Distressed Homeowners Get The Short End Of The Stick
Distressed Homeowners Get The Short End Of The Stick
It's a sad thought to know that many families won't behomefor Christmas in 2010. What about next year? What's going to change in 2011?
Wouldn't it be less damaging to the economy if banks allowed people to pay 35% less on homes that have depreciated by at least that much? Why not keep people in their homes at a reduced mortgage payment until there is a more practical solution to the current problem? According to a recent news report by KSL.com TV, loan modifications are looking bad:Read Story Here.
Havebanks found a creative strategy that benefits them once they get rid of homeowners through foreclosure or lead them into less than owner-centric loan modifications? While banks have options, what are distressed homeowners supposed to do? Here are the most common options:
Walk away from an unprofitable investment
Hope for a reduced monthly payment through a loan modification
Have their loan legally audited as a basis for negotiations
File for and try to honor Chapter 13 bankruptcy requirements
Cure their loan deficiency
Short sell their homes
Forbearance
Deed in lieu of
Sale And Pay Off
Foreclosure
Regardless of which option homeowners (more like home renters) choose or end up with, their credit will be badly damaged. Late payments have already put a hole in their credit scores and exit options such as foreclosure, short sale and bankruptcy will definitely hurt their FICO even further.
How do you treat a one-way relationship when all efforts have been in vain?
It's common for homeowners to be advised to short sell in order to avoid less damage to their credit and avoid potential deficiency collection efforts. However, they still end up losingtheirhomes whilehelping the bankfind a buyer through a short sale that may or may not be accepted. Some simply choose to let the banks find their own buyers through REO sales. People are led to believe that by helping the bank find a short sale buyer, they're helping themselves and their credit. That would be true if they'd catch the plague if they didn't short sale. But that's not the case.
While renting is like throwing money out of the window with no tax advantages, paying for a home that has substantial negative equity is not a wise investment either. Most crappy, non-running cars end up in the junkyard so why not toxic investments? Is a place to shower and sleep worth the aggravation? Some homeowners don't seem to think so, especially those who had purchased higher priced homes that have little or no chance to be called an investment anymore, at least not for a few years anyway.
Foreclosures hurt everyone and kill middle-class dreams. Had banks not received taxpayer bailout money, maybe they would be more flexible toward the tens of thousands of homeowners that they are foreclosing on or offering elusive and one-sided "pretend-to-help" loan modifications.
I think that people shouldn't lose hope or panic even if they end up losing their homes or feel like nobody cares about what happens to them. They're not alone in this fraudclosure season and there are those who do care. Remember: banks have received bail out money in part because they were too big to fail. What a concept.
Smart people shouldn't assume that banks are out the help them. They just want their money one way or another. You signed a promissory note - which banks should have in their possession - and if you fail to pay, it's a breach of contract and that's all you are to them, someone who failed to meet his or her financial obligations. What got you to that point is irrelevant to banks. They don't now you. You're an account number on the computer and a voice on the other end of the line. To them you're either a profitable or unprofitable investment so they treat you as such.Treat them likewise before you end up more stressed, frustrated, wasting money you don't really have and end up foreclosed on anyway.
If all fails and you lose your job and your home, look for ways to keep you chin up, think positive and look for online and offline work. Maybe you can start your own business cleaning up bank owned homes instead of dwelling on the losses and getting depressed.More information here.
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