On October 24th, President Obama came to Las Vegas as part of his national tour for re-election. During his trip he announced his new plan to help struggling homeowner's. His "We Can't Wait" plan is targeted to homeowner's who have continued to make payments and still find themselves "underwater" and allowing them to refinance their original loan.
The plan isn't going to solve all the problems Nevada homeowners are facing, but it should make a significant impact on those seriously considering walking away.
The mortgage plan will revise the HAMP program, which was unveiled at the beginning of Obama's administration. Almost three year's later, only about 800,000 people have qualified for the policy, one-tenth of the projected 5 million people it was supposed to. The largest flaw of the program was that only those who owed 25% or more than their properties were worth were able to qualify.
Under the new program, the limit to how much a borrower can owe is gone. Fees will be reduced and banks that allow the refinance will be cleared of liability. In other words, everyone wins. The only draw back is that only borrowers whose loans are owned or guaranteed by Fannie Mae or Freddie Mac are eligible to take advantage.
The program is not expected to increase costs for taxpayers. Final details of the plan will be announced in mid-November, borrowers may not be able to enroll until the first quarter of next year.
Personally, I think this is a great idea. Hopefully, other banks will allow their borrowers to take advantage of the low interest rates and refinance. I've had so many conversations with frustrated homeowners asking, "Why won't banks just allow us to refinance?" Typically when you refinance you have to have equity in the property, since the value of the home is less than what is owed, there is no equity. Perhaps this program, if it's successful will be the first step towards a more practical idea to real solutions.
Thursday, November 3, 2011
Monday, August 1, 2011
10s, 50s, 100s
Last Tuesday at my office, my broker introduced us to Coldwell Banker's REC Business Consultant John "Shoes" Schumacher. He was there to teach us all how to identify where we were in our business, how to locate the path to get us where we want to be and most importantly, stay on the path.
During his discussion he mentioned something that really made an impact on me. He said, "Typically, when you goal-set it's a negotiation between the manager and sales associate. Your "goal-setting" is related only to numbers and your goal for productivity, but there isn't a lot of motivation built into that. We have to get below the surface."
Ask yourself... What do I want:
1. to acquire?
2. to achieve?
3. to do?
4. to learn?
5. to see?
6. to become?
In the past when we were asked to think of goals it was always in terms of short term and long terms goals. What makes "Shoes" idea of 10s, 50s, 100s different is the idea that are little goals, medium goals, and long range goals that we want to achieve.
The 10s: represent things that you want to do, achieve, or acquire that doesn't cost much to accomplish.
The 50s: represent things that take money or time that will have to be dedicated in order to achieve.
The 100s: if time and money weren't an object, what would you want to acquire, achieve, do, learn, see or become?
As I wrote my list I included things both personal and business related. I sat deep in thought and imagined the person I wanted to be and something interesting happened. My list first began to fill with 100s... the larger-than-life, unbelievably impossible things I wanted to accomplish, but didn't seem possible. As I reread them I realized, 'not all of these are impossible... if I just dedicated a bit more time, effort, money I could do these!? They were 50's!'
As I adjusted my list again, the 10s and 50s began to grow and then my "A-Ha" moment occurred. If I accomplished every 10 (which was the easy stuff), I could accomplish the 50s. And naturally if I accomplished the 50s... I could EASILY accomplish my "impossible" dreams.
I then took the next few moments to think about that sentence a bit more. I actually became emotional. Never had the impossible seemed so "easy" to achieve. I actually became extremely motivated and excited at the thought of being able to do things like take a photo adventure and travel to every continent, live a life where I never have to worry about money EVER, and the idea that I could actually make significant anonymous donations to cancer, aids and autism research!
Make your list of 10s, 50s, and 100s and see what you can accomplish. Add at least one 10 into your daily schedule everyday. No longer do you have to "imagine the possibilities"... MAKE IT HAPPEN.
During his discussion he mentioned something that really made an impact on me. He said, "Typically, when you goal-set it's a negotiation between the manager and sales associate. Your "goal-setting" is related only to numbers and your goal for productivity, but there isn't a lot of motivation built into that. We have to get below the surface."
Ask yourself... What do I want:
1. to acquire?
2. to achieve?
3. to do?
4. to learn?
5. to see?
6. to become?
In the past when we were asked to think of goals it was always in terms of short term and long terms goals. What makes "Shoes" idea of 10s, 50s, 100s different is the idea that are little goals, medium goals, and long range goals that we want to achieve.
