensed professionals in good standing should negotiate with your lender. A mortgage modification can only be done once. If you hire someone, make sure it is a knowledgeable person who can really lower your monthly payments to an affordable level. Please, see our blogs about Suing Your Lender or Mortgage Modifications for more resources.
Foreclosure
New York Foreclosures are a very formal process. You may receive a letter after three months of missed payments requiring you to pay in full and “answer”. This is the time to hire an attorney if you intend to keep the house. An attorney can look at your mortgage documents to find mistakes and use those mistakes to negotiate lower monthly payments with the lender.
An attorney can write the requested “answer” to the court (not the lender). Your lender will gladly take any money you send after this letter is sent to you, but the foreclosure may continue unless you repay the entire loan amount. An attorney can use the law to give you more time to stay in the home while you come up with a repayment plan.
As I mentioned above, these negotiations determine if you'll keep your most valuable asset, hiring a licensed professional in good standing is often the most cost effective thing to do. They know the tricks to getting you monthly payments you can afford. (Some loan modification companies declare success for lowering a monthly bill by $50!)
Short Sale
Short sales are a popular way to avoid foreclosure in New York. However, short sales affect credit ratings about as badly as bankruptcy or foreclosure. When you sell your most valuable asset below market cost, you’re telling credit rating agencies that you are resorting to a drastic solution to get out of unmanageable debt. They will likely lower your credit score a lot if you sell your home below market value.
A short sale may cost you a lot of money if you don't have a buyer lined up already. You will likely pay lawyers, brokers and others to sell your home successfully. The home seller is the only party to the short sale that pays, but does not profit.
The other little known fact about short sales is that lenders often refuse to forgive the deficient amount in writing. Without a signed writing saying that the debt is forgiven, you will still be liable for the deficiency. Many banks do one of two things: sell it to a debt collector who hounds you for payment; or the lender will take it as a loss on their books and force you to pay taxes on it with a 1099 form. Some people don’t even know that they have to pay taxes on the short sale deficiency until the end of the year when the 1099 form comes in the mail. Foreclosure and Bankruptcy avoid this tax issue neatly.
This blog is for general info purposes only and is not legal advice. It does not create an attorney-client relationship. Please, consult an attorney of your choice concerning the details of your case.
thanks for the information