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Information About Help with Foreclosure

We are facing foreclosure because the mortgage is beyond our means, what can we do to avoid this?

Bill, My wife obtained a Home Loan from First Horizon to purchase a "Second Home" based off her previous employment. I was not part of the loan due to "Lack of Credit". The lendor instructed me on how to build my credit, and once that was done, we would be able to "Rewrite" or "Refinance" the loan in my name and/or put me on the title. This home is now our primary, and only home. My wife lost her job due to illness, and I am the sole receiver of an income. We are facing foreclosure because the mortgage is beyond our means of living with my sole income. I am self employed, earn $140,000 gross annually with newly established credit scores averaging 650. How can we save our home? First Horizon won't even speak to me, because I am not on the loan. Our original lendor has moved out of town, and now we are dealing with somebody in Texas that doesn't know us from adam. Little do they know, I have made the mortgage payments on this loan for roughly 16 months. Several medical situations have arosen with my spouse that caused me to focus financial responsibility towards keeping her alive and healthy...Not to mention supporting our 4 year old child. Pretty ruthless that they would rather foreclose on a home and have it vacant, along with roughly 45% of our city (Lake Havasu AZ) where the home will sit with no income generating whatsoever. I can afford $1,500-$1,800 a month. Not the $2,400 current rate. We're locked into a 30 year fixed @ 6.25, a good rate considering. But, considering they should never have given her the loan to begin with when my salary was $140,000 proven 1099 and hers was only $74,000. What's even worse, the other home was financed through First Horizon as well! They set her up to default and then bailed out of town and their agreement to let me take over the loan after 6 months establishing credit. Any suggestions?

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Due to the recent downturn in the U.S. housing market, many Americans are currently facing the foreclosure of their homes. However, unlike you and your wife, most of these defaults and foreclosures are being caused by increases in payments due to adjustable interest rate mortgages. In your case, it sounds like your financial difficulties were primarily caused by your wife’s health problems and the subsequent loss of her employment. Unfortunately, I foresee that many American’s who can currently afford their mortgages will find themselves in a similar situation as your family as the economy continues to weaken, leading to layoffs and business closures which will reduce family incomes. This “second wave” of foreclosures will only add to the problems in the housing market and will result in more downward pressure on the economy as a whole. One of the major ways that the government can help prevent this downward spiral is to assist Americans who are struggling with their mortgage payments to stay in their homes. The bad news for you and your wife is that, to date, the federal government has taken no concrete steps to force lenders to assist borrowers with their loan payments, and I expect that it will be several months, at least, until such programs become available. That said, some banks, such as Bank of America, are working with borrowers voluntarily to prevent home loans from defaulting. Hopefully, your lender will see the wisdom in keeping your home out of foreclosure and will offer you a plan to lower your monthly payments to an affordable rate. To read more about foreclosure and the various options available to consumers to help them avoid it, I encourage you to visit the Bills.com foreclosure page.

Although I know that you have been trying to work with First Horizon to rework your loan terms, the loan is in your wifeÂ’s name, so it is not surprising that they are unwilling to discuss the account with you. While some states do allow financial institutions to share information with the spouses of their customers, many companies do not disclose such information in an effort to be overly cautious with their customersÂ’ private data. However, if your wife is willing to sign a consent form or power of attorney authorizing you to speak with First Horizon on her behalf, the lender should have no problem in communicating with you about the loan. Your wife should call the lender to inquire about having you manage her account; the lender should be able to tell her what documentation they would need from her to accept such an authorization. The bank may only require a form authorizing them to disclose account information to you; however, if your wife wants you to be able to make decisions on the account, she may need to make you her attorney in fact by signing a power of attorney in your favor. The lender may be able to provide you with a power of attorney form which they prefer you to sign, or you can write your own. For an example power of attorney form, you can visit this link.

Convincing your wifeÂ’s mortgage lender to speak with you is only one small hurdle toward trying to keep your home out of foreclosure. You should contact the lender to discuss the possibility of lowering your interest rate or extending the term of your loan due to the financial hardship caused by your wifeÂ’s illness. Honestly, I doubt if the lender will be willing to make such modifications to your note; since most loans are no longer owned by the originating lender, the company servicing the loan may be unable to make any significant adjustments to the terms of your loan. Even though it is somewhat unlikely that the lender will be willing or able to assist you by lowering your payments, I encourage you to contact them to discuss your financial situation and what you can afford to pay. Even if they cannot simply lower your payments, the lender may be able to tell you about other options which may be able to mitigate the damage caused by your inability to make your mortgage payments.