The 10s: represent things that you want to do, achieve, or acquire that doesn't cost much to accomplish.
The 50s: represent things that take money or time that will have to be dedicated in order to achieve.
The 100s: if time and money weren't an object, what would you want to acquire, achieve, do, learn, see or become?
As I wrote my list I included things both personal and business related. I sat deep in thought and imagined the person I wanted to be and something interesting happened. My list first began to fill with 100s... the larger-than-life, unbelievably impossible things I wanted to accomplish, but didn't seem possible. As I reread them I realized, 'not all of these are impossible... if I just dedicated a bit more time, effort, money I could do these!? They were 50's!'
As I adjusted my list again, the 10s and 50s began to grow and then my "A-Ha" moment occurred. If I accomplished every 10 (which was the easy stuff), I could accomplish the 50s. And naturally if I accomplished the 50s... I could EASILY accomplish my "impossible" dreams.
I then took the next few moments to think about that sentence a bit more. I actually became emotional. Never had the impossible seemed so "easy" to achieve. I actually became extremely motivated and excited at the thought of being able to do things like take a photo adventure and travel to every continent, live a life where I never have to worry about money EVER, and the idea that I could actually make significant anonymous donations to cancer, aids and autism research!
Make your list of 10s, 50s, and 100s and see what you can accomplish. Add at least one 10 into your daily schedule everyday. No longer do you have to "imagine the possibilities"... MAKE IT HAPPEN.
Tuesday, July 5, 2011
Borrowers sue over Loan Mod mishaps
In an article by the Associated Press released this morning, it is reported that homeowners across the nation are filing a class action lawsuit against their banks for "breach of contract". These people have spent time and energy to negotiate modifications of their loan and the banks then, after accepting the terms, renig on the agreement. They are even renigging on the people who used the HAMP program which was created by the Obama administration to keep people in their homes!?
The bank's response is that they just don't have the manpower to handle all the paperwork... really? Here's a solution- hire more people!? It's not like people don't need jobs in this economy. I could maybe understand if it was a training issue, but the reason you are going against a signed agreement is because you haven't taken time to put out an ad and conducting interviews? You deserve to be sued. The fact that people are losing their homes because of a lack of manpower, clerical error or lack of oversight is just ridiculous! We've already dealt with this once before with Short Sales and Foreclosures flooding the market back in 2008. Come on already banks!? We're making so much head way with Short Sales and Foreclosures: cutting down on response times, moving through inventories and keeping people from having to foreclose on their property or getting deficiencies waved. You threaten our recovery and progress by creating a problem where one isn't necessary. The numbers show there are less people getting loan modifications approved so much so that many local legal firms and agencies have stopped listing it as an option!? Why attack the few that you DID accept!?
Read more from the article on this subject by going here: http://hosted.ap.org/dynamic/stories/U/US_LOAN_MOD_LAWSUITS?SITE=NVLAS&SECTION=BUSINESS&TEMPLATE=DEFAULT
The bank's response is that they just don't have the manpower to handle all the paperwork... really? Here's a solution- hire more people!? It's not like people don't need jobs in this economy. I could maybe understand if it was a training issue, but the reason you are going against a signed agreement is because you haven't taken time to put out an ad and conducting interviews? You deserve to be sued. The fact that people are losing their homes because of a lack of manpower, clerical error or lack of oversight is just ridiculous! We've already dealt with this once before with Short Sales and Foreclosures flooding the market back in 2008. Come on already banks!? We're making so much head way with Short Sales and Foreclosures: cutting down on response times, moving through inventories and keeping people from having to foreclose on their property or getting deficiencies waved. You threaten our recovery and progress by creating a problem where one isn't necessary. The numbers show there are less people getting loan modifications approved so much so that many local legal firms and agencies have stopped listing it as an option!? Why attack the few that you DID accept!?
Read more from the article on this subject by going here: http://hosted.ap.org/dynamic/stories/U/US_LOAN_MOD_LAWSUITS?SITE=NVLAS&SECTION=BUSINESS&TEMPLATE=DEFAULT
Tuesday, May 10, 2011
10 ways to save you money in 2011
1. Have the right credit score. Sure it seems like a "no-brainer", but nowadays credit is more important than ever! In the past the best deals required a score of 720. Now, they require a score of 740. With the state of the economy and many people losing jobs, having to short sale, or foreclose on their property... it's fair to say that there aren't a ton of people with this score. If you are one of many who have had a significant impact on their credit in the subsequent years, whether or not you plan to purchase a house within the next year, Contact me. I can get you in touch with a credit repair company that can get you back on track and fix your credit in as little as 90 days!
