Report: Pre-foreclosure filings triple in September

Pre-foreclosure filings in Florida went up by more than 3,000 in September, Default Research Inc. reported Tuesday.
Florida lis pendens filings, when the bank first files the paperwork on a defaulted payment - the first step in the foreclosure process -- rose from 1,541 in September 2006 to 4,872 in September 2007, according to Default Research. Of those filings, more than 13 percent were condominiums, says Serdar Bankaci, Default Research president and CEO, in a prepared statement.
"Many of these were speculators trying to buy properties and turn a profit, but they got trapped in the market," Bankaci says. "Foreclosures will likely continue to escalate at least for 12 more months as the market and mortgages adjust."
Orange County had 376 lis penden filings in September, a significant increase from the 127 filings in the same month the year prior, the report says.
Default Research also reported Broward, Miami-Dade and Palm counties notched the highest total pre-foreclosures in the state.
Pleasant, Pa.-based Default Research provides clients with pre-foreclosure information.
Source: Orlando Business Journal

E for Effort

One thing that a lender will look for when determining a short sale or workout option is the effort of the borrower to avoid the situation.

I recently had a realtor contact me to say that she could not get the lender to agree to a workout option. The lender told the realtor that her client had not made a legitimate effort to avoid her situation. The realtor told me that her client had made every effort possible. After some more digging on my part, I found out the reason for the preforeclosure was the client had not made any money in a few months. The client was involved in a commission only job where the commissions were high but infrequent and the client had not made a sale in 6 months. When I asked the realtor what other avenues had been taken to bring in income, she said that the client had a job (the commission only) and was not looking for part time work.

The above story is a combination of ego and laziness. The lender tells you what to do and the better impression you make, the better. If you have a job that is commission only and you haven't made the sale, use every effort possible to make some type of money. If that means flipping burgers, then do it to show that you are making an effort to remedy the situation. If the lender feels you don't make the effort, then the possibility of the workout diminishes.

Three Other Points To Remember About Short Sales

There was an article in the Orlando Sentinel on October 14, 2007 called "A Short Sale Can Make Sense If You Are A Desperate Homeowner." The article tackles the basic concept of what a short sale is and when you should actually approach the lender about a short sale. As stated before, always contact the lender when you know you may have an issue with making your mortgage payments. While a short sale may not be the option, there may be other workout alternatives.

One point this article brought to the forefront, which is very important, are points to discuss with the lender (outside of the typical short sale package). The author, Tamara E. Holmes, states:

"Get it in writing. Make sure the lender agrees in writing that the short sale will absolve all debts."

"Protect your credit rating. Ask the lender how it will report the short sale on your credit report."

"Get professional tax advice. Short sales often have tax repercussions because lenders can claim the forgiven debt as income that they provided you."

The above points are good reminders to make sure you have all your bases covered when doing the short sale.

Temporary Solutions

There are many workout options that a lender will present to you if your loan default is the result of a temporary situation. Payment plans and loan forebearance are a couple of options that the lender may propose. Loan modification is another option. While I am not an expert in this field as it pertains workout options, I thought this was a good website to pass along that may help answer those questions if your lender decides loan modification may be your best option. Check out this website from Housing and Urban Development and it should take you in the right direct.

Two Liens from Same Lender

Many distressed borrowers have a first and second mortgage that must be involved in the short sale. The second lien must be released before you move to the first. One point of frustration that realtors bring to my attention is that they must call two separate phone numbers (one for each lien) to get a release. Most lenders are divided into separate entities when it comes to junior liens (second mortgages). When you go to get the second mortgage released, be prepared to deal with a completely different group when you move to the first lien. You will never have dealings with loss mitigation group for two separate liens (unless it is a very small lender). So even though you may have a good relationship with the specific lender, be prepared to deal with two separate groups even though it is the same lender.