SOUTH FLORIDA FORECLOSURES RISE
PALM BEACH COUNTY FORECLOSURES RISE
LOSING YOUR HOME? READ THIS

Foreclosures in South Florida are at record levels. Palm Beach County foreclosures are causing thousands to lose their homes. Many people call me and ask "how do I stop a foreclosure?" or "how do I save my home?".

Are you behind on your mortgage payments? Is your home in foreclosure? Are you considering a "short sale" or "deed in lieu of foreclosure"? Are you thinking about just "giving back your home" to your mortgage company? Did your adjustable rate mortgage raise your monthly payment by hundreds of dollars? Or are you just totally confused and worried about what to do?

For those of us who purchased a home in South Florida or refinanced in the last few years, we are facing some tough decisions. While the majority of people (at least on paper) are making their mortgage payments on time, many people are facing the one thing they feared most; losing their home in foreclosure.

Some of us purchased a home in the last few years for fear that we could never afford a home again if the prices kept rising, some of us refinanced when we were told we had a great deal of equity in our home to make repairs, pay off bills or invest in the hot real estate market and some of us just wanted a piece of the "American Dream" and purchased multiple properties in the hope of making a profit by "flipping" or renting. Unfortunately, life doesn’t always imitate those "flipping" shows on TV or scores off books that make real estate investing look easy. These books and shows rarely show the stories that don't have happy endings. So we all need to sit down, learn from our mistakes, take a deep breath and decide what is going to be best (or least destructive) to our lives.

As you know from reading the rest of this web site, we are not attorneys and we can not give legal advice. However, this is such an important subject to so many people, we’d like to at least give you some things to think about. 

First of all, if you find yourself having problems making your mortgage payment, you need to let your lender know what is going on. Do not "bury your head in the sand" and avoid speaking to them because you are ashamed or embarrassed. Millions of people (from every walk of life and tax bracket) are going through similar situations and there are a lot of good lenders out there that want to work with you to help you save your home. After all, mortgage lenders are in the business of lending money and making a profit on the interest, not having a large inventory of homes that they can’t sell. So, it really is in their best interest to work with you; DO NOT FORGET THIS!

Ask your lender if they have any hardship programs. Tell them you want to work with them and ask them what they can do to make a positive outcome possible for all parties. I strongly encourage that you follow up any phone conversations with a letter sent by certified mail, return receipt requested. I hear a lot of complaints that one employee for a lender promises one thing and when the borrower calls back a few weeks later, a different employee says it can't be done. The most important lesson I have learned over the years when facing a problem with any company is CREATE A PAPER TRAIL! 

Second, you need to immediately contact a mortgage counselor. I recommend that you contact an approved counselor through the HOPE NOW program, in which lenders, trained counselors and the government work with borrowers to help them keep their homes. You may also call HOPE NOW at 1-888-995-HOPE. Another good resource is the Homeownership Preservation Foundation.

Additionally, your State, County and local government may offer some assistance programs. Use the power of the internet to learn more!

If you are served with foreclosure papers, you need to contact an attorney immediately. Non-attorneys like Attorney Alternatives are not allowed to assist with the papers required to respond to a foreclosure lawsuit. A qualified and experienced lawyer might be able to help you save your home if you decide you absolutely want to keep it and you can afford it.

In the last six months, I have met with literally hundreds of people who are thinking about filing bankruptcy in order to help them save their homes or to wipe out any remaining debt after they lose their home. As a "non-lawyer", I always advise them to consult with a bankruptcy attorney if they need some legal advice on the consequences of their decisions. As a licensed mortgage broker in the State of Florida, I want everyone to begin thinking about the most important decision of all; should you try to keep your house?

First of all, try your best to take the emotion out of your decision and approach this decision from a strictly financial point of view. Let me give you a typical examples of what I am hearing on a daily basis:

John purchased his three bedroom, 2.5 bath primary home during the "boom" two years ago for $300,000.00. He had good credit but did not have a lot of money to put down. His good credit qualified him for a loan in which he didn’t have to document his income or assets. He showed up at closing with $3,000.00 and he was handed the keys to his new home. So, John basically financed 100% of the value of his home (as it was valued at that time). Unfortunately, the real estate market changed. His monthly mortgage payment is $3,000.00 per month and he's realizing that there isn't much money left over to pay his other living expenses. Adding insult to injury, John realizes that he could rent a home similar to his own, in the same neighborhood, for $1,000.00 less per month.

