The California Association of REALTORS® recently provided us with a synopsis of a great article offering advice on writing a hardship letter in hopes of obtaining a short sale. The bullet points below were provided by CAR and the link will provide access to the actual article written by Lisa Prevost with the New York Times. We found it to be quite informative and wanted to share it with our readers.
- Homeowners having trouble paying their mortgage are often required to write a hardship letter when applying for a loan modification. Such a letter is a requirement for modification applications under the government’s Making Home Affordable program.
- A hardship letter is not the basis for modification approval – that depends on the borrower’s financials and the intricacies of the various government and in-house lender programs. The purpose of the hardship letter is to explain upfront why borrowers missed payments, and what they propose as a solution.
- Some housing experts recommend that homeowners write short letters, using the philosophy that “less is more.” The lenders’ loss mitigators, faced with mountains of modification requests, are unlikely to spend time reading more than the first few lines of each letter. Also, there is the risk that borrowers who go on at length could unknowingly trip themselves up with unnecessary details that raise red flags for a mitigator.
- The hardship letter should open with a succinct explanation of why the borrower stopped paying the mortgage. The letter should cite a specific hardship, like a lost job, illness, or reduced income.
- Next, the letter should briefly cite any steps the borrower took to avoid defaulting on their loan, like cutting household expenses or tapping in to savings.
If the borrower’s financial situation has since improved, or is likely to, borrowers should mention that as evidence that their hardship was temporary and won’t hamper their ability to make payments on a modified loan.
- Finally, the letter should state exactly what borrowers are applying for. Is the proposed solution a lower interest rate, for example, or a principal reduction?
- Borrowers who are underwater – those who owe more on their mortgage than their property is worth – may ask their lender to consider a short sale, in which the house is sold to another buyer for less than the amount owed.
Although Lake Tahoe has weathered the current foreclosure issues better than most areas, we have not escaped the overall effect. As of January 1, 2009, the South Tahoe Association of Realtors MLS services report 28 closed sales, 18 currently in escrow and 17 currently active. There are some great opportunities for qualified buyers and with today’s record low interest rates, many prospective buyers will find themselves skipping joyfully into a new home.
At the same time, sadly beause times are tough, pathetic low-life scammers raise their ugly heads. In fact, there is a down-right explosion going on. We all seem to be inundated with those annoying telemarketing calls, unwanted spam email or direct mail. If you or someone you know is facing foreclosure and are looking into potential solutions to prevent losing a home, it is crucial to be very aware of deals that sound too good to be true.
The California Association of Realtors has prepared a list of RED FLAG RESCUE SCAMS outlined below.
* Asks for money upfront before providing any service
* Instructs you not to contact your lender, lawyer, housing counselor, family, friend or others.
* Asks for mortgage payments to be made directly to a company or bank account set up by the “negotiator” rather than your lender.
* Requires payments only in the form of cash, cashier check or money wire.
* Promises to stop the foreclosure process, no matter the circumstances.
* Advises you to transfer your property deed or title to the “negotiator’s” company.
* Offers to fill out the paperwork for you
* Asks for something to be done immediately and without delay. This includes pressuring you into signing paperwork that you have not had the chance to read thoroughly or do not fully understand.
* Encourages you to lease your house and buy it back over time.
* Offers to purchase your house for a fixed price that is not set by the housing market at the time of sale
* Asks for you to give a power of attorney
* Refuses or fails to put an oral promise in writing.
* Fails to provide copies of signed documents
* Asks for signatures on a document that has lines left blank.
* Asks for signatures on a grant deed or deed of trust
If you are approached by a scam artist, please report the incident to one of the following ñ and then run.
California Attorney General (http://ag.ca.gov)
California Department of Real Estate (www.dre.ca.gov)
Department of Housing and Urban Development (www.hud.gov)
Federal Trade Commission (www.ftc.gov)
Your local Better Business Bureau (www.bbb.org)
Finally, if you are at risk of foreclosure or have already received a foreclosure notice, you should contact your lender immediately. You may also want to visit the U.S Department of Housing and Urban Development (HUD) website at http://www.hud.gov/ and look for the Guide to Avoiding Foreclosure and its list of California HUD-approved housing counseling agencies.
Copies of the above information are available if needed. Just give us contact us at Souers@HomeInTahoe.com. We’re here to help.