Monday November 19, Dreams In Distress focused on a Chesterfield family that is facing foreclosure because of their subprime mortgage adjusting.

“They are among the estimated 14,000 Virginia households facing foreclosure this year.”

Their payment adjusted from $1,250 to $1,650, making the house no longer affordable.  They are hoping for a loan modification, but there is no guarantee of success.

The only way out is to refinance, but options – as the Lovings discovered – are few.

. . . . . . . .

The Lovings tried repeatedly to get in touch with their lender. “Send more money, send more money,” they said they were told.

They got the subprime loan because their credit was damaged years ago when they went on a debt-management plan to pay off $30,000 in credit-card debt.

They were locked into their original mortgage because it carried a hefty prepayment penalty.

As soon as the penalty phase passed, they looked into refinancing. “At least a dozen lenders turned us down,” Scott said.

They found one taker. The payoff on the old loan — a combo ARM and fixed-rate mortgage – was $137,000.

They walked away with another ARM. This one was for $161,000, which increased their debt. It included $4,000 in cash. Fees and closing costs totaled $20,000.

“We didn’t feel we had any choice,” Scott said.

The new payment is $1,623, not much better than the $1,650 payment on the old loan. “But we had a fresh start,” he said.

The initial interest rate on the new loan is 9.8 percent, 0.1 percent better than the old loan. It, too, has a prepayment penalty — 5 percent of the loan amount. It resets next June.

The Lovings kept up with their new payments for a few months. Then one payment was put into escrow and the Lovings were one month behind.

Repeated calls to the lender solved nothing. When the couple received notice of a foreclosure sale, they turned to Housing Opportunities Made Equal.

“You can breathe,” they said their HOME counselor told them. She had been able to do what they couldn’t – open a line of communication with the lender.

“We’re in limbo,” Scott said, as they wait to find out if their lender will work with them. “We should find out right before Christmas if we can keep our house.”

A 60-day extension was secured on the foreclosure so the Lovings could ask the lender to modify the terms of the loan.

“Banks are really stepping up, but for many, it’s a day late and a dollar short,” said Ann Estes, vice president for ClearPoint Financial Solutions, a nonprofit consumer credit-counseling agency based in Richmond.

The Lovings hang on to the hope that it isn’t too late – that they can keep their house and make payments they can afford.

For others looking at a loan reset, get into a fixed-rate loan and do it today, Estes said. “Don’t put it off.”

Virginia’s foreclosure process is brutally fast.  This is another reason the number appears to be so low.  They are processed much quicker here than in other states.

If your house is falling behind in payments, we can help you sell your house quickly to avoid foreclosure.

Give us a call at 804/719-1489, or get your offers from us in 24 hours.

I received an email from Arie Brown this evening from ProActive Lending Solutions.

As you know the real estate market and mortgage lending has experienced some major changes during 2007, and will continue to see changes in the future as well. I want to share some information with you that I feel is important and I think you will too.

Due to recent market condition changes, many homeowners attempting to sell their home have not been successful. Some homeowners then decided to refinance their current mortgage to avoid the increased payments from their Adjustable Rate Mortgage. Others decided to refinance and update their current home verses buying a different home elsewhere. WOW – They where in for a BIG surprise.

Homeowners who had their property on the market For Sale By Owner or listed on the MLS have found it was almost impossible to secure a refinance. The reason being is that virtually every major lending institution implemented guideline changes and would not refinance a borrower’s mortgage if that borrower’s property was currently for sale, or has been offered for sale within the last 6 months.

The good news is that one of the nation wide lenders has just announced that they will do a refinance for owners who have recently had their properties offered for sale (conditions and limitations due apply).

Hopefully, as the market turmoil settles, we should see more lending institutions ease their standards and start offering more of the common sense-liberal mortgage products again. It usually takes one to lead the pack, and the reset slowly follow.

Freddie Mac has published a resource on how to avoid foreclosure: Freddie Mac: Avoiding Foreclosure .

In it, there are some possible options that lenders may give you to work out a way to avoid selling your property..  Some typical options:

Depending upon your situation, your mortgage company may be able to provide you with temporary financial relief. Here are a number of alternatives to discuss with your mortgage company.

• Forbearance is an agreement to temporarily let you pay less than the full amount of your mortgage payment, or pay nothing at all, during the forbearance period. Mortgage companies may consider forbearance when you can show that funds from a bonus, tax refund, or other source will let you bring the mortgage current at a specific time in the future.
• A reinstatement occurs when you pay your mortgage company the total amount you are behind, in a lump sum, by a specific date. This is often combined with forbearance.
• A repayment plan is an agreement that gives you a fixed amount of time to repay the amount you are behind by combining a portion of what is past due with your regular monthly payment. At the end of the repayment period you have gradually paid back the amount of your mortgage that was delinquent.
• A loan modification is a written agreement between you and your mortgage company that permanently changes one or more of the original terms of your note to make the payments more affordable. Common loan modifications include
  • Adding missed payments to the existing loan balance
  • Making an adjustable-rate mortgage into a fixed-rate mortgage
  • Extending the number of years you have to repay

No matter what your situation is, it’s important early in the process to try and work with your lender before they send it to an attorney and jack up the late fees thousands of dollars.

If you decide you want to sell your house quickly instead of working with your lender, we are here to help you.  Give us a call at 804/719-1489, or get your offers from us in 24 hours.