These days there are many different words being used to describe properties that are in distress. You hear everything from short sale, to pre forelcosure, to quick sale, to well you name it. Today I thought I would cover what is a short sale and what is happening so everyone has a better idea. This will not be the last post on pre floclosure properties. We have really just begun to see what is going to happen.
Let's start at the beginning.
- Defaulting on your mortgage - now to be clear almost all home loans state that you are in default if you are 1 day past when the payment is due. So are all of us in default when we pay late? Well the bank doesn't want to go through the kind of paperwork to say you are in default. In general most banks penalize you if you are past 15 days late on your payment with a late fee.
- 30,60,90 day notices - this is when you haven't paid your mortgage for 30 days after it has been due. For example if your mortgage was due on August 1st of 2007 and you hadn't paid it by September 1st you will more than likely receive a 30 day notice on your credit and from your bank in the mail. Trust me they will be calling you and sending you letters as well.
- It is homes that are past the 30 days that have a potential to be pre foreclosure homes. Now let's get this straight everyone has problems now and then so some people can bring their homes current (pay all past due fees) and some have experienced problems that they cannot and will not be able to bring them current.
So pre-foreclosure means a home owner is at least past the 30 day mark and maybe even after the 90 day late notice point. They have received notices but their home has not been sold to the bank, taken to sale, or sold to an investor. Home owners who are in this situation can consider a short sale. Check out the post earlier in the month on "Avoid Foreclosure - Ask for a Short Sale" for more information on that process.
So we hope that this clears up what a pre-foreclosure is. Feel free to share with your friends. This is a changing market and many home owners need help right now so make sure they know all of their options.
2 comments:
I would also add that in a preforeclosure not only can the homeowner consider a short sale, but the homeowner can also loss mitigate to bring the payments current by obtaining a work-out solution or forebearance agreement although many homeowners find it difficult to make the new agreed upon payments. If the financial hardship is due to an ARM, the homeowner could also be referred for a possible loan modification if they can begin making timely monthly payments. The new interest rates are determined by the last 2 years of tax returns and the income (last 2 paystubs). Filing bankruptcy can also at least temporarily stop a foreclosure. The sooner a homeowner acts to attempt to solve his/her problem, the more options he/she has available. A homeowner in default, must talk or communicate his/her situation to the lender as soon as possible if a solution is to be found.
Janet,
Home owners do have quite a few options as you point out. They key is making the call and taking action. It is absolutely best to make sure that a home owner explores all of their options so they know what can be done.
--Joey
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