Just attended a very interesting seminar where a mortgage broker who is a specialist in foreclosure solutions divulged to us something the banks do not want you to know about-
"The Early Loss Mitigation Dept".
In primary home situations and second homes (investor properties are more difficult to pull off) she is becoming quite successful in getting "loan modifications" from banks that will reduce not only the interest rate but the principle amount. These modifications come from the EARLY LOSS MITIGATION DEPT and according to her every lender has one!
Yes. This is true. It's very important to reach out to the Bank prior to reaching the point of no return. I hope you didn't pay money to learn this, Joe.
May I add, though, that some will not reduce the principal balances. I find this ridiculous because eventually it will wind up, in all likelihood, in foreclosure and they will be stuck with a declining asset. The smarter thing to do would be to reduce the principle balances with caveats that when the property sells, any proceeds up and over what was reduced, up to the original loan amount, will be repaid to the Bank. The average time a homeowner stays in the same home is 7 years.
Secondly,
another tip. Once the Borrower has exhausted working out a solution with the Early loss mitigation Dept- some offer short sale as a solution-- it is imperative, especially if the Borrower can't make the payments, to obtain a lawyer. In true hardship, ie; loss of job or illness, the attorney will appear at the courts to answer the complaint, which after 90 days or so delinquency, the Borrower is served a court notice. Here the attorney is worth every dime because 90% of the complaints are not answered. The foreclosure mill attorneys go after these people first because it is cake walk work.
An attorney will buy time for a short sale to occur by arguing the case in court. It may also put added pressure on the Bank to provide a better workout. Because the FL, CA, NV court systems are so overwhelmed, and understaffed due to budget cuts, the Borrower could be looking at a years time for options.
If nothing else, then they can work with the Bank to just do a deed in lieu of foreclosure if the property doesn't sell via short sale, which doesn't impact the Borrowers credit as heavily as a foreclosure. The Banks at this point are amiable to deeds in lieu since they will not have to pay foreclosure mill attorneys to take it to final REO.