Tag Archives: foreclosure

Tips to Help You Avoid Foreclosure

Have you fallen behind on your mortgage and are facing a pending foreclosure?  Before packing your boxes and resigning yourself to finding a new place to live here are a list of options that are available to help you avoid foreclosure?

Nowadays, due to the high unemployment rate, an increasing number of people are facing a possible foreclosure on their property.  But why wait when you can do something about it now?  If you want to keep your home, there are many possibilities that can help you lighten your burden.

Here are 6 tips that can help you avoid foreclosure and its ramifications:

Tip #1: Request a Loan Modification

You can request a loan modification from your lender.  For this, you will be required to submit necessary documentation to a loan officer.  The loan officer will review your request based on financial statements that you submit.  The loan may be modified according to your paying capabilities.  While the request for modification is pending, your lender should not proceed with a foreclosure action; however, large companies are rarely aware of what their different divisions are doing.  Therefore, if you do receive a foreclosure notice, you should contact the foreclosure department immediately and inform them of the pending modification.  Once all of your documentation has been submitted and reviewed, you will be notified by the lender if your loan modification is approve, if not they may suggest a short sale which is another option discussed below.

Tip #2: Refinance to pay off your home loan

Refinancing means you are paying off an existing loan with the proceeds from a new loan.  Homeowners are allowed to file a second loan for the same property for reasons such as paying the first loan, switching between fixed rate and adjustable rate, and extending the term of payments.  In order to decide if this is worthwhile, the savings and interest must be weighed against the fees associated with refinancing.  If there is a pre-payment penalty attached to the existing mortgage (i.e. you are required to pay a penalty for paying off the mortgage early), refinancing becomes less favorable because of the increased cost to the borrower at the time of refinancing.

Another issue you may encounter with refinancing is that if you are facing foreclosure, then you have probably missed several mortgage payments.  This information will be reflected on your credit report, and in the current credit climate, lenders may be unwilling to lend to you; however, if you have the time, it cannot hurt to speak to an experienced loan officer to see if this is a possible option for you.

Tip #3: Enrol in Forbearance and Repayment Plans

Forbearance agreements between lender and borrower reduce or suspend payments for three to twelve months.  During which time, the lender agrees not to pursue foreclosure on the property. The homeowner and the lender agree on a plan that is best for both parties.  Generally, the repayment plan includes the normal monthly payment along with a payment to repay the delinquent amount.

Tip #4: Attempt a Short Sale Rescue

Short sale is a process wherein the lender and the borrower will have an agreement to sell the property at a moderate loss to the borrower.  The lender will handle the short sale which includes the negotiation with the buyers.  But in this scenario, the borrower may be required to pay the loan balance which is called a deficiency.  If for some reason the lender agrees to waive the deficiency payment, the amount waived will most likely be considered taxable income for that year and will have to be reported on your next tax return as such.

Tip #5: Chapter 13 Bankruptcy

If the reason for your mortgage delinquency was due to a loss of income issue that has now been resolved, and you feel that you could pay the mortgage and any delinquency if you could just spread out the payments, a Chapter 13 bankruptcy may be the right option for you.  The filing of a Chapter 13 puts a stop to any pending foreclosure action/sheriff sale and allows you to keep your mortgage current while making monthly payments on the delinquency over a period of three to five years.

Tip #6: Chapter 7 Bankruptcy

If you have decided that you can no longer afford the home and need to walk away, you may want to consider a Chapter 7 bankruptcy.  In Pennsylvania, your lender is allowed to get a judgment against you for any deficiency that may exist after your property is sold at the sheriff sale.  With home values plummeting, this is often the case with foreclosed property.  A Chapter 7 will discharge any mortgage deficiency as well as all of your other unsecured debt.  Another bonus is that the debt that is discharged in a Chapter 7 is not considered taxable income and will not have to be reported on your future tax return.

Foreclosure is one of the biggest nightmare that homeowners are experiencing today.  If you are falling behind on payments, then it is to consider you options.  If you need help deciding what the right option for you is, please contact the Law Office of Suzanne Szymoniak for a free consultation.