Unless your lender is willing to assist you in lowering your payments, you may have no choice but to give up the home, either through a sale or through a bankruptcy filing. The easiest choice may be to place your home on the market; hopefully you can sell the home for a reasonable price which will allow you to liquidate any equity you have built in the property. If you owe more on the home than it is worth under current market conditions, you may need to discuss a short sale with your lender; in a short sale, your lender would allow you to sell the home for less than you owe on your mortgage and thus avoid foreclosure. Many lenders will also forgive the difference between the amount owed on the mortgage and the short sale proceeds, preventing large deficiency balances which can often result from foreclosures. If you are interested in a short sale of your property, you need to consult with your lender to determine if it will approve a short sale and what terms would apply to the sale. To read more about short sales, you can visit this link.

One final option you may wish to consider to improve your financial outlook is filing for bankruptcy protection. In your case, your income may make filing for Chapter 7 bankruptcy impractical, due to the income restrictions placed on Chapter 7 petitioners. However, Chapter 13 bankruptcy would likely be available to you and may help you significantly improve your overall financial situation. For example, a Chapter 13 filing could allow you to bring your current delinquent payments current and allow you to place that balance on the end of your mortgage. For a Chapter 13 bankruptcy to help you save your home, you will probably need to resume making your regular monthly mortgage payments; since your financial situation does not allow for you to make these payments, Chapter 13 may not be a viable option for you. Another option would be for your wife to file for Chapter 7 bankruptcy on her own, since the loan is in her name only. A Chapter 7 bankruptcy may allow your family to surrender the home to your lender while avoiding foreclosure proceedings and the risk of incurring any deficiency balance. I strongly encourage you to consult with a qualified bankruptcy attorney in your area to discuss how bankruptcy may help your family. If you would like to learn more about bankruptcy, I invite you to visit the Bills.com bankruptcy resources page.

To be honest, I think it somewhat unlikely that your lender will be willing to simply reduce the amount of your loan payments to an amount which you can afford. However, various other options exist to help you minimize the impact of your financial difficulties, though you may be forced to give up your home in the process. I wish you the best of luck in finding a way to ameliorate your financial problems, and hope that the information I have provided helps you Find. Learn. Save.

Best,

Bill

www.bills.com/

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3 Comments

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  • 35x35
    Dec, 2008
    Walter
    It really depends on your state and the lender. If your state has a judicial or non-judicial process and just how swamped your lender is could change the process from a few weeks to a year or even more. You could call the lender and ask them about the time expectations. Good luck.
    0 Votes

  • 35x35
    Dec, 2008
    Diane
    I know this may sound like a funny question but my mortgage is also will FH. I lost my job in Jan 08 and went back to school, graduated and started my own business in late August. The business was right on track with growth until the ecomony bit the dust in October. I can not make my payments starting in January (unless of course someone delivers me a big bag of money). I have a condo that is currently rented out and the lease ends in April. That is why I am asking how long foreclosure proceedings take. I know that some banks like Countrywide for instance are so screwed up that they can take up to 8 months to 1 year to foreclose while other banks who are not in the same position as CW can foreclose much quicker. I need a place to live and have no family here in Las Vegas nor would I ask friends to put me and my 2 dogs up. Regards.
    0 Votes

  • G&
    Nov, 2008
    Geno
    Thank You Bill for the well defined reply. We will take your advice to heart and first pursue the power of attorney approach with the lender. The current market in our "County" is fare lower than the average condition of most counties nation wide. The bank is surely aware of this. The vacant to occupied ration at present is 65/35 with the higher being vacant! This town was built by "Snow Birds" who utilize their homes here as "Second Homes". Being as most are retired, and relied on their stock portfolio's for supplemental income, they have been hit with a "Double Cross Left Jab" that has forced them to surrender their homes. Currently, there are roughly 390 Foreclosed homes in Lake Havasu City. The towns economy and unemployment rate is skyrocketing upward and tourism is down an estimated 31% from last year. We're trying to hang around for the "Rebound" being as we have 2 businesses established here. Fortunately, neither rely on tourism. If and when that happens, this entire community will be a "Buyers Gold Mine" and current home prices are already indicating such a swing. Our home was purchased for $300,000.00 and comps in the area are close to $215,000 for a home equal to ours. I'm leaning toward your advice to "Let The Home Go" under my wife's credit, which is shot already, and dip into the "Buyers Pot of Gold" with my credit and we'll start over from there. I think the odds of success are far better since we've already lost 30% of our homes value and I don't foresee the market raising any time soon with the community sinking rapidly. Thanks again, I will share this with several in our similar situation.
    0 Votes

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