Stop, thief. That guy is trying to steal my home.
Mortgage giant Freddie Mac said on January 15th that rates on 30-year fixed-rate mortgages fell below 5% during that week — the lowest level since it began surveying lenders in 1971. The average rate on a 30-year fixed-rate mortgage was 4.96%, with a fee equal to 0.7% of the mortgage, for the week ending Jan. 15, 2009. It was down from last week when it averaged 5.01 percent and has been falling for 11 straight weeks. Even though this situation paints a wonderful picture for potential homebuyers with credit scores above 720, there is still a serious problem for existing homeowners and consumers who have below average credit scores.
Mortgage rates rose for subprime borrowers during the middle of 2008 and are expected to further increase for millions of current subprime borrowers within the next three to six months. This situation will result in higher mortgage payments, with some almost doubling the price of their current mortgage.
According to Realtytrac, foreclosures were filed on more than 2.3 million properties in 2008, an increase of 81% over 2007. A recent poll commissioned by the American Bar Association (ABA), suggested about 50% of Americans who currently have a mortgage are concerned about staying in their homes and avoiding foreclosure. In addition, the survey revealed that 73% of the participants have adjusted their spending habits in order to accommodate the increases in food and fuel prices. Sixty-one percent of the respondents have already taken some type of action to address their concerns, while the remaining 39% have not made any steps toward a solution.
Given these distressing facts, there are scam artists who are attempting to prey on unsophisticated homeowners. These people are setting up shop to ‘steal’ equity from unsuspecting homeowners. This has become a cottage industry with web-site and instruction manuals on how to get homes from consumers facing foreclosure, identifying where these properties are and getting the money to finance the purchase of foreclosed properties. Unfortunately, a property-owner who is more than three months behind on their mortgage has few available options. This person has either of two choices: they can keep their home or attempt to dispose of it before the foreclosure process is completed. Homeowners should not make this decision lightly. If you are facing this situation, you should consult Renewal’s Avoiding Foreclosure coach.
Scam artists use the following type of language in their advertisements to lure in unsuspecting homeowners:
Does one or more of these apply to you?
• Are you one or more payments behind on your mortgage?
• Is your interest rate about to adjust?
• Are you trying to stop foreclosure?
• Do you have 1, 2 or even 3 mortgages on your property?
• Are you worried about having a foreclosure on your credit report for the next 10 years?
• Do you have equity in your home you can’t get to?
• Do you need help FAST?
If you answered yes to any of these questions, we can help! You have options….YOU DON’T HAVE TO FACE FORECLOSURE ALONE!
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While the companies who placed these ads may not be scam artists, it is important that you use an abundance of caution when seeking help to avoid foreclosure. Scam artists encircle foreclosed properties like vultures aiming to pick up on a quick and cheap property. They usually are unconcerned about the welfare of the homeowner. This situation was made worse when the hot housing market collapsed leaving property-owners with over-inflated home values that immediately deflated along with their equity. As a result, these homeowners faced foreclosure with little knowledge of available options. However, there are things you can do to avoid being scammed.
First, don’t panic. You have rights. Scam artists attempt to pressure unsuspecting homeowners into making a quick decision. They insist that the deal that they have on the table is the best or only deal available. They often add insult to injury by saying that the deal on the table is for today only. Often, the deal on the table involves you signing away your rights to the property to avoid “having the blemish of a foreclosure on your credit report.” It is important for you to know that having late mortgage payments on your credit is just as bad. Before making this offer, the “investor” examines the numbers of your property to make sure that the equity will satisfy their financial interests. If they feel good about the profit potential, away goes your property and you won’t even get a thank you in exchange.
Second, don’t be pressured to make a quick decision. Opportunists prey on those who make hasty, uninformed decisions. You may be in debt, but you do have rights. Knowing those rights is key to ensuring that you are not being cheated out of your hard-earned property.
Third, talk to as many people as possible. Make sure to talk to those who hold the mortgage. Scam artists will often tell homeowners to avoid talking to their bank or mortgage company. This is obviously self-centered and unwise advice. It would be wise to respond immediately whenever your bank or mortgage company provides a notice concerning the disposition of your property. This is especially true if you are behind on your mortgage. Talk to them and try to modify the loan. While lenders are typically NOT required to modify loan arrangements, many will. The usual choices include:
• Deed in lieu of foreclosure. The lender accepts the return of your title.
• Claim advance. If you bought with less than 20 percent down, either the loan is self-insured by the lender or you have private mortgage insurance (PMI). In some cases PMI companies will provide a cash advance to bring the loan current — money which is sometimes interest free and need not be repaid for several years.
• Disasters. Most lenders, but not all, will provide substantial relief in the face of hurricanes, earthquakes and other terrible events. If you experience any of these situations, you may qualify for a deletion of late fees, no late payment reports to credit bureaus, a suspension foreclosure actions and modified payment schedules.
• FHA loans. If you financed with a loan guaranteed by the Federal Housing Administration, call 1-800-569-4287 or 1-800-877-8339 (TDD) to reach a HUD-approved housing counseling agency for assistance and advice.
• Forbearance. This is a temporary change in mortgage terms, such as the right to skip a payment or make smaller payments for a year or less.
• Modification. This option should be considered when the borrower experiences difficulty making regular mortgage payments as a result of a permanent or long-term financial hardship.
• Private mortgage insurers. Mortgage insurance companies typically require lenders to begin foreclosure proceedings once a delinquency reaches 150 days or when a sixth missed payment is due. However, such requirements may be waived in areas impacted by natural disasters and for other reasons.
• Re-Amortization. Missed payments are added to the loan balance bringing the account current. However, since the debt load has increased, future monthly payments may be larger unless the lender agrees to lengthen the loan term.
• Refunding. This loan is backed by the Veterans Administration (VA) through your lender and they may take over servicing the loan.
• Reinstatement. Typically called “temporary indulgence,” this loan will bring your loan current, pay late fees and other costs, and the original terms continue as before.
• Repayment plans. You agree to pay an additional amount of money above your current mortgage until the arrearages are repaid.
• Short sale. In this arrangement, the lender accepts less than the mortgage debt as satisfaction for the entire loan amount.
You must know that you have options. Renewalfinancial.com has developed a number of resources to help consumers who are facing foreclosure. First, we developed the Avoiding Foreclosure classroom which provides valuable and important information about foreclosures and what can be done to avoid this unfortunate situation. In addition, for those who need a step-by-step guide to help them avoid foreclosure, they should consult the Avoiding Foreclosure coach. These resources are designed to help unsuspecting homeowners avoid being taken advantage of by unscrupulous scam artists who are aiming to steal your property.