5 More Foreclosure Myths – Busted!

On November 10th a Broker from San Francisco, CA named Tara-Nicholle Nelson posted this article as a blog on Trulia. Thinking it’s wonderful, I am re-posting on my blog for my readers…

Four years into the housing crisis, myths about foreclosure still litter the minds of even the smartest of real estate consumers. When it comes to matters as high stakes as your home, confusion can cost you thousands – or even your home. Whether you’re a buyer looking at foreclosures, a homeowner struggling to keep your home or a seller concerned making sure your home can compete with the foreclosed homes on your block, these foreclosure myths are prime for the busting, with no further ado.

Myth #1: Foreclosure happens fast. With unemployment and underemployment still affecting nearly 1 in every 4 Americans, no one is immune from fears that a pink slip might quickly turn into a foreclosure notice. According to NeighborWorks America, nearly 60 percent of families seeking foreclosure counseling cited a lost job or cut wages as the reason they were facing foreclosure.

While the Obama Administration’s Home Affordable Programs haven’t been nearly as effective as predicted in actually preventing foreclosures, they have had the effect of extending the foreclosure process for many families. Even though the legal process of foreclosure can happen in as few as 6 months in most states, it is currently taking much longer for the average foreclosure to get to completion. Recently, JP Morgan Chase revealed that their average borrower who loses a home to foreclosure has not made any payments in 14 months nationwide; 22 months in FLorida and 26 months in New York.

To be sure, some see this as a good, others view it as unnecessarily dragging out the overall market’s recovery. Many insiders will point out that these delays in foreclosure may be calculated to save the banks the costs of owning and maintaining foreclosed homes, not to help homeowners. In any event, the fact that foreclosure does not happen nearly as fast, in many cases, as expected does give families who are temporarily down on their luck some extra time to try to get back on their feet and save their homes.

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Do You Qualify for a FHA/HUD Preforeclosure?

Qualifications for an FHA/Hud foreclosure are very similar to the requirements for a short sale, but there are some differences.
Eligibility requirements include:

  • Property must me owner occupied (you must still live in the home unless you provide a verifiable reason why you have already vacated (ie job loss, job transfer, divorce).
  • The property must be your primary residence (no investment properties)
  • The homeowner must be 31 days or more delinquent on their mortgage at the time of closing.

If you find yourself in a hardship situation that requires a short sale or Pre-foreclosure sale, and need help I can you get through the process as a Certified Distressed Property Expert I have the the tools and knowledge to help get the deal closed.

Following is some excellent information and Q&As provided by HUD:
Question 1: When submitting a PFS Variance for approval, what items need to be attached to a PFS Variance?
Answer: Depending on the type of Variance, the Mortgagee may need to submit the HUD-1 Settlement Sheet, the first three (3) pages of the FHA “As Is” Appraisal, and/or Hardship Letter.

Question 2: Previous HUD-1 Settlement Sheets have been submitted to NSC, only for NSC to deny the Variance due to buyer or seller receiving cash at the PFS closing. Please provide guidance.
Answer: The HUD-1 Settlement Sheet is to be “completely” filled out, providing both the buyer’s and seller’s costs and fees. Neither the buyer nor seller is to walk away from the PFS closing with “cash.” The seller, if applicable, may be eligible for the Seller Incentive, but even the Incentive is “not” to be reflected as a payment of cash on the HUD-1.

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Options for the Distressed Home Owner

Homeowners who have defaulted or are at risk of defaulting on their mortgage may believe that the only solution to their mortgage problems is foreclosure. However, that is not the case. There are options available and those options are listed below:


Homeowners who are current on their mortgage payments may find that refinancing is the answer. They can take advantage of today’s low mortgage rates, reduce their monthly payments, and most importantly, keep their home. In early 2009, the Obama administration launched the Making Home Affordable programs in an effort to help stabilize the housing market. For more information about these programs, visit www.MakingHomeAffordable.gov.

Lender Workout

Mortgage lenders will often work with homeowners who are in default or at risk of defaulting to help them keep their homes with a number of their own options. These workout options can include forbearance, a repayment plan, reinstatement, and loan modifications. Homeowners who are seeking this option are encouraged to look into the Making Home Affordable programs. A link to the website is provided in the paragraph above.

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