by Attorney William Bronchick
Calling foreclosure leads, knocking doors, and mailing letters, but no success? That’s because your angle is all wrong. Instead of offering to BUY the person’s house, try to gain trust and rapport with the seller. In other words, instead of coming on hard, try a “soft sell”. Offer to explain the process to the person in foreclosure instead of offering to buy their house up front.
Understanding the different options available to the seller, you can have an honest, no-pressure conversation about their situation. Below are the 5 most common options that sellers may address with you if the sellers are either in default or anticipating being in default. We will have another 5 options in Part 2 of this article.
1. Reinstatement of Loan (Cure): This option is paying the lender everything that is owed in one lump sum to include missed payments, any late fees associated with these payments, foreclosure fees, legal fees and the principal owed during the delinquency. A cure may involve the seller curing or deeding it to the investor “subject to” the existing loans, who will cure. There is a risk to the homeowner that the lender may accelerate the loan because of the due-on-sale, and the homeowner no longer owns the property and has no recourse if the investor doesn’t pay the loans.
2. Repayment Plan: This is a written agreement between the lender and the seller. These plans require higher payments than the regular monthly mortgage amount for a period of time until the loan is brought up-to-date.
3. Loan Modification: A loan modification involves changing one or more terms of a mortgage. Modifications can be considered to reduce the interest rate of the mortgage, change the mortgage product (from an adjustable rate to a fixed rate, for example), extend the term of the mortgage or capitalize delinquent payments (add delinquent payments to the mortgage balance-only available in extreme hardship situations). Modifications are NOT easily granted and there must be strong, justifiable reasons for the request.
4. Forbearance Agreement: The lender will allow you a period of time (3-6 months typically) of either low payments or no payments at all. Unless the loan term is extended (which happens rarely), the later payments generally will have to be higher than the original monthly mortgage payments until the loan is up-to-date.
5. Special Forbearance (FHA Loans only): Allows eligible borrowers to postpone monthly mortgage payments for a minimum of four months. While there is no limit on the maximum number of months, at no time may the agreement allow the delinquency to exceed the equivalent of 12 monthly PITI installments.
Stay Tuned- we will have 5 more Foreclosure Options in our next posting!!