| March 6, 2009

Foreclosure Is Not The Only Option

With a record number of people losing jobs lately many people are finding themselves suddenly unable to pay the bills, including their mortgage, but what may be even more confusing are the foreclosure options they might face.

Raul Ramirez is one of those people. Pointing to a foreclosure two houses from his, he told CBS4 reporter David Sutta, “I hope that is not my future. That is my goal. That doesn’t happen to me.”

When Raul and his wife Odlys walk down their block it’s a sobering experience. You see foreclosure after foreclosure, and they could be next. Raul knows it too. “We are in trouble,” he said. Over the last year they blew their savings to keep their business afloat. That business is now gone thanks to the economy. Now they are behind on their mortgage payments.

“Every day is thinking I have to pay that bill. I have to another. I don’t have money. You know it’s terrible for us right now. I can’t sleep at night,” said Odlys Ramirez.

The car has been repossessed; Raul is now delivering printing supplies for minimum wage. He is on the edge of losing everything.

“After working 20 years it’s hard to ask your family for help, to buy a gallon of milk for your daughter. That is tough.”

So far South Florida is on track to have more foreclosures then our record year in 2008. Many homeowners in the Ramirez’s situation don’t know they have options.

SEEK AN ATTORNEY

Attorney Eric Shane of Ferrer & Associates represent hundreds of homeowners facing foreclosure. He says, “The first and most important thing you need to do, who has either been served with a foreclosure or know a foreclosure is coming in the eminent future, is contact a lawyer.”

If you get a notice of a foreclosure, the homeowner needs to contest it within 20 days or else they could lose the home quickly.

“You will be on a fast track to losing your home, and when I say fast track, it could happen as soon as 60 to 90 days; you will be out of the house.” said Shane.

An attorney can keep you in your home up to two years. Over that time they will defend you in court and could possibly even get the mortgage revoked.

“Most people are under the misconception that, ‘hey I haven’t paid my mortgage, that means I don’t have any defenses or the bank is always right.’ That is not the case in every single circumstance. There are plenty of people out there who have been fraudulently placed in these loans. They should have never been placed in these loans in the first place. They didn’t have the means to qualify for that loan. The underwriting guidelines were extremely negligent for a lot of these people,” Shane said.

At the very least attorneys will put the bank through its paces. Often that leads the bankers to modify the loan to something the homeowner can afford.

LOAN MODIFICATIONS

Frank Obregon with Total Realty Solutions is doing more loan modifications today than anything else. His best advice: Watch out.

“Loan modifications need to be done through attorneys. There are a lot of companies that are sprouting up right now, and they’ve been in business for a year, six months or not even and have no idea how to do these modifications,” said Obregon.

Loan modifications are a great option for someone in foreclosure, but you need to be careful.

“If someone tells you to stop making your mortgage payment (and) pay me. Turn around. Don’t do the business with them. Because that’s not right. You could lose your house.” said Obregon.

Loan modifications change your interest rate and the length of your mortgage to make your payment affordable. Rarely does the bank adjust how much you owe. Obregon says, “You don’t have to make a single late payment and modify your loan. If your loan is going to adjust in a couple of months and it’s going to go up two and half, three percent and you are not going to be able to afford it. You can start doing your modification already.” Homeowners should never pay a fee upfront for a loan modification. The only exception is for attorney’s fees.

THE SHORT SALE REALITY CHECK

Most people think short sales are better options than letting their house go into foreclosures. But when it comes to credit, there is no difference. It may be a more honorable option. But the credit is going to be damaged significantly and maybe even as the same as a foreclosure.

A typical credit score will be hit anywhere from 200 to 300 points, and a two to three hundred point drop can take a consumer with great credit to almost the worst credit out there.

Really, the only difference a short sale will make comes from Fannie Mae, the largest issuer of mortgages in America. They will allow you to buy a home in three years. That’s two years sooner than if it were a foreclosure. For the Ramirez family, whose credit is already ruined from missing the mortgage payments, their priority is staying in their home.

“This is the house where our daughter grew up for four and half years, and that is the house we want.” said Raul Ramirez.

The family has hired an attorney and is now working with the bank to modify their loan. They hope to keep their American dream alive. “We are trying to keep it alive. Now it’s up to the lender if they want to let the people dream,” said Raul.

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