John owes $300,000.00
His property is now worth $250,000.00
He is now "upsidedown" $ 50,000.00

John is hoping to find a way to "hang on" for a few more years until the market starts to pick up again. Here’s the problem with that:

Since there are many other people in John’s shoes, sellers are desperate. They can’t sell their home because there are so many other homes on the market so they also try to rent it out, even if it isn’t enough to cover the monthly mortgage payment. When sellers get desperate, they keep lowering their selling price to try and get rid of their home faster. In John's case, if he makes his $3,000.00 per month mortgage payment for the next two years, he will have paid $72,000.00 to his lender. What will his property be worth in two years? There's no way to know, but from the reports I have been reading, we have at least a two year inventory of homes currently on the market. This means that it will take buyers two years to buy all the homes currently on the market. This figure doesn't include all the other homes that will be listed in the next two years as more people lose their homes in foreclosure or just want to sell.

Adding to the problem is that lenders have made it much more difficult to get a loan for people who want to buy a home. Forget about the days when a borrower with less-than-perfect credit could borrow 100% of the purchase price of a home without documenting their income or assets. We are moving to a more traditional lending environment, similar to that which our parents dealt with and accepted. If you want to buy a home, you should expect to have a down payment , anywhere from 5-20% and you need to show the lender real proof (as in tax returns and pay stubs) that your income is sufficient to be able to make your mortgage payments as well as your other monthly living expenses.

If John walks away from his home or includes it in a bankruptcy, he can rent a similar home for $2,000.00 per month. Over the next two years, he will have saved $24,000.00. If John is disciplined and puts that money in a bank every month, he can possibly reestablish his credit in two years and use that money as a down payment on another home which will be priced more realistically and not based on inflated prices driven by investors and speculators. Ironically, he might be able to purchase the home he walked away from for much less than he paid the first time.

I'm not suggesting that this scenario applies to everyone, but it is one that I see many people deciding is best for them. If you are having problems making your mortgage payments or are facing foreclosure, you have to ask yourself some tough questions:

• Can I really afford this house?
• Do I have any equity in my home (can I sell it for at least what I owe)?
• If not, can I see myself staying in this home for the long term and being able to afford the payments?
• What are the legal ramifications if I let the home go back to my lender? (consult an attorney on this)
• Is bankruptcy an option I should consider? (consult an attorney on this)
• Will bankruptcy stop a foreclosure? (consult an attorney on this)
• Which will hurt my credit worse, having a foreclosure on my credit or filing bankruptcy?

On December 20, 2007, the President signed into law The Mortgage Forgiveness Debt Relief Act of 2007. 

"Families dealing with the pain of a foreclosure should not have the double whammy of a large tax bill for terminating their mortgage through no fault of their own," said Ways and Means Committee Chairman Charles B. Rangel. "I am pleased the Committee joined together to unanimously pass this critical legislation and I look forward to bringing this measure before the full House."

What Chairman Rangel really should have said was "it is absolutely absurd that IRS rules previously allowed a homeowner who lost their home to be hit with a tax bill in the first place. It is the perverted thinking of Washington that someone who loses their home has somehow received income." Of course, he wouldn't ever say that, but he should have.

And finally, a house panel narrowly approved a measure that would allow bankruptcy judges to lower the balance a borrower owes on their home as well as change the interest rate and other terms. Supporters of the bill argue that it is needed to help people stay in their homes. Those against it (including lenders.... surprise!) argue that bankruptcy judges have no business getting involved in a contract between a lender and a borrower. They argue that it isn't government's job to bail out people who made bad financial decisions.

In the coming months and years, we will see more grim housing news, foreclosures will continue at record rates and the government will offer more help in an effort to reverse the trend. Until that happens, don't wait to take actions to deal with your situation if you are facing a South Florida foreclosure or are in danger of losing your home.