Denver is Rampant With Foreclosures
Yet there are a variety of options for those at risk for missing mortgage payments or already in the process of losing their home to avoid foreclosure.
Let me paint a picture with a completely hypothetical but fairly typical short sale/foreclosure scenario:
Jerry and Lisa bought their home in 2005 at the peak of the last real estate upswing and thought they were on the path to living happily ever after. Unfortunately now, in 2008, Jerry has lost his job and Lisa doesn’t make enough money to support the entire slew of monthly expenses including the mortgage. With his tail between his legs 
Jerry calls and asks,”Bob, what can you sell my house for right now?
I dread that call.
The answer, invariably, is significantly less than whatever the 2005 purchaser paid for it and leaves the owners with only a few options.
In all scenarios we’ll have to assume that the family has exhausted personal resources such as: savings accounts, borrowing against a 401k, personal loans or gifts from parents, rich uncles, employers, or churches, and any other options for holding them over until they are in better financial position.
Now the homeowner is left with a “lesser of evils” decision. For the sake of brevity I’ll lump them into the following four categories:
- Deed in Liu of Foreclosure
- Loan Modification or workout
- Short Sale
- Foreclosure
The worst of which, in my opinion is the “Dead In Lieu of Foreclosure” as far as I 
can tell, this makes little sense for anyone until just before the foreclosure sale, so I’ll skip talking about this and jump right to the next . Loan modifications or workouts. As the nightly news is quick to point out, Millions of homeowners are losing their homes or close to losing their homes to foreclosure. With the implementation of government bailouts and the expansion of lender flexibility there are more and more options to avoid foreclosure AND STAY IN THE HOUSE. Today post we’ll talk about one in particular:
One of the best ways may be HOPE for Homeowners also known as H4H.
This program came into effect October 1, 2008 and should be effective through 2011. HOPE is a program created by Congress to help those at risk of foreclosure to refinance into a new 30 year fixed-rate loan with significantly lower payments.
Their are several requirements for borrowers to qualify:
Homeowners must have originated their mortgage on or before January, 2008;
They cannot afford their existing loan;
They must have made at least six full payments;
They do not own a second home;
Their mortgage debt-to-income ratio must be greater than 31%;
They didn’t lie on their loan application nor were they convicted of fraud within the last 10 years;
They must complete a fully documented loan application;
Homeowners must agree to share both the equity created at the beginning of their new HOPE for Homeowners mortgage and any future appreciation in the value of their home;
Existing subordinate lien holders (like a second mortgage holder or an HOA which has filed a lien) must agree to release their outstanding liens.
The best way to get started learning more is to call the HOPE NOW Alliance at 1-888-995-HOPE . HOPE NOW is an alliance between HUD approved counseling agents, loan servicers, investors and other mortgage market participants that provides free foreclosure counseling. explore more at www.HOPEnow.com
There is never a fee for the HOPE NOW service and there is no need to pay a fee for mortgage modifications elsewhere either.
In my next post I’ll talk about the FHA Secure program designed to help those with subprime mortgage deficiencies.
{ 3 comments… read them below or add one }
Hey Bob- I love the article and especially the benefits to buying a short sale over an REO. Have you actually seen any of the lenders doing the H4H and if so who? Kristin
Words from an Opinionated California Lawyer
In California, the Department of Real Estate website (www.dre.ca.gov) lists the companies that have DRE “permission” to modify loans… add to this list any licensed California attorney, and that is where you should begin your due diligence when you seek help in California. Other states probably have similar laws, so check with your own state DRE.
My law firm has been getting more and more calls recently from homeowners that were victims of predatory lenders who put them into an unaffordable loan and now fell into the hands of those same people who sold the toxic loans but profess to be saviors… DON’T BE A VICTIM TWICE!
Do your homework and THOROUGHLY investigate any firm before hiring them to save your biggest asset and the place you call “home.” These scammers are popping up like dandelions on a freshly mowed lawn. They advertise on the Internet, freeway billboards, radio, television, and print media everywhere. Make no mistake, in many cases, these are the exact same loan officers and mortgage brokers who fleeced homeowners the first time around. After losing their jobs with the crash of the mortgage industry, they have found a new way to make ill-gotten profits from hard-working homeowners through loan modifications.
In California, with very few exceptions (and attorneys are one exception), it is against the law for anyone to take money up front for helping a homeowner who is in default. Don’t trust a company that begins its relationship with you by breaking the law.
Of course, this is one lawyer’s biased opinion, but one based on many distressing calls to my office every day. And, yes, my firm does take cases against loan modification companies who have violated laws. This field is quickly becoming one of the fastest growing sections for our mortgage law firm.
- Paul J. Molinaro, Esq.
Hi Paul,
Your experience with loan modifications is very parallel to the guidelines we have here in Colorado. Your DRE is the parallel body to our DORA (Division of Regulatory Agency) at http://www.dora.state.co.us/real-estate/ where the public can find more facts about the qualifications Colorado spells out for any professionals soliciting clients for loan modifications. One of the most important requirements is that Loan Modifiers must be licensed mortgage brokers (mortgage Brokers are required to be licensed in Colorado)
Here are a few of the guidelines from Erin Toll’s Colorado Division of Real Estate Position Statement on Loan Modifications:
a. A duty of good faith and fair dealing in all communications and transactions with borrowers;
b. A prohibition against making any promise that influences, persuades, or induces another person to detrimentally rely on such promise when the licensee could not or did not intend to keep such promise;
c. A prohibition against soliciting or entering into a contract with a borrower that provides in substance that the mortgage broker may earn a fee or commission through the mortgage broker’s “best efforts” to obtain a loan even though no loan is actually obtained for the borrower; and
d. If the mortgage broker has obtained for the borrower a written commitment from a lender for a loan on the terms and conditions agreed to by the borrower and the mortgage broker, and the borrower fails to close on the loan through no fault of the mortgage broker, the mortgage broker may charge a fee, not to exceed three hundred dollars, for services rendered, preparation of documents, or transfer of documents in the borrower’s file that were prepared or paid for by the borrower if the fee is not otherwise prohibited by the federal “Truth in Lending Act”, 15 U.S.C. section 1601,and Regulation Z, 12 CFR 226, as amended.
4. The Director’s position on this matter shall not be construed to include employees of nonprofit
HUD-approved housing counseling agencies as long as such individuals receive no compensation nor anything of value for participation in loan modifications.
5. The Director’s position on this matter shall not be construed to include employees of
mortgage loan servicing companies operating on behalf of mortgage lenders.
6. Noncompliance may result in the imposition of any of the sanctions allowable under
Colorado law, including, but not limited to:
a. Imposition of fines;
b. Restitution for any financial loss;
c. Refusal to renew a license;
d. Refusal to grant a license; and
e. Revocation.
The revised position statement posted December 11, 2008 amended the statement to clarify that Real Estate Brokers performning work on Short Sale negotiations could perform the work without a mortgage brokerage license as long as they didn’t perform “loan modification” but limited their work to negotiating the short sale.
Attorneys in Colorado can perform loan modifications without mortgage brokerage licenses… That’s good news for me since I have been helping both Buyers and Sellers negotiate short sales all year long!
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