2. Protect and Preserve your Credit Score. Again, this is an obvious tip, but probably the hardest. It reminds of junior high and high school, when the teacher started off the year by stating, "You all have A's. It's up to you to maintain it." Consider hiring a company like Life-Lock, that can keep you up to date with any misuses or hits on your credit. This will give you the greatest chance of maintaining the credit score you've worked so hard to maintain.
3. Shop Around. Don't just look for who has the best interest rate. Consider the other costs- discount points, and even the type of loan. Is it an adjustable, fixed? Holden Lewis of Bankrate.com suggests comparing the total fees and monthly payments that you would make under 3 or 4 loan deals to figure which option works best for you and your family.
4. Know you're borrowing limit. The FHA suggests that your house payment should equate 31% of your gross monthly income. Some housing counselors suggest a safer 28% or 30%. Roughly, if your monthly income is $4,200 before taxes. According to the FHA percentage of 31% you can afford a monthly house payment of about $1,302. The monthly house payment includes the principal, insurance, taxes and association dues.
5. Don't "reset" your Refinance Calender to 30-years. In other words when you've lived in a property for 5 years, ask your lender to amortize the loan for the remaining years of the old loan. By shortening the length of the loan you end up saving money on interest that is automatically included in your monthly payment. It may raise your monthly payment, but in the long run will actually save you a lot of money.
6. Consider a "no closing cost" Refi. If you are fortunate enough to have positive equity in your home, but you don't have a lot of money around you may think you can't qualify for a refinance. Think again! With a "No Closing Cost" Refi you can get your loan refinanced and not pay anything out of pocket. Holden explains that you end up paying a slightly higher interest rate as the closing cost gets factored in to your monthly payment.
7. Small downpayment? See the feds. Most lenders require 10% of the home price to be used as a downpayment, refinancing requires at least 10% of equity to qualify. For those borrowers with good credit, try applying for an FHA loan. They only require a 3.5% down payment. If you are a veteran, apply for a VA loan, no down payment is required. For those who aren't veterans or won't qualify for an FHA loan go to http://www.americandreamdownpaymentassistance.com/state.cfm?code=NV.The American Dream Down Payment Act is a down payment assistance program that gives grants to assist low-to-mid-income families and uniformed employees such as, policemen, firemen, sanitation, maintenance workers, and teachers achieve homeownership. The link above is for the State of Nevada.
8. Small loans? Act early. In the past lenders were paid a certain percentage of the loan. The more money they lend, the more money they would receive. Changes made April 1st have since made it illegal for lenders to be paid this way. In the past those that needed smaller loans or loans less than $100,000 weren't given the time of day. Now, big lenders like Wells Fargo as well as the small independent lending brokerages are more willing to lend to these kinds of borrowers. Since there are many a home here in Las Vegas that is under $100,000, this change is an important change.
9. Make an extra payment any time of year! You've probably heard that an extra mortgage payment made at the end of the year will shorten the repayment time. This is true. But, you don't have to wait until the end of the year, how about sending in that payment after you received your tax return, or after a bonus? Not only will it save you interest and shorten your repayment, but may come in handy at the end of the year when we all tend to spend a bit more.
10. Behind on your payments? See a housing counselor. According to a study by NeighborWorks America, Delinquent homeowners who receive Department of Housing and Urban Development-certified foreclosure counseling are more likely to keep their houses and not lose them to foreclosure. When late-paying borrowers get counseling, they are more likely to get a mortgage modification, which can reduce their payments. Click here for Housing Counselors in Nevada. http://portal.hud.gov/hudportal/HUD?src=/states/nevada/homeownership/hsgcounseling
The most important factor when deciding on purchasing a property is to shop around! Talk to several lenders- ask about their interest rates, their fees, discuss your needs and find out how much home you can afford. These factors will all come to play when you are ready to purchase a home. Not only will it help aid in the type of home, area and how much to put an offer in on... but can be very helpful when we negotiate the offer- like when asking to have your closing costs paid by the seller!
For more information about the Credit Counseling company, or if you would like to speak with some lenders, please don't hesitate to contact me at kathy.herron@cbvegas.com.
Monday, May 2, 2011
Foreclosure Sales: A First Step in Recovery?
A few years ago when the banks flooded the markets with foreclosures prices dropped fast. Ever since then homeowners have been fearful of another wave referred to as the "shadow" industry that would cause the home prices to go down even further. But economists and real estate agents across the country are noticing that the hardest hit cities are actually seeing the first steps in recovery because out of state and international buyers are scooping up these foreclosures.
