Personal Lending

With so many Americans facing foreclosure, a new industry has appeared. Wow, read this one carefully and understand how it works, so that you, your loved ones and friend are not duped into this quagmire.

First off, when a family is experiencing difficulties with their house payments, it is a combination of a bunch of problems. It could be the option arm mortgage getting ready to adjust, it could be loss of revenue from the job or many other issues.

We all know what it is to live from paycheck to paycheck. So, when that cash flow is interrupted we begin to other dangers out on the horizon. Lets look into this. We all thought we were protected against any problems when we purchased that home for $175,000 and within six months to a year we found out that it had gone up in value to over $250,000. We thought we were the smartest “cats” on the block. We just made a cool $75,000 simply by buying a home.

So, what do we do. We need or we thought we needed a newer car, a vacation, some big boys toys and on and on. We called our friendly mortgage broker and with our good credit scores and having a home worth $250,000 we could refinance 90% of that amount. Hmmmm. Lets see. That means that we could get a check for roughly $50,000 and that would be more cash than we ever had in our hand at any time. “Bring it on”.

With our new toys and being able to sleep at night because we had security in our home, life could not be any better. But, little did we know what was happening on the horizon. Not our fault, but we were trapped in this mess.

So many of those fancy mortgages were coming due for readjustment and now, when folks could not make those mortgage payments, they lost their homes in foreclosure. Lets go on. When the banks had a backlog of thousands of homes that they took back, they started aggressively selling these homes to hungry purchasers on a “short sale”. That means the bank sold that home that was worth $ 250,000 and had a mortgage balance of $225,000 (remember the refinance) for $ 150,000 to $175,000.

Well, with enough of these in one area, the only comparisons for appraisers and realtors to draw from was a slug of short sales for $150,000. This drove the value of real estate down tremendously. Now, what has happened to poor little old me who bought the house for $175,000, refinanced for $225,000 (still owe that much) but now that house is only worth what the short sales are paying.

So, you guessed it, you are upside down in your home. That means you owe a lot more than what it is worth. Problems are just beginning. You cannot make the mortgage payments, you fall (2) to (4) months behind and the bank is threatening foreclosure action. You are about to lose your home, your credit and your sanity.

The waters are getting red with financial blood from un-informed homeowners. Here is the favorite ploy. We can help. Come on in and lets discuss your problem. Hell, its not rocket science. You are (4) months behind on your house payment and about to lose it. Your credit already reflects over (90) days late on a payment, so no matter what these folks tell you about saving your credit, you can forget it. It is already shot. Kaput, Gonzo, Stinky and bad.

They ask you for some money to handle your case. What do you think they are really going to do. Negotiate with a bank on your behalf? Maybe, but there are plenty of legitimate companies out there that do this professional for a very small fee and they are honest.

The sharks have you sign a “deed in lieu of foreclosure” over to them. Now they own the house and they have not put up any money. BUT, you still legally owe on the mortgage note. So, IF, you have any equity in the home, they simply borrow that equity, put the money into their pocket and you now owe more than you did before. Quite a profitable scam.

Is there an answer out there or is there any hope for folks facing foreclosure? Yes, but you have to be realistic. You cannot be emotional about your house. Because it went down in value, that is what is realistic. Do you have the resources to hold on and wait for the market to return to normalcy?

You have a couple of choices. You can elect to lease purchase a home from an investor that bought a home on a short sale. Let him make a small profit and agree to purchase the home one or two years later, after you have managed your credit problems and you are now in a position to re-finance that home. Yes, you can refinance the home that you have a lease purchase option on.

BUT, you better get off of your butt and work out those credit issues. A lazy effort will not get you approved in the future. But an aggressive effort will go a long way in telling a bank that “yes” I had problems but I faced them and here I am asking for a “second chance”. It will work.

Regis Sauger

Regis Sauger is a licensed Mortgage Broker in Florida, an author, lecturer on credit awareness. He has conducted seminars for underwriters, attorneys, mortgage lenders, realtors and the general public.

www.yurcredit.com