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Foreclosure Information

Faster short sales would reduce foreclosures

No one likes foreclosures. That's why Virginia REALTORS® support federal legislation to speed up the short-sale process.

It's impossible to talk about real estate in Virginia—or any other U.S. state, for that matter—without bringing up the subject of foreclosures. While experts disagree on exactly how much damage foreclosures cause to neighborhoods and home sales, there's no denying that the effect is generally negative. Foreclosures, truth be told, hurt everyone and benefit almost no one.

So what's the status of foreclosures in Virginia today?

 The answer is both good news and bad news, according to the Virginia Housing Development Authority's March 15, 2011, report on foreclosure trends in the state.

 The good news:

  • More Virginia homeowners are making their mortgage payments on time, thanks to improved employment.
  • Lenders are making process in resolving problem loans and offering loan modifications.

 The bad news:

  • More homes are still being lost in foreclosure.
  • The large volume of foreclosures, along with legal issues and moratoria, have contributed to a backlog of foreclosed homes owned by banks and investors.
  • The excess supply of bank-owned homes that currently are or soon will be for sale puts downward pressure on home prices.

The good-news factors suggest foreclosures could return to more normal levels by the end of next year. But the other indicators and the long timeline of foreclosures today hint that normalcy might not return until early 2014.

 In either scenario, nothing is for certain. A rising tide of foreclosures could set off a further drop in home prices, which would trigger more foreclosures, perpetuating the cycle. Or, a stronger economy and higher employment could get things going again.

Virginia homeowners might well be concerned about these trends. Not only have friends, family and neighbors lost their homes, but home values have been hit and that affects everyone who owns a home or aspires to buy one and wants to realize a return on that investment in the future.

One way to help fix these problems is to speed up the process of short sales, which transactions occur when a homeowner, struggling to pay a mortgage that's more than the home is worth obtains the lender's approval to sell the home for less than the loan balance. The homeowner transitions to other housing and the lender takes a loss, but a foreclosure is avoided.

The National Association of REALTORS® has been actively pushing lenders and federal government agencies to create better procedures, forms and deadlines for short sales, and the Virginia Association of REALTORS® supports these efforts. One initiative, a bill introduced in Congress in April, would force loan servicers to decide whether to approve a short sale within 45 days after receiving a complete offer. Currently, servicers often delay their decisions for months or even a year or longer.

Faster short sales would reduce the number of foreclosures, benefitting not only buyers and sellers, but Virginia homeowners as well.

How to work with your loan servicer to prevent foreclosure

If you are worried about making your payment a couple of weeks later than usual, you should immediately let your loan servicer know when you will be making the payment. Make sure the servicer has documented the anticipated date you will be making the payment.

If you are unable to make your mortgage payment:

1. Don't ignore the problem.
The further behind you become, the harder it will be to bring your loan current and the more likely that you will lose your house.

2. Contact a housing counselor.
Housing Counselors can help you understand the law and your options, organize your finances and represent you in negotiations with your lender if you need this assistance. Find a Housing Counselor now.

3. Open and respond to all mail from your lender.
The first notices you receive will offer good information about foreclosure prevention options that can help you have a positive outcome. Later mail may include important notice of pending legal action. Your failure to open the mail will not be an excuse later in the foreclosure process. Keep every piece sent to you so you can get it to your Housing Counselor.

4. Know your mortgage rights.
Locate your loan documents and read them to try to get some idea as to what will take place if you are unable to make your house payments. You may want to contact a Housing Counselor because you may have several options. Do not be afraid to ask what the mortgage loan documents mean. Your Housing Counselor will be able to explain what is in the loan documents, as well as explain the foreclosure laws and timeframes in Virginia. Be sure to take these loan documents with you when you see your Housing Counselor. Make certain you understand everything explained to you.

5. Understand foreclosure prevention options.
Your Housing Counselor has valuable information about foreclosure prevention (also called loss mitigation) options. Make certain you understand these options when they are explained to you by your Housing Counselor. If you do not understand it the first time, do not be afraid to ask to have it explained again. Many of the concepts are difficult to understand.

6. Prioritize your spending.
After healthcare, keeping your house should be your first priority. Review your finances and see where you can cut spending in order to make your mortgage payment. Look for optional expenses-cable TV, memberships, entertainment-that you can eliminate. Delay payments on credit cards and other "unsecured" debt until you have paid your mortgage. Your Housing Counselor will help you put together a spending plan. It will be a “crisis spending plan” initially. Once you are able to get some cash together to start paying back your delinquent payments, you and your housing counselor will development a more stable spending plan together.

7. Use your assets.
Do you have assets-a second car, jewelry, whole life insurance policy-that you can sell for cash to help reinstate your loan? Can anyone in your household get an extra job to bring in additional income? Even if these efforts don't significantly increase your available cash or your income, they demonstrate you are willing to make sacrifices to keep your home. Your Housing Counselor will give you more tips on how to tighten your spending.

8. Avoid foreclosure prevention companies.
You don't need to pay fees for foreclosure prevention help-use that money to pay the mortgage instead. Many for-profit companies will contact you promising to negotiate with your lender. While these may be legitimate businesses, they will charge you a hefty fee (often two or three month's mortgage payment) for information and services your Housing Counselor will provide free.

9. Don't lose your house to foreclosure recovery scams!
If any firm claims they can stop your foreclosure immediately if you sign a document appointing them to act on your behalf, you may well be signing over the title to your property and becoming a renter in your own home! Never sign a legal document without reading and understanding all the terms. If there is any doubt at all, get assistance from a Housing Counselor.

10. Don't ignore the problem.
The longer you wait to get help, the harder it will be for your Housing Counselor to assist you. Losing your home may be the price you pay for thinking something will come along to fix everything. Action is what will make that happen.

Click here to learn about other issues affecting homeowners in Virginia.