If you want to keep your home the most important factors in stopping foreclosure is acting fast and working with the right team of people.
Here are some of the basic options available to you when you work with us:
Loan Restructure (Most Popular Alternative-more below) - We can negotiate with your lender to get your loan in good standing again. This can be accomplished through a separate payment plan for your delinquency or even adding the delinquency to the end of your loan. Sometimes we can even lower your monthly payment!
Reinstatement - Pay your lender(s) all of your past due payments to bring your mortgage current. This option is rarely feasible.
Refinance - Only a viable option if there is enough equity in your property available. Rarely feasible these days.
Sell Your Home - You may simply sell your home before the Foreclosure Sale Date. Sometimes the home owner is unable to sell the home outright at the desired sale price and this is not an option.
Short Sale - We may be able to negotiate a Short Sale on your behalf with your lender(s). In this instance the lender may take less than what you owe on the loan to avoid a lengthy and costly foreclosure process. You will benefit from using a team of attorneys and loss mitigators rather than doing it yourself or using a Realtor, we can get the short sale negotiated quicker and often with better results.
Deed-in-lieu of Foreclosure - We can arrange for you to simply give the home back to the lender and walk away with a clean slate.
Bankruptcy - This is a last resort. This will only save your home temporarily. If you miss one payment during this process the lender will put you right back into foreclosure. However it may be a viable option for many, especially if you have very little assets and a lot of debt. We can help you file for ch. 7 and ch. 13 bankruptcy as well.
Foreclosure - You may elect to allow the home to be entered into mortgage foreclosure. See our foreclosure page and read more about our HomeFree Walk Away Toolkit, filled with information that will give you the answers you need to make the right decision for you.
Stop hesitating and start acting!
For further information or to discuss getting help with bankruptcy, short sales, or foreclosure we invite you to schedule a free confidential consultation with our experienced northern and southern California real estate and bankruptcy attorneys by calling us at 916.983.2941, or filling out our contact us form on our website. The confidential consultation is free.
Loan restructure/ Loan Modification
One remedy available to a property owner facing delinquency and foreclosure is negotiating a loan restructuring, also called a workout. Each negotiation has special objectives, which for most people can include a:
- Discounted loan payoff (debt cancellation might be a taxable event).
- Partial loan write-down with enhanced terms, such as extending a term to reduce the debt service, reducing the interest rate, placing a moratorium until property-performance improvement, capitalizing the accrued interest, restructuring the debt so net operating income is acceptable payment and negotiating for an advance.
- Full debt restructure of payment, rate and terms without a partial write-down.
- Deed-in-lieu with perhaps a discounted final settlement against a potential future deficiency judgment.
The steps to planning a workout strategy are:
1. Complete a financial analysis and evaluation of the expected recovery value that the lender would realize in a foreclosure. Acquisition dates and asset dispositions are projected. The analysis reviews property data such as loan-agreement copies, the promissory note, the deed of trust, the security agreement and all other liens secured by the property or borrower’s property operations, including real estate taxes and assessments. Also up for review are current rent rolls, copies of all current leases, a schedule of all rent concessions and current tenant improvements, copies of any current listing agreements and/or purchase offers from the past 12 months. Operating statements for the income and expenses face analysis for the previous three years to establish trends and calculate the current net operating income.
2. All appropriate expenses are analyzed and compared to expense models that lenders use to present a fair position on the owner’s behalf. Required capital expenses, leasing expenses for buyouts or brokerage commissions, the total debt service of senior debt and asset-management expenses then reduce the net-operating income. The results are the net proceeds from operations a lender may realize after acquiring title.
3. Establish market value. The operations proceeds are then added to the net-sale proceeds to create the expected recovery value available from the collateral.
4. Thoroughly review the borrower’s exposure to a deficiency judgment. Facing analysis are all borrowers’ federal tax returns for the three most current tax years — including all K1s, if partnership interests are owned — along with a current financial statement, including cash-flow statements showing income sources and expenditure categories. The purpose is to develop strategies that protect personal assets and establish that it is not in the lender’s best interest to pursue a judicial foreclosure. Once the personal exposure is analyzed, asset values that may be exposed are reduced by liquidation and litigation costs, as well as risk factors in losing a judgment. This reduced value is the expected recovery value from personal assets.
5. Combine and discount the future expected-recovery value from the collateral and personal assets to create a present value. The discount rate considers the cost of funds, administration and risk. It takes great work and thought to develop the present value of the expected combined recovery. Negotiations begin with this discounted value.
6. Negotiate with the lender. Documentation is prepared and reviewed in this final phase. Upon approval, escrow and title are opened, and the transaction is closed.
7. Proper preparation of the financial analysis, which can be placed on a spreadsheet, is 70 percent of the work in a successful negotiation. Although comprehensive packaging for the lender is essential, negotiations must be directed to the present value of maximum recovery. The cost of a lender’s asset-management burden can reduce the maximum recovery to less than what a property owner can provide. In addition to closing the lender’s economic risk, adjusting the capital structure of a property allows the owner to maintain ownership and operation or the possibility for sale at a much higher price than if the lender sells it as real estate-owned.
8. When structuring strategies and implementation, it is vital to understand forbearance, loan restructuring, debt cancellation, short sales, deeds in lieu of foreclosure with release from any personal responsibility, land trusts and bankruptcy. Knowing how such devices and actions can be used independently, sequentially and or concurrently is essential in structuring strategies and their implementation. It also is vital to coordinate relationship strategies with other professionals who implement other aspects of assimilating and analyzing data or processing actions.
Don't try to do this by yourself or with an inexperienced person, the results could be devastating and what is more the process working without an experienced attorney could take months, digging you even deeper into the hole.
For further information or to discuss getting help with bankruptcy, short sales, or foreclosures we invite you to schedule a free confidential consultation with our experienced northern and southern California bankruptcy attorneys by calling us at 916.983.2941, or filling out our contact us form on our website. The confidential consultation is free.
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