The low prices are leading investors to snap up foreclosed homes in Detroit, Las Vegas, Miami, Phoenix and Tampa. The severely low priced homes are reducing prices in the short run, but they're also thinning the supply of homes -- clearing the way for higher prices in the future.
For some buyers, the deals are now too good to pass up. A highrise studio condo on the Las Vegas strip that cost $500,000 at the height of the housing boom is now selling for roughly one-third that price. Across the valley, we've seen an average drop of almost 60%.
News reports suggest that "such sales have helped shrink the combined supply of unsold homes in those five cities by 13 percent over the past year, according to an analysis of local listing data. Home prices in each of those markets are at or below 2002 levels, according to the latest reading of the Case Shiller index."
"If we were to see several consecutive months of supply getting smaller, it would point to an improving housing market," said Celia Chen, senior director at Moody's Analytics. "Even if it is investors buying them, they are renting them out in hopes that prices in the next several years will rise." As of today there are only 14,015 homes currently available here in Las Vegas, which is about a 4 month supply- a great sign we are on our way to a recovery. There are 12,787 homes that currently have offers on them (a bulk of these are short sales waiting on bank approval), and 14,232 homes that have sold year to date.
It's important to get rid of foreclosures and other risky properties so the market can turn around. When foreclosures and distressed properties are sold, home prices fall. But as the supply of cheap homes shrinks, prices stabilize. Homeowners who had put off moving because they didn't want to sell during the downturn grow confident that they can fetch a decent price. That prompts more buying and selling and thus forces home values to rise.
Most of the current foreclosure sales involve investors: Private equity firms; foreign and out-of-state buyers seeking vacation houses; individual investors hoping to rent out or quickly sell properties for a profit.
In March, 35 percent of previously occupied homes sold were bought entirely in cash, according to the National Association of Realtors. Here in Las Vegas it's actually about 50% of all sales.
Economists caution that a second wave of foreclosures could throw the housing market back into turmoil and few see home prices rebounding before the end of this year. However, with the current focus forcing banks to do more to help people stay in their homes, and create programs that shorten the short sale time frame, it's hard for me to believe this will occur again. If anything I think it may just become a small, but consistent, trickle.
Friday, April 29, 2011
Banks Push to Improve Foreclosure Procedures
Time is ticking for banks to improve their foreclosure methods. U.S. regulators have given 14 financial institutions until mid-June to create better processes on their servicing methods and another 60 days to implement the changes.
The changes will no doubt cost the banks a considerable amount of money to implement. Since the foreclosure mess erupted last year, JP Morgan Chase has already spent $1.1 billion to create and apply the changes and Citigroup predicts the changes will boost expenses by as much as $35 million a year.
On Thursday, Fannie Mae and Freddie Mac rolled out new protocol designed to increase the number of successful modifications. The guideline will require servicers to reach borrowers as soon as the first missed payment occurs and will continue to with the intention of modifying the loan. They'll also pay more to the servicers that meet certain benchmarks and establish timelines for banks to modify loans or process foreclosures.
The Regulators have asked the banks to create programs that establish a single point of contact, have deadlines that are "appropriate", and hire more people to facilitate the programs and assist it's borrowers. These are the minimum requirements and some have already made the necessary changes.
Last June, Wells Fargo began assigning two employees to each borrower seeking a loan modification. They found that the program "significantly improved customer communication and the modification process," said spokeswoman. Wells Fargo also plans to expand the same effort to foreclosures and short sales.
Ally Financial has assigned borrowers a team of employees to help them gather documents, execute a final loan modification or advises on other foreclosure alternatives.
J.P. Morgan is working on a software program to make it easier for employees and borrowers to track loan-modification requests. Last year, it started providing some borrowers with a "relationship manager" to advise on the process. No word yet on when the software will be available.
Citigroup now provides borrowers with a single point of contact for gathering documents and handling short sales. In the next months, it will roll out a "concierge" system that will assign a small team of employees to help delinquent borrowers and homeowners at risk of default navigate the system.
Bank of America has begun its version of a single point of contact but declined to provide details. For the past year or so they have used the Equator system that enables better communication and facilitation of short sales between real estate agents and the negotiator. Currently the time frame of the short sale, with the use of this system, is about 5-16 weeks. Bank of America is continues to make changes to their practices in order to reduce this time frame further.
