New Year Resolutions for the Financially Distressed

By Farhad Patny, M.S.B.A.Realtor & Loan Officer, Contributor.

“Let this coming year be better than all the others. Vow to do some of the things you've always wanted to do but couldn't find the time. Call up a forgotten friend. Drop an old grudge, and replace it with some pleasant memories. Vow not to make a promise you don't think you can keep. Walk tall, and smile more. You'll look ten years younger. Don't be afraid to say, 'I love you'. Say it again. They are the sweetest words in the world.”

What better way to start my first column of the year 2010 than with the above quote from Ann Landers. And to say Thank You to all my readers for the wonderful reception to this column on Loan Modification and Short Sales for the last eight months. Every month I get numerous calls from Valley India Times readers and their friends and their neighbors (Thanks Raj, for referring your ‘over the fence’ neighbor friend Jen).

Many of them are in financial trouble due to the current economic downturn. People with million dollar homes and others with monthly payments under $1000, all wanting to know how to get out of this problem; readers calling about Loan Modifications, Short sales, Loan Refinance, etc. Readers interested in buying or selling a home or investment property. So thank you once again and I hope to keep you informed of all the latest updates and the best strategies to get through these difficult situations and also how to profit from this. Many of my readers are holding Real Estate which is worth much less than the debt owed on it or the mortgage payments are excessive. For those readers I would suggest you explore at least some of the following resolutions and adopt them, should they fit your financial condition:

1. I WILL ELIMINATE/REDUCE/MANAGE MY TOXIC ASSETS:

If you are holding onto a primary home or investment property that is worth less than the debt owed on it, do something. Don’t ignore it and allow it to become a bigger financial problem. I have talked to numerous readers who had investment properties with negative cash flows. They kept on paying the huge mortgage payments by dipping into their savings and credit cards, and finally, after they were so much into debt that they could not make any more payments, they come to me for assistance. Reader SS was a smart gal. In early 2007 she decided she could not continue feeding the shortfall on her investment home as well as the huge mortgage payment on her primary home. She decided to let the homes go into foreclosure and save on the payments. Her credit got completely messed up due to the foreclosure, which a short sale would have avoided, but she got rid of her toxic assets! Take charge of the problem as early as possible and you could be in a much better position. Available options include loan forbearance, repayment plans, Loan Modifications, Short sale, etc. Please contact your bank or a qualified professional who can help mitigate this situation.

Scammers are abundant so be vigilant.

2. I WILL EXAMINE WAYS TO SAVE MY CREDIT:

There are various ways to save your credit or minimize the negative impact on your credit even when you are in financial distress and cannot make your mortgage or credit card payments e.g. I have a reader turned client who has an investment property with negative cash flows. Being a businessman, he could not afford his credit being negatively affected, yet wanted to get rid of the investment property at no cost to him. The strategy I devised was a Short sale listing whilst still making the mortgage payments, being a licensed realtor I have listed the property in the Realtor MLS as a short sale. Lenders approve short sale of such properties on a routine basis. The property is sold while the borrower is still making timely payments and there is little or no effect on the credit of the borrower, except maybe a note that the home was sold as a short sale. And he may be eligible to get a home mortgage immediately! Talking to your lender is still the easiest and best way to save your credit..

3. I WILL APPLY FOR A LOAN MODIFICATION:

If you are facing a hardship and your mortgage payments are high, go for a loan modification. If you are Comfortable doing it yourself, that may be the route for you; if not contact a qualified professional. I have done many successful loan modifications for my clients. It does need some knowledge and a lot of time and persistence but lenders have approved over 650,000 trial loan modifications in 2009. Don’t assume you will not qualify or its too difficult. Clients of mine of have saved from $65K to well over $125K when their loan modifications were approved. Installments have dropped by as much as 52% or over $1500/mth! So do give it a try. My Valley India Times readers are eligible for a Zero Upfront cost Loan Modification this month.

4. I WILL NOT LET MY HOME FORECLOSE:

If you have not been able to make your mortgage payments and your lender is ready to auction your home, try all the above options to keep from losing your home. I have been able to postpone or cancel home auctions for my clients that are just days away from the sale date. A foreclosure can negatively affect your credit for a long time. A foreclosure will remain as a public record permanently and on a person’s credit history for 10 years or more. Credit scores may be lowered anywhere from 250 to more than 300 points. A foreclosure will typically will affect a credit score for over 3 years. According to Fannie Mae guidelines you may not be able to get a Fannie Mae backed loan for upto 7 years. A foreclosure could also affect your future loan approval and loan interest rates and terms. Current and future employment, security clearances, etc are other things that might be affected and need to be considered. (See details in the Box titled “Homeowner consequences*). That is the reason foreclosure should not be an option for most people. Since I am a Licensed Real Estate Agent and a Loan Officer, not a licensed CPA or Attorney, I strongly recommend you talk to these professionals.

5. I WILL SHORT SALEMY HOME OR INVESTMENT PROPERTY: