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If you are having trouble making your house payment and wondering what your options are, here they are in a nutshell:

1. Loan Modification
2. Short Sale
3. Deed-in-Lieu of Foreclosure
4. Foreclosure

Loan Modification

When attempting to get your lender to modify the original terms of your loan,  you may want to hire a lawyer or law firm to help you get it modified – but it is possible to get your loan modified without the help of a lawyer thanks in part to the Making Home Affordable program. The loan modification process is long, complicated and many people end up frustrated and moving on to one of the other options (short sale, deed-in-lieu or foreclosure) because they were unable to get their loan modified.

Short Sale

A short sale usually occurs after trying to get your loan modified and not being able to do so. If you are attempting to short sell your home, you may want to hire a lawyer to help you review the final paperwork because of various state’s anti-deficiency statutes – or in other words, the laws of your state as to whether or not the lender can come after you for the difference. I have heard many stories recently of lenders “slipping in” a promissory note expecting the person short selling their home to pay it and many homeowners agree to sign it – even though they are not legally required to do so.

Deed-in-Lieu of Foreclosure

If you are unable to short sell your home, you may be able to negotiate a Deed-in-Lieu of Foreclosure with your lender.  A Deed-in-Lieu is basically where you agree to vacate the property and leave it broom swept clean and the lender agrees to take over the property. The difference between Deed-in-Lieu and Foreclosure is that with a DIL, once you hand the property over to the lender, they will stop reporting negative items on your credit. I always recommend hiring a lawyer to help you if you get to this stage.

Foreclosure

The final possibility is Foreclosure. Each state has different foreclosure laws, so if you are going through foreclosure, I reccommend that you hire an experienced attorney who can help you know your rights throughout the process.

Because after all, there is nothing more expensive in life than cheap legal advice.

Justin McHood is a loan officer living in the Phoenix, Arizona area. You can find Justin on Facebook, Twitter, ActiveRain or LinkedIn and he is happy to answer any mortgage-related questions that you may have.

If you are considering selling your house, one of the first things you may want to consider when setting the asking price is “how many foreclosures are in my neighborhood?” While you may think that the foreclosure crisis isn’t fazing you because you can make your payments and just need to sell your home due to job transfer or some other reason – when it comes time to sell your house is when you realize the foreclosure crisis is very real.

According to a story in the Arizona Daily Star:

Is it fair? Probably not. There can be a world of difference between a bank-owned home that’s been through hell and back and a gently used home that’s been lovingly maintained by its owner. But we’re in a declining market and lenders are hedging their bets against falling values.

Not only are lenders pushing appraisers to include foreclosures as comparable sales for non-foreclosures, but they are also limiting appraisers to finding sales within a one-mile radius and three months time, Madson said.

Is this happening all over the US or just in the hard-hit states of Florida, California, Arizona and Nevada?

All over.

One of the largest problems is that there is no uniformity to the way that appraisers account for foreclosures and no standard way to use them as a comparable sale or not. Until there is a standard way of how to include the foreclosures or leave them out in appraisals for traditional sales it will continue to add another level of chaos in an already shaky market.

Justin McHood is a loan officer living in the Phoenix, Arizona area. You can find Justin on Facebook, Twitter, ActiveRain or LinkedIn and he is happy to answer any mortgage-related questions that you may have.

A new term has cropped up to describe people who could afford to stay in their home, but choose to just walk away. The term that the media has put on this is Strategic Default.

The foreclosure crisis has left no part of the country untouched, but in many of the “sand states” of California, Nevada, Arizona and Florida – foreclosures are more common than in other places. In Las Vegas, for example, it is estimated that 80% of all homeowners who bought their home between 2005 and 2007 have negative equity – where the homeowner owes more to the lender than he could sell his home for.

In an article by the Las Vegas Sun, it highlights some of the common reasons that people simply choose to walk away and become a strategic default statistic including:

• People who know someone who defaulted are 82 percent more likely to declare their intention to do so.
• No households would default if their equity shortfall were less than 10 percent of the value of their home but “Once the numbers become a bigger percentage of the value, the temptation is much greater,” Zingales declared. “If there are a lot of people negative, there is a very high risk. Our study shows there is a highly contagious effect.”
• The social stigma of default lessens if others are doing it around them. Once foreclosure had a negative stigma attached to it, now it is more common.

But not everyone agrees that strategic defaults will become a major problem:

Shari Olefson, author of “Foreclosure Nation: Mortgaging the American Dream,” said she thinks the number of people who walk away will be limited because she doesn’t expect prices to fall much further.

Besides, it’s complicated for families because they have to find a new home and put their children in a new school, she said. Others will be unwilling to take a hit on their credit that could affect them for three to five years if they try to buy a new home or new car. It would affect their ability to get loans, and interest payments would be higher.

Olefson said she is concerned, however, that over time some will become fatigued with their home values and get more comfortable with the thought of walking away from their mortgages. Many are waiting to get loan modifications, but if that doesn’t happen, they are vulnerable.

Olefson said the decision to walk away is a conversation people should have with their pastor rather than their financial adviser. She said she considers it wrong for them to pursue walking away even though she understands people are angry when their neighbors go through the foreclosure process and that brings down others’ home values. It’s easy to make excuses because Wall Street contributed to the problem, she said.

Will strategic defaults continue to climb? Will house values continue to slide? While there may not be a clear answer to these questions, one thing is crystal clear: as house values decline, the number of people who become a strategic default statistic increases.

Justin McHood is a loan officer living in the Phoenix, Arizona area. You can find Justin on Facebook, Twitter, ActiveRain or LinkedIn and he is happy to answer any mortgage-related questions that you may have.