As far as "appropriate" deadlines, the Los Angeles Neighborhood Housing Services says it takes an average of 141 days for borrowers it works with to get an answer after completing an initial loan-modification request. The nonprofit group says Wells Fargo has the fastest turnaround with initial reviews averaging 79 days. A Wells Fargo spokeswoman said 60% of borrowers receive a decision five days after the company receives a complete package, up from 45% a year ago.
Ally Financial said it responds to the average borrower within seven to 10 days of receiving a complete financial package.
At Citigroup, the goal is to give borrowers a final answer about a permanent modification within 22 days of their final trial payment. "On average, we do that," said Sanjiv Das, chief executive of the CitiMortgage unit.
When it comes to staffing, J.P. Morgan said it will add as many as 3,000 new home-lending jobs, BofA said it hired roughly 3,000 people in the first quarter to work on troubled mortgages and Citigroup said it will expand its loan-modification unit by 500 employees. Wells Fargo doesn't expect to increase staffing because according to their reports the number of borrowers behind on loan payments is declining.
As far as how these programs will affect the number of short sales or foreclosures we will have to just wait and see.
The changes will no doubt cost the banks a considerable amount of money to implement. Since the foreclosure mess erupted last year, JP Morgan Chase has already spent $1.1 billion to create and apply the changes and Citigroup predicts the changes will boost expenses by as much as $35 million a year.
On Thursday, Fannie Mae and Freddie Mac rolled out new protocol designed to increase the number of successful modifications. The guideline will require servicers to reach borrowers as soon as the first missed payment occurs and will continue to with the intention of modifying the loan. They'll also pay more to the servicers that meet certain benchmarks and establish timelines for banks to modify loans or process foreclosures.
The Regulators have asked the banks to create programs that establish a single point of contact, have deadlines that are "appropriate", and hire more people to facilitate the programs and assist it's borrowers. These are the minimum requirements and some have already made the necessary changes.
Last June, Wells Fargo began assigning two employees to each borrower seeking a loan modification. They found that the program "significantly improved customer communication and the modification process," said spokeswoman. Wells Fargo also plans to expand the same effort to foreclosures and short sales.
Ally Financial has assigned borrowers a team of employees to help them gather documents, execute a final loan modification or advises on other foreclosure alternatives.
J.P. Morgan is working on a software program to make it easier for employees and borrowers to track loan-modification requests. Last year, it started providing some borrowers with a "relationship manager" to advise on the process. No word yet on when the software will be available.
Citigroup now provides borrowers with a single point of contact for gathering documents and handling short sales. In the next months, it will roll out a "concierge" system that will assign a small team of employees to help delinquent borrowers and homeowners at risk of default navigate the system.
Bank of America has begun its version of a single point of contact but declined to provide details. For the past year or so they have used the Equator system that enables better communication and facilitation of short sales between real estate agents and the negotiator. Currently the time frame of the short sale, with the use of this system, is about 5-16 weeks. Bank of America is continues to make changes to their practices in order to reduce this time frame further.
As far as "appropriate" deadlines, the Los Angeles Neighborhood Housing Services says it takes an average of 141 days for borrowers it works with to get an answer after completing an initial loan-modification request. The nonprofit group says Wells Fargo has the fastest turnaround with initial reviews averaging 79 days. A Wells Fargo spokeswoman said 60% of borrowers receive a decision five days after the company receives a complete package, up from 45% a year ago.
Ally Financial said it responds to the average borrower within seven to 10 days of receiving a complete financial package.
At Citigroup, the goal is to give borrowers a final answer about a permanent modification within 22 days of their final trial payment. "On average, we do that," said Sanjiv Das, chief executive of the CitiMortgage unit.
When it comes to staffing, J.P. Morgan said it will add as many as 3,000 new home-lending jobs, BofA said it hired roughly 3,000 people in the first quarter to work on troubled mortgages and Citigroup said it will expand its loan-modification unit by 500 employees. Wells Fargo doesn't expect to increase staffing because according to their reports the number of borrowers behind on loan payments is declining.
As far as how these programs will affect the number of short sales or foreclosures we will have to just wait and see.
Friday, April 22, 2011
Don't Walk Away from your Home
There has been a lot of talk about short sales and loan modifications on various news channels, and in conversations with real estate agents, and those in the industry. But, what about the people who are dissatified with the value of their home and don't qualify for a short sale or modification?
With no solution in sight many homeowners dealing with underwater mortgages who can still afford to pay their mortgages are simply walking away from their mortgage, even when they can afford the payments.
