Foreclosure prevention

Foreclosures have hit the Falcon area hard. An article published in The Gazette Jan. 23 identified the Falcon area as having one of the highest foreclosure rates – between 5 and 5.9 percent – in the Colorado Springs area. Only zip codes in the Fountain area had a higher rate.With 23 foreclosure filings in January compared with 22 filings in January a year ago, the trend isn’t getting any better.Foreclosure should be avoided if at all possible, said Mike Lowe, retired manager of Chase Home Finance’s loss mitigation department, which also services loans for General Motors Acceptance Corp., Wells Fargo and Bank of America.”Foreclosure is going to stay on your credit record for seven to 10 years, depending on the credit agency. It’s just about as bad as a bankruptcy,” Lowe said.The foreclosure process starts when a homeowner gets behind in his or her mortgage payments.”If you’re three months down, the next thing that’s going to happen is foreclosure. So the trick is, don’t ever get 90 days down,” Lowe said. “Most mortgage companies won’t file anything until you’re 90 days delinquent.”In Colorado, lenders initiate foreclosure proceedings through each county’s public trustee, a position appointed by the governor.”We’re probably the only state that has a public trustee system,” said Brad Bufkin, an attorney who represents lenders.The public trustee’s office schedules a date for the public auction and sends a notice to the homeowner, along with information about the homeowner’s right to cure the default.The right to cure “sounds a little bit better than it is,” Bufkin said. “If you can come up with the money you owe, then the foreclosure will be called off.”In addition to the overdue mortgage payments, the lender can add any costs incurred by the foreclosure process to the amount required to cure the default. Those costs can include attorney fees, interest and the cost of filing for foreclosure, which can run from $300 to $500, he said.”Assuming you don’t cure and you don’t work anything out with your lender, the public trustee holds a public auction on the sale date. The property is open for anyone to bid on, but most of the time, the only bidder is the lender,” Bufkin said.The lender typically bids the amount owed and ends up owning the property.”Bankruptcy can prolong the process and allow you to keep the house for a longer period of time, but ultimately the lender has the property as collateral, and bankruptcy doesn’t eliminate their right to take it,” Bufkin said.Lowe said it costs a lender $40,000 to take a loan through foreclosure.”The mortgage company doesn’t want your house,” Lowe said. “Regardless of what it may feel like, the bank really wants to work something out with you.”As sad as it may seem, the vast majority of mortgage holders in trouble haven’t spoken to their mortgage lender. There are a lot of reasons for that. Some have ignored the mail, and some are in denial.”Lowe recommended the following steps for homeowners facing foreclosure:

• Homeowners should examine and understand loan documents. Know the term of the fixed rate and the floor and ceiling of an adjustable rate.
• Homeowners should make a realistic budget and understand how much money is coming in and going out, and attempt to find ways to reduce expenses or increase income.
• Based on their loan type and budget, homeowners should decide if they want to keep the home.
• Homeowners should call the lender and talk with the loss mitigation department. If keeping the home is the desire, homeowners need to tell the lender that they want to work with them. Homeowners should be prepared to discuss their financial situation.

“Two years ago, when the crisis first really hit bad, most mortgage companies weren’t willing to work with anyone,” Lowe said. That attitude has changed.”There are a number of things mortgage companies typically will do,” he said. “If a foreclosure notice hasn’t been filed yet, the mortgage company may be willing to set up a payment plan where you pay a little bit extra to get caught up.”Another type of modification is re-amortization, where the delinquent amount is added to the back end of the loan. “Your monthly payment will go up a little bit, but at least you don’t have to pay the entire delinquent amount at one time,” Lowe said.The house can be sold while it’s in foreclosure, he said.”Most banks will deal with you on what’s called a short sale – a sale that’s less than the amount owed – rather than go through the foreclosure process,” Lowe said.If negotiating a short sale, most lenders will put the foreclosure on hold for 60 days. If the homeowner sells the property, the foreclosure is stopped. “It’s still a ding on your credit, but it’s not like the foreclosure actually happened,” he said.”When I left Chase in December, they were doing any kind of modification you could imagine,” including fixing the rate of an adjustable rate mortgage and lowering the interest rate for a period of time.It doesn’t matter if a loan is being serviced by a company other than a lender.”Whoever is servicing your loan was assigned the rights to negotiate with you on behalf of your lender. In fact, your lender pays the servicing company to negotiate with you on their behalf,” Lowe said.Be persistent.”Ask to talk with a supervisor,” he said. “Tell them that if you don’t get a fair hearing, you’ll be happy to talk to your state’s attorney general or your senators. I guarantee you’ll get some response, because that’s the last thing they want.”Foreclosure tips from Brad Bufkin and Mike Lowe

• Homeowners should keep the lender informed of their current address. The public trustee sends notices to the address the lender has on file.
• If homeowners have multiple mortgages, try to keep the first mortgage current. The first mortgage holder is more likely to file foreclosure than any junior lien holders.
• Homeowners should keep records of all contacts with the lender, including date, time, name of the person and the information discussed. Pending legislation may require that homeowners talk with their lender before asking a judge to modify the loan.
• Homeowners should ask if the lender has a cash-for-keys program. Some institutions will pay the homeowner to move out if he or she guarantees to keep the property clean and not destroy it.

Additional resources:El Paso County Public Trustee, elpasopublictrustee.comPikes Peak Foreclosure Prevention Partnership, www.ppar.com/ppfpp