Why prevent Foreclosure?: The Deficiency Judgment

The ramifications of a Foreclosure are significant in not only the emotional and psychological damage it rears, but also the ongoing FINANCIAL BURDEN and possible lingering LEGAL hassels.

Many struggling homewowners and investors who are “underwater” or the owe more on the house than they can sell it for are simply continuing to do things the OLD FASHIONED WAY: They either sit and wait out the market in hopes it returns to the booming levels of yesterday, or they call up their friendly Realtor who sold them the house in the booming market, or they give up all hopes and WALK AWAY. All three of these likely situations are NOT THE ANSWER, here’s why:

  • The market is in a DEPRECIATING CYCLE, which means it reached its appex in 2005 and is now in correction. The current rate of declinging home values in Maine is 14% per year, and picking up steam. This basically means that if you are maxed out in your equity position or have about 5 to 1o% in equity – IT WILL BE GONE in about a year.
  • The OLD FASHIONED real estate broker who sold you your home DOES NOT KNOW the intricacies of the SHORT SALE process. It is complicated and they just don’t want to educate themselves on how to get it done. If they do take on a Short Sale listing they will likely OUTSOURCE the Loss Mitigation to a 3rd party which means ADDED costs to the Buyer and Seller.
  • If you surrender and simply DO NOTHING and let the home go to Foreclosure many devastating things will happen: 1) Your credit will be ruined for at least 10 years (which is the least of your worries) 2) The Bank may obtain a Deficiency Judgment against you for what is LEFT OVER if the home sells for less than what is owed on the balance at auction. 3) You may be sent a 1099 as TAXABLE INCOME GAINED from the LEFT OVER balance . This is reported as INCOME to the IRS and you will be taxed at the higher tax bracket around 30%.

So what’s the GOOD NEWS?

The right SHORT SALE EXPERT will have the knowledge to handle the Short Sale/Pre Foreclosure Process and handle the Lender’s Loss Mitigation Department’s difficult negotiation tactics. This Short Sale will PREVENT FORECLOSURE and will EDUCATE the home Seller on how to PREVENT a Deficiency Judgment and how to SET-OFF a 1099 for ADDED INCOME.

A SHORT SALE Service is absolutely FREE to the SELLER and BUYER!

Call us today to discuss this process at 207-400-4413 for a confidential consultation with a NON-PROFIT Pre-Foreclosure Advocate.

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Don’t Walk Away…Fight and Stay!

by Martin Macisso

That’s my motto and it’s pretty simple at that, but the message is a complicated one. When so many Americans (millions) are underwater on their home’s value, falling behind on monthly payments and have lost income or employment, they see no other option than to just throw in the proverbial towel.

My message to these individuals and families is one word: DON’T!

There are so many better options that struggling homeowners now have at their disposal as opposed to admitting defeat and turning over the keys to their homes. The American Dream is not owning a home, in my humble opinion, the American Dream is life, liberty and the pursuit of happiness. (Well, that’s what Tom Jefferson said anyway a couple hundred years ago, and I tend to agree.) However, owning a home is a product of a FREE and Democratic society. When a Free American who is down on their luck and experiencing a temporary hardship, it is not the American Way to simply duck and run for cover. We must fight! We must not let the Corporate Quasi-Governmental Banking Institutions take our homes!

So the question you might ask is:

“How can I stay in my home when I can no longer meet the payment obligation that was outlined in the Promissory Note that I signed at my loan closing? ” Or a question similar to that right? :p

There are options, but you won’t find them in the monthly mortgage statements or the predatory mailings from “Foreclosure Saviors” that you may be receiving. It takes a little Due Dilligence on the homeowner’s behalf and a qualified Real Estate Professional with loan experience and foreclosure knowlege.

In a nutshell, if a struggling homeowner can no longer afford the monthly mortgage payment for reasons they can document, such as income loss, family hardship or miscellaneous reasons then the FIRST option is: Loan Modification.

  • Loan Modification is a new and evolving process where a homeowner asks for a mortage payment reduction to at least 31% of their Gross Monthly Income. The idea is to present the Mortgage Company with a Packet that includes a Hardship Letter, Debt to Income Analysis and Proof of Income. The Loss Mitigator with the company will determine if a lower payment is warrented versus Foreclosing on the property and loosing thousands. The Lender’s are not obligated to do this so its a case by case basis and time consuming, but well worth it.

The Second option: Short Sale

  • The Short Sale is quickly becoming a saving grace for homeowners who more on their mortgage than what the house is currently worth. In Maine the rate of depreciating values is 14% per year. Those who bought in the past 5 years will likely be “underwater” on their homes and in need of Short Sale services if they need to sell their house. A real esate pro who is experienced in Loss Mitigation is needed to make this process work. There are many factors to consider and Lender’s DON’T have to consider a short sale but they WILL if you present them with the necessary informational packet and negotiate properly. This is considered MUCH better for a homeowner than a Foreclosure and actually enables a homeowner to qualify for a mortgage again in as little as 24 months.

Third Option: Qualified Written Request (RESPA Law)

  • When the negotiation process breaks down with a hard nosed Loss Mitigator for whatever reason, the Real Estate Settlement Procedures Act, 12 U.S.C. Section 2605(e) calls for a written letter DEMANDING verification of the alleged debt and a dispute of the debt by the borrower. This is a powerful tool that, if used correctly, can provide the borrower with needed leverage over their greedy lender. The unfolding reality of this Foreclosure Crisis is that the “Lender” claiming to have right to collect the mortgage payment from a borrower is NOT ACTUALLY the lender and owner of the debt at all! If a company alleging ownership of a debt does not provide the PROOF as called for in detail by a Qualified Written Request, then the borrower can actually have the debt “set-off” and wiped clean if the QWR is created in the correct manner.

After these steps have been excersised and the Foreclosure Process has still been initiated, the Borrower who is now the Defendant in a Civil Suit, will now have the WEAPONS needed to fight an unlawful Foreclosure Complaint. In the State of Maine, a Judicial Foreclosure is a Godsend for homeowners who have mortgages that were originated by a Broker and Securitized. (more on this in a future article)

So with that said, the Struggling Homeowner has many reasons to keep their head up and their “dukes up” to fighting for their homes and their lives.