The idea is known as a strategic default and the prospect of simply walking away has increased across the nation. In the past, lenders traditionally looked at the degree of a home's value depreciation to identify the risk of strategic default. But FICO Labs research now shows that these borrowers are only twice as likely to default as those whose home has managed to keep most of it's value.
In fact, true strategic defaulters are found to be savvy investors. They have higher credit scores, and fewer instances of going over credit card limits. The findings show a vast difference from their counterparts. There is even a rise of notable celebrities walking away from their mortgages.
The reality remains, however, that the ramifications of of simply walking away can haunt a homebuyer for years to come. "Walking away is a very serious matter," says Glamis Haro, a lending manager at Union Settlement, a credit union in New York City. "Just one late report on your mortgage can seriously damage you."
"In the past," Haro says, "a 30-day late payment on a home loan could result in 30 to 40 points being deducted from your credit score. But in today's unforgiving credit market, one late payment can now result in up to 100 points being deducted. And lest homeowners think they can take the heat, a late payment stays on the record for 7 long years. After 120 days of no payment, the delinquent homeowner enters what Haro calls "five fives" status – the notation (5-5-5-5-5) made on a borrower's credit report when they've gone beyond the point of no return. "You're considered unbankable," she says. "It could take years of working with a financial adviser to get back into lenders' good graces," she adds.
While there are some experts who claim that walking away is actually beneficial in the long run for struggling homebuyers, the risks often far outnumber the benefits. "A public record, such as a bank judgment or collections account, will affect a borrower's credit for 10 years from the last date of payment -- and any judgment is enforceable for up to 20 years," Haro says.
Karen Metoyer, a housing and credit counselor at Clearpoint, recommends that you work with a HUD-certified housing counselor, if your house is underwater, rather than try to work on a modification or refinance on your own. She says, "having a third party negotiate the modification or refinance helps give your financial situation credibility, because the banks tend to act more quickly in that case." These free counselors will also suggest if perhaps a reverse mortgage, refinance, or modification is your best option.
To find a HUD-certified housing counselor click here: http://portal.hud.gov/hudportal/HUD?src=/i_want_to/talk_to_a_housing_counselor
With no solution in sight many homeowners dealing with underwater mortgages who can still afford to pay their mortgages are simply walking away from their mortgage, even when they can afford the payments.
The idea is known as a strategic default and the prospect of simply walking away has increased across the nation. In the past, lenders traditionally looked at the degree of a home's value depreciation to identify the risk of strategic default. But FICO Labs research now shows that these borrowers are only twice as likely to default as those whose home has managed to keep most of it's value.
In fact, true strategic defaulters are found to be savvy investors. They have higher credit scores, and fewer instances of going over credit card limits. The findings show a vast difference from their counterparts. There is even a rise of notable celebrities walking away from their mortgages.
The reality remains, however, that the ramifications of of simply walking away can haunt a homebuyer for years to come. "Walking away is a very serious matter," says Glamis Haro, a lending manager at Union Settlement, a credit union in New York City. "Just one late report on your mortgage can seriously damage you."
"In the past," Haro says, "a 30-day late payment on a home loan could result in 30 to 40 points being deducted from your credit score. But in today's unforgiving credit market, one late payment can now result in up to 100 points being deducted. And lest homeowners think they can take the heat, a late payment stays on the record for 7 long years. After 120 days of no payment, the delinquent homeowner enters what Haro calls "five fives" status – the notation (5-5-5-5-5) made on a borrower's credit report when they've gone beyond the point of no return. "You're considered unbankable," she says. "It could take years of working with a financial adviser to get back into lenders' good graces," she adds.
While there are some experts who claim that walking away is actually beneficial in the long run for struggling homebuyers, the risks often far outnumber the benefits. "A public record, such as a bank judgment or collections account, will affect a borrower's credit for 10 years from the last date of payment -- and any judgment is enforceable for up to 20 years," Haro says.
Karen Metoyer, a housing and credit counselor at Clearpoint, recommends that you work with a HUD-certified housing counselor, if your house is underwater, rather than try to work on a modification or refinance on your own. She says, "having a third party negotiate the modification or refinance helps give your financial situation credibility, because the banks tend to act more quickly in that case." These free counselors will also suggest if perhaps a reverse mortgage, refinance, or modification is your best option.
To find a HUD-certified housing counselor click here: http://portal.hud.gov/hudportal/HUD?src=/i_want_to/talk_to_a_housing_counselor
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