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The Cost of an Education

If you are like me, you probably have a decent amount of student loans that are now due or will be coming due shortly.  When I was growing up, I remember hearing about how I needed to get a good education if I wanted to get a well-paying job and make a decent living.  Coming from a lower-middle class family (and that’s probably being generous), I knew that the only way I could get that education and go on to live the American dream was to finance my education.  What I probably didn’t consider was how much that education was going to ultimately cost me.  Granted, I believe my education is valuable to an extent, but will it be worth the $130,000 I had to take out in student loans and will be paying on with interest over the next 25-30 years?  Only time will tell.  But what if it’s not?  That’s the question, I believe potential college students need to carefully consider before deciding to further their education.

Student loan lenders (unlike most other lenders short of government agencies) are given great protection by our government (don’t believe me see this article where a court determined that paying back loans were not an undue hardship for a blind diabetic who was making $811 a month in social security); therefore, if all that education fails to deliver on that promise of a bright future, there is little if anything you can do about it.  Let’s look at a comparison.  Five years ago you bought a $200,000 house.  Now, thanks to the decline in the housing market, that house is worth significantly less than what you currently owe on it.  For one reason or another, you are unable to make your current monthly payments, and you default on the loan.  Now late fees and attorney’s fees are adding on and that balance is getting larger by the minute.  Sounds like a pretty bad scenario, and it is, but the government offers the everyday Joe a way out of this mess.  Ultimately, if you end up with more house than you can afford, then you can allow the lender to foreclose on the property and file for bankruptcy to wipe out any deficiency that may remain after the sale of the property.  But what assistance is there if you get “more” education than you can afford?  In short, there isn’t any.  Unlike the liability on your home, car, credit cards, and medical bills, the liability on your student loans cannot be discharged in bankruptcy.  Not only that, but let’s say something unforeseeable happens, you become disabled, and can no longer work.  You are collecting disability which is probably significantly less than what you are used to living on.  You would probably expect sympathy and understanding.  What do you get?  You get your student loan lenders attaching your social security check and taking up to 15% of what little money you do have.  This is a remedy that is not afforded to any other lender.  So what makes student loans so special?  Can it really be that your education is more valuable than your house or car or health?  It seems illogical that we would not receive any protection against huge student loan bills particularly when you consider the fact that you got the education to make a better life for yourself and that education can’t even provide you with a job to cover the minimum payment on the money you borrowed to get it.

Now comes the small light at the end of the tunnel.  There are programs out there aimed to assist people with paying back their student loans.  One such program is the Income Based Repayment (IBR) option which determines the amount of your payment based off of your income.  IBR is intended to help you maintain a reasonable standard of living while allowing you to pay off your loans at an affordable rate.  The best part about the program; if you do not manage to pay off your loans in a 25 (I believe they may have reduced this to 20 for new grads) year period, then they are forgiven.  Additionally, in some extreme circumstances an argument can be made for an undue hardship discharge in bankruptcy that would allow your student loans to be discharged with the rest of your debt.  If you are having a difficult time meeting your student loan obligations, contact the Law Office of Suzanne Szymoniak today to discuss your potential options.

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Mortgage vs. Note

You may not realize it, but when you obtain a mortgage, you are actually signing two different legal documents.  The first document, the mortgage, gives the lender a security interest in the property that you are purchasing/refinancing.  It is this document which gives the lender the ability to foreclose on your property in the event of a default.  The second document, called the note, makes you personally liable for the debt.  It is the note that gives the lender the power to come after you personally for any outstanding balance in the event that the foreclosure and sale of the property does not payoff the outstanding balance on the mortgage (a common occurence in today’s real estate market where most properties are significantly underwater).  If you are behind on house payments and contemplating bankruptcy, it is important to note that the mortgage is not dischargeable.  If you are hoping to keep your house, you will have to cure any default and continue to make regular payments.  If you do not, the lender has the right to petition the court to be removed from the bankruptcy and to proceed with a foreclosure/sale.  But let’s say you decide you do not want to keep the property.  You want to walk away and get a fresh start.  Here is where it is important to recognize the difference between the two legal documents; while your mortgage cannot be discharged in bankruptcy, your note (i.e. personal obligation for the debt) is.  That means that by filing bankruptcy, you limit the lender’s rememdy to the sale of the property.  The lender gets whatever the property is worth up to the amount remaining on the mortgage, and you get to walk away with no remaing obligation to the lender.  For more information on how bankruptcy can affect you as a homeowner, contact the Law Office of Suzanne Szymoniak today.

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